Managing Reality

Book Three
Managing the Contract

Third edition
Other titles in the Managing Reality series:
Managing Reality. Book One: Introduction to the Engineering and Construction Contract.
Third edition (2017)
Bronwyn Mitchell and Barry Trebes. ISBN 978-0-7277-6182-8
Managing Reality. Book Two: Procuring an Engineering and Construction Contract.
Third edition (2017)
B. Mitchell and B. Trebes. ISBN 978-0-7277-6184-2
Managing Reality. Book Four: Managing Change. Third edition (2017)
B. Mitchell and B. Trebes. ISBN 978-0-7277-6188-0
Managing Reality. Book Five: Managing Procedures. Third edition (2017)
B. Mitchell and B. Trebes. ISBN 978-0-7277-6190-3
Managing Reality
Book Three
Managing the Contract
Third edition

Bronwyn Mitchell and Barry Trebes

Published by ICE Publishing, One Great George Street, Westminster, London SW1P 3AA.

Full detail of ICE Publishing representatives and distributors can be found at:
www.icebookshop.com/bookshop_contact.asp

Other titles by ICE Publishing:

NEC4: The Role of the Project Manager
B. Mitchell and B. Trebes. ISBN 978-0-7277-6353-2
NEC4: The Role of the Supervisor
B. Mitchell and B. Trebes. ISBN 978-0-7277-6355-6
NEC3 and NEC4 Compared
R. Gerrard. ISBN 978-0-7277-6201-6

www.icebookshop.com

A catalogue record for this book is available from the British Library

ISBN 978-0-7277-6186-6

# Thomas Telford Limited 2018

ICE Publishing is a division of Thomas Telford Ltd, a wholly-owned subsidiary of the Institution of
Civil Engineers (ICE).

All rights, including translation, reserved. Except as permitted by the Copyright, Designs and
Patents Act 1988, no part of this publication may be reproduced, stored in a retrieval system or
transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise,
without the prior written permission of the Publisher, ICE Publishing, One Great George Street,
Westminster, London SW1P 3AA.

This book is published on the understanding that the authors are solely responsible for the
statements made and opinions expressed in it and that its publication does not necessarily imply
that such statements and/or opinions are or reflect the views or opinions of the publishers. While
every effort has been made to ensure that the statements made and the opinions expressed in
this publication provide a safe and accurate guide, no liability or responsibility can be accepted in
this respect by the author or publishers.

While every reasonable effort has been undertaken by the author and the publisher to acknowledge
copyright on material reproduced, if there has been an oversight please contact the publisher and
we will endeavour to correct this upon a reprint.

Commissioning Editor: Michael Fenton

Production Editor: Madhubanti Bhattacharyya
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Typeset by Academic þ Technical, Bristol

Index created by Laurence Errington
Printed and bound by NOVOPRINT S.A., Spain
Contents Preface
Foreword
vii
ix
Acknowledgements xi
Series contents xiii

Introduction 1
General 1
Background 1
The structure of the books 2

01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment procedures in the Engineering and Construction Contract 3

Synopsis 3
1.1. Introduction 4
1.2. The payment procedure 4
1.3. How the ECC includes the HGCR Act 11
1.4. The effects of Y(UK)2 11
1.5. Assessment at Completion 14
1.6. Assessment after termination 14
1.7. The payment procedure after the defects date 14

03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Control of time 15
Synopsis 15
2.1. Introduction 16
2.2. Terminology 16
2.3. What is the programme? 17
2.4. Definition of the Accepted Programme 19
2.5. The purpose of the Accepted Programme 20
2.6. What is included in the programme? 21
2.7. Submission of the first programme 30
2.8. How often is the programme revised? 31
2.9. Acceptance of the programme 32
2.10. Completion 34
2.11. Take over by the Client 34
2.12. Acceleration 34
2.13. Other aspects of programming in the ECC 35

03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Control of quality 39
Synopsis 39
3.1. Introduction 40
3.2. The ECC and quality 40
3.3. The Contractor’s obligations 40
3.4. The role of the Client’s representatives with respect to quality 45
3.5. The Client’s supply 46
3.6. Subcontracting 47
3.7. Quality control 49
3.8. Defective work 52
3.9. Certification 54
3.10. Enforcement 55

04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disputes and dispute resolution 59

Synopsis 59
4.1. Introduction 60
4.2. How disputes arise 60
4.3. How the ECC seeks to reduce the incidence of disputes 66
4.4. Dispute resolution under the ECC 69
4.5. Dispute resolution – general comments and observations 77

Index 79

v
Preface In the preface to the first edition of Managing Reality, in 2005, we set out our aims and
aspirations for ‘managing reality’. These were as follows:

g to add and contribute to the body of knowledge on the use of the NEC Engineering
and Construction Contract (ECC)
g to provide a set of books that focuses on the ‘how to’ – how to manage and
administer the ECC contract
g to present as a five-part book series that covers both the needs of the student
professional or prospective client, through to the novice practitioner and experienced
user
g to provide a rounded view of the ECC, whatever your discipline, on both sides of
the contractual relationship
g to enable everyone to realise the business benefits from using the NEC suite of
contracts generally and the ECC in particular.

Managing Reality does not attempt to give a legal treatise or a blow-by-blow review of
each and every clause. It is intended to be complementary to other publications, which
give excellent theoretical and legal perspectives.

This book is about dealing with the reality of real life projects: managing reality.

The feedback and support we have received since the first publication of Managing
Reality in 2005 has been universally positive, and we would like to thank all of you who
have bought and used it since its first publication.

We have greatly enjoyed updating and working on this third edition, and we hope that
these books continue to provide a useful body of knowledge on the use of the
NEC4 ECC.

Bronwyn Mitchell and Barry Trebes

2017

vii
Foreword A key objective of the first edition of Managing Reality was to provide a five-part book
series to meet the needs of students, prospective clients, novice practitioners and
experienced users. Satisfying such diverse needs is an ambitious objective for any text.

Does Managing Reality achieve its stated aim? I believe that the answer to this is a
resounding ‘yes’. In my view, the calibre of authorship is exceptional. All levels of and
types of readership from the uninitiated to the experienced professional will derive
considerable benefit from this text. Although written in a very accessible style, there is
no skimping on detail or on addressing difficult issues. The worked examples are
particularly helpful. Managing Reality should be your prime aid from the moment you
are considering whether or not to use an NEC contract right through to using and
operating the contract.

But Managing Reality is much more than simply a ‘how to’ guide. It seeks to deliver a
clear message that NEC contracts cannot be used to their full potential unless one is
prepared to ditch one’s knowledge and experience of traditional contracting. For
example, emphasis is placed on the fact that certainty and predictability are the
hallmarks of NEC contracts. Open-ended and subjective phrases and concepts have no
place in NEC contracting.

I am privileged to be associated with this third edition of Managing Reality. Its

publication is very timely since it coincides with the publication of the NEC4 suite of
contracts. This new edition of the NEC suite is a reflection of the dominant position
that NEC contracts now have both in the UK and in many other countries. It will
continue to support those who need help overcoming any reservations about using NEC
contracts, and reinforce existing users in their continued use of these ground-breaking
contracts.

Professor Rudi Klein

President, NEC Users’ Group

ix
Acknowledgements We would like to thank the following individuals and companies who have supported
this book.

For their active participation in this book we would like to thank

g Professor Rudi Klein (SEC Group Chief Executive) for writing the Foreword
g Dr Robert N. Hunter of Hunter and Edgar Edinburgh for his thoughts and
suggested revisions for this third edition
g Michael Fenton, the ICE commissioning editor, for his enthusiasm and patience
g Richard Patterson of Mott MacDonald
g everyone who has given feedback on this book since 2005.

And our continued gratitude to those who provided support and input into the first
edition of Managing Reality:

g Mike Attridge, of Ellenbrook Consulting, who reviewed this book on behalf of the
authors
g David H. Williams, who provided guidance and support in the development of the
first edition of this book
g everyone at Needlemans Limited Construction Consultants (now part of the Mott
MacDonald Group)
g everyone at MPS Limited with whom Needlemans Limited worked to develop the
first web-based management system for the NEC in 2000.

Finally, we would like to thank our family and friends for their ongoing support,
understanding and patience.

xi
Series contents The following outlines the content of the five books in the series.

Book 1 Managing Reality: Introduction to the Engineering and

Construction Contract
Chapter 1 Introduction to the Engineering and Construction Contract, concepts
and terminology
This chapter looks at
g an introduction to the ECC
g an identification of some of the differences between the ECC and
other contracts
g an outline of the key features of the ECC
g conventions of the ECC
g concepts on which the ECC is based
g terminology used in the ECC
g terminology not used in the ECC
g how the ECC affects the way you work.

Chapter 2 Roles in the Engineering and Construction Contract

This chapter describes the roles adopted in the ECC, including
g how to designate a role
g discussion of the roles described in the ECC
g discussion of the project team
g how the ECC affects each of the roles.

Appendix 1 List of duties

Book 2 Managing Reality: Procuring an Engineering and

Construction Contract
Chapter 1 Procurement
This chapter looks at the concept of procurement and contracting
strategies and discusses
g procurement and contract strategy
g what tender documents to include in an ECC invitation to tender
g how to draft and compile a contract using the ECC
g procurement scenarios that a client could face and how to approach
them
g what are framework agreements and how they could incorporate
the ECC
g what is partnering and how it can be used with the ECC.

Appendix 1 Assessing tenders

Appendix 2 ECC tender documentation

Chapter 2 Contract Options

This chapter looks at the Contract Options available within the ECC,
including
g ECC main and secondary Options
g priced contracts
g target contracts
g cost-reimbursable contracts
g choosing a main Option
g choosing a secondary Option.

xiii
 Appendix 3 Inspection of the Contractor’s accounts and records plan

Chapter 3 Completing the Contract Data

This chapter gives guidance on
g how to choose a main Option
g how to choose an Option for resolving and avoiding disputes
g how to choose secondary Options
g choosing optional statements in the Contract Data
g where to position the optional statements in the Contract Data
g how to complete each statement in the Contract Data.

Chapter 4 Scope guidelines

This chapter looks at the Scope and Site Information, including
g Providing the Works
g what should be included in the Scope
g separation of the Scope and the Site Information
g structuring for the Scope
g interface management
g general rules in drafting the Scope
g Site Information.

Appendix 4 Scope clauses

Book 3 Managing Reality: Managing the Contract

Chapter 1 Payment procedures in the Engineering and Construction Contract

This chapter discusses the following
g the payment procedure, including
– when the Contractor’s application for payment is submitted
– when assessments take place
– when the payment certificate is issued
– how invoicing is carried out
– when payment takes place
g the effects of option Y(UK)2, taking into account the Housing
Grants, Construction and Regeneration Act 1996 as amended.

Chapter 2 Control of time

This chapter discusses aspects relating to the Contractor’s programme,
including
g the terminology used to describe the programme
g what the programme is
g the definition and purpose of the Accepted Programme
g how and when to submit programmes
g what the programme is used for
g what to include in the programme.

Chapter 3 Control of quality

This chapter discusses:
g The quality framework embedded within the ECC
g The Contractor’s obligations
g Role of the Employer’s representatives
g Subcontracting
g Quality control

Chapter 4 Disputes and dispute resolution

This chapter

xiv
 g emphasises the importance of early dispute resolution to the
successful outcome of a contract
g considers the common sources of dispute
g considers how the ECC has been designed to reduce the incidence of
disputes
g examines how the ECC provides for the resolution of disputes
g looks at the implications for the dispute resolution process as a result
of the HGCR Act as amended
g looks at ECC changes in relation to adjudication.

Book 4 Managing Reality: Managing Change

Chapter 1 Compensation events

This chapter describes
g the compensation events contained within the ECC
g procedure for administering compensation events
g roles played by the two main parties to the contract in relation to
compensation events.

Appendix 1 Compensation event procedure

Chapter 2 Schedule of Cost Components and Short Schedule of Cost Components

This chapter discusses aspects relating to the full SCC and its short
version, the SSCC, including
g when the SCC and SSCC are used
g how the SCC and SSCC interact with the payment clauses
g Defined Cost
g the Fee
g the components of cost included under the SCC and SSCC
g Contract Data part two.

Appendix 2 Example quotations for compensation events

Appendix 3 Example people cost calculations

Appendix 4 Comparison between traditional preliminaries build-up and how they relate
to the Schedule of Cost Components and the Short Schedule of Cost
Components

Appendix 5 Interrelationship between the Contractor’s and the Subcontractor’s share

on target cost contracts

Book 5 Managing Reality: Managing Procedures

Chapter 1 ECC Management: Procedures

This chapter brings together all the aspects discussed in previous
chapters in Books One to Four of the Managing Reality series. This
chapter provides the ‘how to’ part of the series. It introduces some
example pro formas for use with the ECC. Unless detailed separately due
to a complex procedure, replies are described under the relevant action.

For quick reference, this chapter may be read on its own. It does not,
however, detail the reasons for carrying out the actions, or the clause
numbers that should be referred to in order to verify the actions in
accordance with the contract. These are described in detail in the other
books that form part of this series.

xv
Managing the Contract
ISBN 978-0-7277-6186-6

ICE Publishing: All rights reserved

http://dx.doi.org/10.1680/mc.61866.001

Introduction

General This series of books will provide the people who are actually using the Engineering and
Construction Contract (ECC) in particular, and the New Engineering Contract (NEC) suite
in general, practical guidance as to how to prepare and manage an ECC contract with confi-
dence and knowledge of the effects of their actions on the contract and the Parties.

Each book in the series addresses a different area of the management of an ECC contract:

g Book One – Managing Reality: Introduction to the Engineering and Construction Contract
g Book Two – Managing Reality: Procuring an Engineering and Construction Contract
g Book Three – Managing Reality: Managing the Contract
g Book Four – Managing Reality: Managing Change
g Book Five – Managing Reality: Managing Procedures.

Book One (Managing Reality: Introduction to the Engineering and Construction Contract) is for
those who are considering using the ECC but need further information, or those who are
already using the ECC but need further insight into its rationale. It therefore focuses on the
fundamental cultural changes and mind-shift that are required to successfully manage the
practicalities of the ECC in use.

Book Two (Managing Reality: Procuring an Engineering and Construction Contract) is for those
who need to know how to procure an ECC contract. It covers in practical detail the invitations
to tender, evaluation of submissions, which option to select, how to complete the Contract Data
and how to prepare the Scope. The use of this guidance is appropriate for clients, contractors
(including subcontractors) and construction professionals generally.

Book Three (Managing Reality: Managing the Contract) is essentially for those who use the
contract on a daily basis, covering the detail of practical management such as paying the
contractor, reviewing the programme, ensuring the quality of the works, and dispute resolution.
Both first-time and experienced practitioners will benefit from this book.

Book Four (Managing Reality: Managing Change) is for those who are managing change under
the contract; whether for the client or the contractor (or subcontractor), the management of
change is often a major challenge whatever the form of contract. The ECC deals with change
in a different way to other, more traditional forms. This book sets out the steps to efficiently
and effectively manage change, bridging the gap between theory and practice.

Book Five (Managing Reality: Managing Procedures) gives step-by-step guidance on how to
apply the most commonly used procedures, detailing the actions needed by all Parties to comply
with the contract. Anyone administering the contract will benefit from this book.

Background The ECC could be termed a ‘modern contract’ in that it seeks to holistically align the setting up
of a contract to match business needs as opposed to writing a contract that merely administers
construction events.

The whole ethos of the ECC, and the NEC suite generally, is one of simplicity of language and
clarity of requirement. It is important that the roles and responsibilities of all of those involved
in the contract are equally clear in definition and ownership.

When looking at the ECC for the first time it is easy to believe that it is relatively straight-
forward and simple. However, this apparent simplicity belies the need for the people involved

1
Managing the Contract

to think about their project and their role, and how the ECC can deliver their particular
contract strategy.

The ECC provides a structured flexible framework for setting up an appropriate form of contract
whatever the selected procurement route. The fundamental requirements are as follows:

g The Scope – quality and completeness: what are you asking the Contractor to do?
g The Site Information: what are the site conditions that the Contractor will find?
g The Contract Data – key objectives for completion (e.g. start date, completion date and
programme): when do you want it completed?

The details contained in this series of books will underline the relevance and importance of the
above three fundamental requirements.

The structure of the Each chapter starts with a synopsis of what is included in that chapter. Throughout the book
books there are shaded ‘practical tip’ boxes that immediately point the user towards important remin-
ders for using the ECC (see example below).

Clarity and completeness of the Scope is fundamental.

There are also unshaded boxes that contain examples to illustrate the text (see example below).

Imagine a situation in which the Supervisor notifies the Contractor that the reinstatement of
carriageways on a utility diversion project is not to the highway authority’s usual
standards. However, the Scope is silent about the reinstatement.

The test of a Defect is also whether the work is in accordance with the applicable law. In this
instance, the reinstatement is not in accordance with the Road and Street Works Act 1991.

Other diagrams and tables are designed to maintain interest and provide another medium of
explanation. There are also standard forms for use in the administration and management of
the contract, together with examples.

Throughout the books, the following terms have been used in a specific way:

g NEC is the abbreviation for the suite of New Engineering Contracts and it is not the
name of any single contract
g ECC is the abbreviation for the contract in the NEC suite called the Engineering and
Construction Contract.

The NEC4 suite comprises the

g Engineering and Construction Contract

g Engineering and Construction Subcontract
g Engineering and Construction Short Contract
g Engineering and Construction Short Subcontract
g Professional Service Contract
g Professional Service Short Contract
g Term Service Contract
g Term Service Short Contract
g Supply Contract
g Supply Short Contract
g Framework Contract
g Dispute Resolution Service Contract
g Design Build and Operate Contract
g Alliance Contract – consultative version.

2
Managing the Contract
ISBN 978-0-7277-6186-6

ICE Publishing: All rights reserved

http://dx.doi.org/10.1680/mc.61866.003

Chapter 1
Payment procedures in the Engineering and
Construction Contract

Synopsis This chapter discusses the following:

g the payment procedure, including

– when the Contractor’s application for payment is submitted
– when assessments take place
– when the payment certificate is issued
– how invoicing is carried out
– when payment takes place
g the effects of option Y(UK)2, taking into account the Housing Grants, Construction
and Regeneration Act 1996 as amended.

3
Managing the Contract

1.1. Introduction One of the biggest changes made by the ECC in terms of payment is that it is the Project
Manager’s job to assess the amount due to the Contractor. The Contractor is required to submit
an application for payment, and the Project Manager is required to consider it in assessing the
amount due, but it is still the Project Manager’s duty to assess the amount due and to certify
payment. The lack of detailed application for payment from a Contractor, which includes the
Price for the Work Done to Date, could hinder the Project Manager in their assessment of the
amount due, particularly for contract Options C, D and E.

Another point to note is that there are no contractual invoicing procedures.

Lastly, the deductions made from the amount due are made by the Project Manager and are
obliged to be made by them. There is no discretion on their part not to retain one-quarter of
the Price for Work Done to Date in assessments of the amount due if a first programme has
not been received, and there is no discretion not to deduct delay damages if Completion is late
and Option X7 applies to the contract. It is not the Client who makes these deductions but the
Project Manager.

It is worth noting here that the power for the Project Manager to act in this way may not align
with the internal procedures of the Client. Sometimes the client or finance officer of a business
will wish to retain these powers for themselves. This needs to be addressed for the ECC to work
effectively.

The allocation of these powers in the ECC is a reflection of the importance that the contract
places on the Project Manager, and it emphasises the significance of the selection procedures
for a Project Manager and that they should have the power and authority to act as described
in the contract.

1.2. The payment The following is a breakdown of the payment procedure as outlined in the conditions of
procedure contract. The choice of main Option will affect what appears in the application for payment and
the assessment of the amount due, but will not necessarily affect the procedure.

1.2.1 The Contractor’s The Contractor submits an application for payment to the Project Manager before the assess-
application for payment ment date, setting out the amount that the Contractor considers is due at the assessment date
(clause 50.2). The Contractor’s application for payment includes details of how the amount has
been assessed, and is in the form stated in the Scope.

It is to the Project Manager’s advantage if the Scope provides that the Contractor’s application
for payment follows a certain format that mirrors the way the Project Manager will set out its
assessment of the amount due. For example, in Options C, D and E, the Contractor is paid their
Defined Cost plus its Fee; that is, its interim payments are based on the Schedule of Cost
Components and not on some immediately determinable pricing tool such as an activity
schedule or bill of quantities. Therefore, for these Options, the Scope may require the Contractor
to provide its application using the headings and information required by the Schedule of Cost
Components.

The Contractor is required to submit an application for payment.

The Contractor’s assessment comprises (clause 50.3)

g The Price for Work Done to Date

g plus other amounts to be paid to the Contractor
g less amounts to be paid by or retained from the Contractor.

The Scope may require the Contractor to show the Price for Work Done to Date as a cumulative
amount, less previous payments, leaving a payment for the assessment date in question.

4
 Payment procedures in the Engineering and Construction Contract

1.2.2 The assessment Assessments of the amount due by the Project Manager take place at each assessment date
date (clause 50.1).

1.2.2.1 The first The first assessment date is decided by the Project Manager to suit the procedures of the Parties,
assessment date and is not later than the assessment interval after the starting date (clause 50.1). There are three
aspects to note about this clause:

g It is the Project Manager who decides the date of the first assessment, rather than the
conditions of contract or the Parties.
g Although the Project Manager decides the date of the first assessment, it must suit the
procedures of both the Client and the Contractor. In order to do this, input is required
from the Contractor regarding what date would suit their procedures. This could take
place at the start-up meeting, or by other communication prior to the starting date.
The other assessment dates could be independent of this first date (they occur at the end
of each assessment interval, and the assessment interval need not be related to the first
assessment date). The occurrence of this first date need not affect later assessments.
g The first assessment date cannot be later than the assessment interval after the starting
date. It is the starting date that is the important date here, not the start date on Site or
access dates, as the starting date indicates the start of the contract and therefore facilitates
payment for work done off Site prior to work starting on Site, such as manufacture or
design.

1.2.2.2 Other assessment g In the ECC, assessment dates other than the first assessment date occur at the end of
dates each assessment interval until the Supervisor issues the Defects Certificate or the Project
Manager issues a termination certificate (these two scenarios are in the alternative).
The Defects Certificate is issued at the defects date if there are no notified Defects, or
otherwise at the earlier of the end of the last defect correction period and the date when
all notified Defects have been corrected (clause 44.3). This means that assessment dates in
the ECC take place regularly, from Completion until the defects date or the end of the
last defect correction period or the date when all notified Defects have been corrected;
that is, assessments should take place regularly during a period of approximately 1 year,
even though there may have been no activity on the contract and an assessment is
therefore not necessary. The assessment interval is identified in Contract Data part one,
and is the key to the length of time between interim valuations of the project. Note that
the trigger is the end of the assessment interval. Examples of assessment intervals are as
follows:
(a) The assessment interval is 4 weeks. Because not all months are 4 weeks long, the end
of a 4-week period will creep earlier and earlier in the month, and it will not be long
before the end of the 4-week period is somewhere in the middle of a month. This is
unlikely to be convenient for either Party; however, some organisations operate
13 periods of 4 weeks.
(b) The assessment interval is one calendar month. The end of a calendar month is more
convenient and is also more definable without resorting to calendars to determine
when the date will fall. If, for example, the assessment interval is ‘one calendar
month’ (as stated in Contract Data part one), then the assessment dates will be at the
end of each calendar month, irrespective of the day of the week on which the end of
the calendar month falls. If even more preciseness is required, the Parties could agree
to the last Friday of each month, or whatever is suitable to their procedures, in
which case the assessment interval is the period between the last Friday in the
previous calendar month to the last Friday in the next calendar month.
(c) The assessment interval is the period between relevant dates in the schedule of project
dates included in the Scope. Some employers, recognising that the project procedures
could correlate with the accounting department’s requirements, compile a schedule of
project dates showing
– when the Contractor submits their application for payment
– the assessment date
– the date of the payment certificate
– the date of invoice (see below)
– the date for payment.

5
Managing the Contract

This matrix of project dates makes it quite clear to all parties concerned when
documents are required to be submitted.
g A final assessment takes place no later than 4 weeks after the Supervisor issues the
Defects Certificate or 13 weeks after the Project Manager issues a termination certificate.

1.2.3 Assessing the At each assessment date as identified above, the Project Manager assesses the amount due
amount due (clauses 50.1 and 50.2). The Project Manager assesses the amount due in the same way that the
Contractor would; that is, by assessing the cumulative Price for Work Done to Date and then
the amount now due.

The Project Manager assesses the amount due.

1.2.3.1 What is included The amount due assessed by the Project Manager is the Price for Work Done to Date, plus
in the assessment other amounts to be paid by the Contractor less amounts to be paid by or retained from the
Contractor (clause 50.5). Any value added tax (VAT) or sales tax that the law requires the Client
to pay to the Contractor is added to any payment made under the contract. This is similar to the
way in which a Contractor would be expected to submit an application for payment.

‘If the Contractor submits an application for ‘If the Contractor does not submit an
payment before the assessment date, the application for payment before the
amount due at the assessment date is assessment date, the amount due at the
assessment date is the lesser of
g the Price for Work Done to Date,
g plus other amounts to be paid to the g the amount the Project Manager
Contractor assesses as due at the assessment date,
g less amounts to be paid by or retained assessed as though the Contractor had
from the Contractor.’ (clause 50.3) submitted an application before the
assessment date∗ and
‘In assessing the amount due, the Project
g the amount due at the previous
Manager considers an application for
assessment date.’ (clause 50.4)
payment submitted by the Contractor
before the assessment date.’ (clause 50.2) ∗
That is, the Price for Work Done to
Date plus other amounts to be paid to the
Contractor minus amounts to be paid by
or retained from the Contractor.

So, if the Contractor has not submitted an application for payment before the assessment date,
and the Project Manager assesses the amount due as £100 000 and the last amount due at the
previous assessment date is £80 000, then the £80 000 is taken as the amount due. This provides
a significant incentive for the Contractor to submit an application for payment.

Alternatively, if the Project Manager assesses the amount due as £100 000, and the last amount
due at the previous assessment date is £120 000, then the £100 000 is taken as the amount due.

The amount due can be summarised as follows:

g The Price for Work Done to Date

g plus other amounts to be paid to the Contractor
g less amounts to be paid by or retained from the Contractor subtotal
g less previous payments
Payment due for this application
g plus VAT (to be added to payment)
Total to pay

6
 Payment procedures in the Engineering and Construction Contract

g The Price for Work Done to Date is a defined term that depends on the main Option
chosen as part of the Client’s contract strategy. For example, in Option A, the Price for
Work Done to Date is the total of the Prices for completed activities that are without
Defects (clause 11.2(29)). The Project Manager should therefore take the main Option
into account when assessing the amount due (more about this in Chapter 2 of
Book Two).
g Other amounts to be paid to the Contractor could relate to an advanced payment
(Option X14), a bonus for early Completion (Option X6), a correction of previous
certificates, and interest due.
g Amounts to be paid by or retained from the Contractor could include retention
(Option X16), the repayment of an advancement (Option X14), delay damages
(Option X7) or the retention of 25% of the Price for Work Done to Date for a first
programme showing the information that the contract requires was not submitted for
acceptance by the Contractor (clause 50.5)
g Since the Price for Work Done to Date is the total to date, in order to calculate the
amount due in the current assessment, previous payments should be deducted.
g VAT is to be shown separately, and is added to any payment (clause 51.5).

1.2.3.2 The programme This section refers only to contracts where the Client has included the statement about a first
programme in Contract Data Part One, and where the Project Manager can therefore expect
to see a first programme submitted for acceptance after the Contract Date by the Contractor
showing the information that the contract requires, including any additional information
included in the Scope.

Contract Data part one, section 3, ‘Time’

If no programme is identified in part two of the Contract Data

The period after the Contract Date within which the Contractor is to submit a first
programme for acceptance is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

This section does not apply where the Client has requested a programme to be submitted with
the tender, and so has included the relevant statement about the programme in Contract Data
part two and not Contract Data part one.

Contract Data part two, section 3, ‘Time’

If a programme is to be identified in the Contract Data

The programme identified in the Contract Data is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

If the Client has asked for an outline programme at tender stage, or a programme focusing on
certain elements of the overall programme, the contract will need to make clear which pro-
gramme the Client considers to be a first programme for the purposes of clause 50.5.

The Project Manager determines whether the Contractor has submitted a first programme for
acceptance that shows the information required by the contract (clause 50.5). This would
generally apply when the Client has asked for a first programme to be submitted after the
Contract Date and the relevant statement has been included in Contract Data part one.

If the Project Manager has not received a first programme for acceptance showing the infor-
mation that the contract requires, then a quarter (25%) – this is an obligation, not an option
– of the Price for Work Done to Date (not 25% of the amount due) is retained in assessments
of the amount due. Note that the criterion is not that the Project Manager has accepted the
programme but that one has been submitted, showing all the information required by the
contract, including the Scope.

7
Managing the Contract

The Contractor’s cash flow could suffer if they do not submit a first programme for
acceptance when they are required to do so.

Where a programme was requested and submitted with the tender, this programme may not
show all the information required by the contract, especially if that information was not avail-
able at the time of tender. It is unlikely, however, that the Project Manager would be able to use
this lack of information as the reason for retaining one-quarter of the Price for Work Done to
Date in assessments of the amount due, since clause 50.5 refers to situations where no pro-
gramme was identified in the Contract Data; that is, the statements relating to the programme
do not appear in Contract Data part two, but do appear in Contract Data part one. If, on the
other hand, the Contractor was required to submit a first programme within a certain time
period after the Contract Date, then the Contractor should ensure it is submitted at the latest
by the first assessment date.

1.2.3.3 Interest Note that it is the Project Manager who assesses the interest and includes it in the certificate for
payment. The Project Manager should not wait for the Contractor to claim the interest. Interest
is paid for five reasons:

1 If a certified payment is late, interest is assessed on the late payment and paid in the
very next assessment (clause 51.2). The interest is assessed from the date when the
payment should have been made to the date when it was made. This clause refers to a
payment that was certified by the Project Manager; if the payment is made late, then
interest is paid, but the clause does not differentiate the reason for the payment
being late.
2 The same clause provides for a late payment that is late because the Project Manager has
not issued a certificate that should be issued. Interest is assessed on the late payment and
paid in the very next assessment (clause 51.2). The interest is assessed from the date when
the payment should have been made to the date when it was made. The clause does not
specifically pertain to the Project Manager’s payment certificate, although it is implied.
This part of clause 51.2 is in the alternative to the first part of the clause discussed in
reason 1 above; that is, the assessment of interest only takes place once for a payment
that is late, even if the reason is that the Project Manager did not issue a certificate that
should have been issued.
3 If an amount due is corrected in a later certificate in relation to a mistake or a
compensation event, interest is assessed on the correcting amount (clause 51.3) and paid
in the assessment that includes the correcting amount. The interest is assessed from the
date when the incorrect amount was certified to the date when the correcting amount is
certified.
4 If an amount due is corrected in a later certificate because a payment was delayed by an
unnecessary delay to a test or inspection done by the Supervisor, interest is assessed on
the correcting amount (clause 51.3) and paid in the assessment that includes the
correcting amount. The interest is assessed from the date when the incorrect amount was
certified to the date when the correcting amount is certified.
5 If an amount due is corrected in a later certificate following a decision of the Adjudicator
or tribunal or a recommendation of the Dispute Avoidance Board, interest is assessed on
the correcting amount (clause 51.3) and paid in the assessment that includes the
correcting amount. The interest is assessed from the date when the incorrect amount was
certified to the date when the correcting amount is certified.

Interest is calculated on a daily basis at the interest rate, and is compounded annually
(clause 51.4).

1.2.3.4 The time period The Project Manager has less than a week in which to complete their assessment (since they
for assessment have to issue a payment certificate within 1 week of each assessment date (clause 51.1)). This
short time period may become too onerous for the Project Manager, particularly for contracts
under Options C, D and E, where there would be insufficient time to examine fully the
Contractor’s application and all the supporting documentation.

8
 Payment procedures in the Engineering and Construction Contract

A suggested course of action is that the Project Manager conducts a spot check of the appli-
cation for payment that the Contractor is required to submit, and conducts later inspections
of the Contractor’s records that they are required to keep according to the Scope. This inspec-
tion process should be detailed in the Scope and adhered to by the Project Manager and their
assistants. The Project Manager has the ability to correct any wrongly assessed amount due in a
later payment certificate (clause 50.6), which gives the Project Manager the opportunity to make
any changes post audit.

1.2.3.5 The details of In assessing the amount due, the Project Manager is required to consider an application for
assessment payment submitted by the Contractor before the assessment date.

If the Contractor has submitted an application for payment (clause 50.2), the amount due is the
Price for Work Done to Date plus other amounts to be paid to the Contractor, less amounts to
be paid or retained from the Contractor.

If the Contractor does not submit an application for payment before the assessment date, the
amount due at the assessment date is the lesser of

g the amount that the Project Manager assesses as due at the assessment date, assessed as
the Contractor had submitted the application before the assessment date
g the amount due at the previous assessment date.

So, if the Project Manager assesses that the amount due is £100 000 and the last amount due at
the previous assessment date is £80 000, then the £80 000 is taken as the amount due. This
provides a significant incentive for the Contractor to submit an application for payment.

Alternatively, if the Project Manager assesses the amount due as £100 000 and the last amount
due at the previous assessment date is £102 000, then the £100 000 is taken as the amount
due.

1.2.4 Certification The Project Manager certifies a payment within 1 week of each assessment date (clause 51.1).
The Project Manager includes with the payment certificate the details of how the amount due
has been assessed by them. If any previous amount due was incorrect, it is corrected in a later
payment certificate. Interest (on previous late payments or on correcting amounts) is included in
later payment certificates (clauses 51.2 and 51.3). The Project Manager should voluntarily
include interest in a payment certificate if previous payments were made late to the Contractor;
the Project Manager should not wait for the Contractor to claim interest (an example of a pay-
ment certificate is included in Chapter 1 of Book Five). Any tax that the Client is legally obliged
to pay is added to payments made under the contract (clause 51.5).

1.2.5 Invoices Any invoice procedure dictated by the Client takes place at this stage.

None of the NEC contracts cater for invoicing as part of the payment procedure.

If the Client wishes to receive an invoice from the Contractor for the purposes of payment,
then an invoice process will have to be introduced into the contract through either secondary
Option Z or the Scope.

Many employers augment the payment procedure in the conditions of contract with other infor-
mation that they prefer to receive and as described in the Scope. For example, some Clients may
dictate how the Contractor should format their application for payment and what documents
should accompany the application, such as, in the case of Options C, D or E, labour records,
timesheets, plant records and the payroll. As part of the payment administration procedures,
Clients could also include a section on invoicing, instructing the Contractor when to submit
an invoice and what the invoice should contain. Some examples of what a Client may include
in the Scope regarding invoicing procedures are listed below:

g To whom the invoice is to be addressed – possibly the Client’s finance department within
the Client’s organisation.

9
Managing the Contract

g When the invoice should be submitted; for example, ‘Invoices shall be submitted within
7 days of the date of the Project Manager’s payment certificate or on the date stated on
the attached schedule of project dates.’
g The sanction on a late invoice; for example, ‘Payment shall be delayed by the number of
days that the invoice is late.’
g What the invoice should show; for example, ‘Invoices shall show the full amount claimed
to date, deducting separately previous payments. The latest statement of account should
accompany the invoice. Accounts shall be shown net of VAT, with the amount of VAT
shown separately.’

Invoicing is usually an internal procedure that facilitates payment, and is not therefore, strictly
speaking, a condition of contract. A Client’s invoicing procedure normally coincides with the
procedures required by their accounts department, and may therefore vary from client to client.
Whatever the invoicing procedure, it takes place within the parameters of the interval between
the assessment date and the payment date (or, in the case of Option Y(UK)2, the certificate date
and the final date for payment), and care should be taken to ensure that a late invoice resulting
in a late payment is not construed as a Client’s default.

The ECC does not include an invoicing procedure.

Figure 1.1 Default time period in the contract

Assessment Payment

3 weeks
Payment
certificate Invoice
1 week

1.2.6 Payment The Client makes payment a specified time after the assessment date. This may be 3 weeks
(clause 51.2), which is the default in the conditions of contract, or the Client could use the
CD1 entry to change the 3 week payment period to 4 or 5 weeks.

Note that the payment date is dependent on the assessment date and not the date of the
payment certificate or the date of the invoice. None of the activities that takes place between

Figure 1.2 Payment procedures in the ECC

Payment for the previous application and

the assessment date for the next coincide
on a four-week payment cycle

Payment Payment
Assessment date Contractor’s takes place takes place
Contractor’s application for Contractor’s
application for payment Assessment application for Assessment date
payment date payment
Payment Payment Payment
certificate issued certificate issued certificate issued

1 week
Invoice from 1 week Invoice from
1 week Contractor Contractor
(if required) (if required) … and so on

4 weeks
4 weeks 4 weeks

(Based on a 4-week assessment interval )

10
 Payment procedures in the Engineering and Construction Contract

the assessment date and the payment date should delay payment. Additional clauses using
Option Z or additional requirements in the Scope can be used to ensure that the Client is not
in default when a payment is late as a result of a late invoice.

1.2.7 Representation of Figure 1.2 assumes that certified payment is made within 4 weeks of the assessment date, rather
the payment procedure than the default 3 weeks in clause 51.2. A Client would need to include the time period (4 weeks)
in the ECC in Contract Data part one to effect this change.

Contract Data part one

If the period in which payments are made is not 3 weeks and Y(UK)2 is not used

The period within which payments are made is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.3. How the ECC The ECC incorporates the Housing Grants, Construction and Regeneration Act 1996 (HGCR
includes the HGCR Act) as amended in two different places: payment changes in Option Y(UK)2 and adjudication
Act changes in Option W2.

Adjudication is discussed in Chapter 4 of this book.

1.4. The effects of Where the Client has determined that the HGCR Act as amended applies to the contract,
Y(UK)2 and thus has chosen Option Y(UK)2 to apply to the contract, the payment procedure is
1.4.1 Periods for affected.
payment
Four concepts are introduced in Option Y(UK)2 and through the HGCR Act:

g The date on which the payment becomes due (the payment due date). This is not the
date on which payment has to be made but rather the date that marks that the
payment is due to be paid some time in the future. The date on which a payment
becomes due is 7 days after the assessment date (clause Y2.2 of Option Y(UK)2), and is
the latest day by which the Project Manager must certify a payment (clause Y2.2 of
Option Y(UK)2).

The due date is different from the final date for payment.

g The final date for payment. This is the latest date by which each certified payment must
be made. The final date for payment is a certain time period after the date on which the
payment becomes due (rather than a certain period after the assessment date, as with the
default conditions of contract). In the ECC, the final date for payment is 14 days after
the date on which payment becomes due, or a different period if stated in the Contract
Data (clause Y2.2 of Option Y(UK)2).
g The notified sum. This is the sum included in the payment certificate as the sum that is
due to be paid on the final date for payment. The Local Democracy, Economic
Development and Construction Act 2009 which amended the 1996 Act provides further
information about the notified sum.
g The prescribed period. This is the number of days agreed between the Parties to be the
period before the final date for payment. Clause Y2.3 of Option Y(UK)2 states that the
prescribed period is 7 days. A notice that the Client is not going to pay the Contractor
the notified sum (and including details required) must be given to the Contractor this
period of time before the final date for payment.

1.4.1.1 Differences The certification procedure is unchanged since the ECC requires the payment to be certified
between Option Y(UK)2 within 7 days of the assessment date; and legislation requires the certificate to be issued not
and ECC section 5 later than 5 days after the payment due date (and payment is due 7 days after the assessment
date).

11
Managing the Contract

Figure 1.3 Times for payment in ECC section 5

Assessment Payment

3 weeks
Payment
certificate Invoice
1 week

Figure 1.4 Times for payment in Y(UK)2

Assessment date Payment takes place

Certificate

2 weeks

1 week

Clause 51.2 requires payment to be made within 3 weeks after the assessment date. The 3-week
time period is a default that can be changed using an optional statement in the Contract Data.
The important point is that the trigger is the assessment date (Figure 1.3).

Clause 51.2 requires payment to be made within 3 weeks after the assessment date; and
clause Y2.2 of Option Y(UK)2 requires the final date for payment to be made 14 days after pay-
ment becomes due (payment becomes due 1 week after the assessment date). The time periods
therefore equate to the same timeline. Once again, the 3-week time period is a default that can

Figure 1.5 Times for payment in clause 51.2 and Option Y(UK)2

Assessment Project Manager Certified payment

date certifies payment is made

1 week

Timeline

3 weeks or other period stated

in the Contract Data

Interest on late payment

(clause 51.2)

Y2.2 due Y2.2 final

Assessment date for 14 days or other date for
date payment period stated in CD payment
7 days

Timeline

7 days

Y2.3 notice to
pay less than Interest 51.2 on
Project Manager’s late payment
assessment Y2.4 suspension of
performance of all
or part of works

12
 Payment procedures in the Engineering and Construction Contract

Figure 1.6 Payment procedure with Option Y(UK)2

Final date for

Final date for payment: payment
payment: payment takes place
Assessment date
Contractor’s takes place
application Contractor’s
Payment certificate for payment Assessment Assessment
Contractor’s date application for date
issued; payment payment
application becomes due
for payment Payment certificate
issued; payment
Invoice from becomes due
Contractor
(if required) Invoice from
7 days Contractor
(if required)

3 weeks

(Based on a four-week assessment interval and a final date for payment 21 days after
the date on which payment becomes due)

be changed using an optional statement in the Contract Data. This time, however, the trigger is
when payment becomes due; that is, certification (Figure 1.4).

There is no difference between the payment date and the final date for payment in Option
Y(UK)2. This is because the final date for payment is 14 days after the date on which payment
becomes due, whereas in clause 51.2, payment is made 3 weeks after the assessment date
(Figure 1.5). Because the date on which payment becomes due is 7 days after the assessment
date, the time periods between assessment and payment are the same, although the time periods
run from different dates.

1.4.2 The payment The payment procedure with Option Y(UK)2 is shown schematically in Figure 1.6.
procedure with
Option Y(UK)2

1.4.3 Intention to pay Option Y(UK)2 includes the concept of paying less than the notified sum to comply with the
less with Option Y(UK)2 HGCR Act as amended. If the Client intends to pay less than the notified sum to the
Contractor, then the Contractor should be informed about the amount that is to be paid and
the basis on which that sum was calculated. The Client must tell the Contractor this not later
than 7 days before the final date for payment (clause Y2.3 of Option Y(UK)2) (see Figure 1.7).

The Contractor may suspend performance if the procedure is not followed.

Figure 1.7 The withholding payment procedure

Final date for

Employer’s payment: payment
Assessment date notice of takes place
paying less
than the
Payment certificate notified sum
Contractor’s issued; payment
application becomes due
for payment

No later
than
7 days
7 days

2 or 3 weeks

13
Managing the Contract

1.5. Assessment at A specific assessment at Completion is not required in the ECC. Therefore, Completion will be
Completion taken account of in the next assessment after Completion has been certified. The Price for Work
Done to Date plus other amounts to be paid by the Contractor less amounts to be paid by or
retained from the Contractor will be assessed in the normal way. There could be some differ-
ences to take into account secondary Options such as retention (Option X16), delay damages
(Option X7) and bonus for early completion (Option X6). There may also be some activities
that are assessed at Completion for the sake of convenience rather than because they are wholly
chronological activities, such as the submission of building manuals and as-built drawings.

It is possible that a Contractor might inform the Project Manager that Completion has been
achieved, although this is not part of the procedure of the ECC. It is the Project Manager who
decides that Completion has been achieved, based on the objective criteria stated in the Scope.

1.6. Assessment Assessments occur at the end of each assessment interval until the Project Manager issues a
after termination termination certificate (clause 50.1). This is in the alternative to Section 1.7 below, as termin-
ation is likely to occur before the defects date rather than after the defects date. The termination
procedures in section 9 of the ECC core clauses detail the payments due on termination.

1.7. The payment Assessments occur at the end of each assessment interval until the Supervisor issues the Defects
procedure after Certificate (clause 50.1).
the defects date
The Defects Certificate is either a list of Defects that the Supervisor has notified before the
defects date which the Contractor has not corrected or, if there are no such Defects, a statement
that there are none (clause 11.2(6)). The Supervisor issues the Defects Certificate at the defects
date if there are no notified Defects, or otherwise at the earlier of the end of the last defect
correction period and the date when all notified Defects have been corrected (clause 44.3). The
defects date is generally a year or so after Completion takes place, and is identified in Contract
Data part one.

This assessment would be related to the release of retention and the deduction of monies where
the Contractor has not corrected Defects that were required to be corrected.

Therefore, assessments must take place regularly right through the period of the contract from
the starting date to a date more or less 1 year after Completion was certified.

14
Managing the Contract
ISBN 978-0-7277-6186-6

ICE Publishing: All rights reserved

http://dx.doi.org/10.1680/mc.61866.015

Chapter 2
Control of time

Synopsis This chapter discusses aspects relating to the Contractor’s programme, including

g the terminology used to describe the programme

g what the programme is
g the definition and purpose of the Accepted Programme
g how and when to submit programmes
g what the programme is used for
g what to include in the programme.

15
Managing the Contract

2.1. Introduction One of the underlying principles of the ECC is to avoid and reduce the amount of change that
occurs on construction projects. However, the ECC contract recognises that change is inevitable
even when the project has been well planned and prepared. Having accepted that change is
inevitable, the contract sets out to deal with the effects and consequences of change in an
improved way.

The programme is one of the most important tools for use by both the Contractor and the
Project Manager throughout the duration of the project. It is valuable not only as a scheduling
tool but also as a pricing and project management tool and a change control tool. Indeed, there
is an adage that states that ‘planning plus management equals project management’.

The ECC has unique features for dealing with the programme, and is a manual of procedure for
the Parties to the contract. The ECC programme is the Contractor’s programme. The Contractor
compiles the programme, and they own the terminal float, but the programme is also a project
management tool, and there are incentives within the ECC to ensure that the Contractor keeps
their programme up to date. The programme is used not only as a project planning tool but can
also be used for forensic analysis to assess the effects of a compensation event on time and
money.

Although the clauses for programming are to be found primarily within section 3 of the ECC
core clauses, other clauses might impact or be affected by the programme. The ECC should be
read as a whole to be properly understood and implemented.

The programme is an important tool for use by the Contractor and Project Manager to
manage the contract.

2.2. Terminology The following words or phrases denote the terminology in the ECC that affects the programme:

g Contract Date defined in clause 11.2(4)

g starting date identified in Contract Data part one
g access date identified in Contract Data part one
g Completion defined in clause 11.2(2)
g Completion Date defined in clause 11.2(3)
g planned Completion used in clauses 31.2 and 63.5
g Key Date defined in clause 11.2(11).

2.2.1 The Contract Date The date when the contract came into existence, and is generally stated in the form of contract/
Articles of agreement/letter of award.

2.2.2 The starting date The date stated in the Contract Data part one, when the Contractor starts work on the contract.

In effect, the starting date is the date from which the Contractor is ‘on risk’ (clause 83.3). The
starting date is not necessarily the date when the Contractor will commence work on Site, since
the work commenced at the starting date could be design or manufacture required to be under-
taken off Site prior to construction or enabling works required on Site.

2.2.3 The access date(s) The date or dates stated in the Contract Data part one, before which the Contractor cannot start
work on the Site.

The starting date is not necessarily the same as the access date because the starting date is not
necessarily the date when the Contractor will take access to the Site. This is because, on
contracts that have a significant amount of design or manufacturing work for the Contractor,
the starting date could be several weeks or months prior to starting work on Site, to enable the
Contractor to design or manufacture the Plant and Materials that are required to Provide the
Works.

The Contractor might not have sole access to the Site. If so, this should be stated in the Scope, as
well as any interfaces required.

16
 Control of time

2.2.4 Completion Completion is when the Contractor has done all the work that the Scope states it is to do by the
Completion Date and has corrected notified Defects that would have prevented the Client from
using the works or Others doing their work. This recognises that the Client may employ others
to undertake works in association with the project and that they may be delayed by uncorrected
Defects.

Completion is not a date but a status to be achieved, and the date on which Completion occurs
is decided by the Project Manager (clause 30.2).

Completion is not a date.

Completion could occur on the Completion Date, after the Completion Date or before the
Completion Date.

The date of Completion is decided by the Project Manager.

2.2.5 The Completion The Completion Date is defined in clause 11.2(3), and is the date stated in the Contract Data as
Date the completion date unless later changed in accordance with the contract; that is, it is the date on
or before which the Contractor is contractually obliged to complete the works if they are not to
be in default.

The Completion Date could be different from the date of Completion, where the date of
Completion is that date the Project Manager decides the works are complete.

2.2.6 Key Dates A Key Date is the date by which work is to meet the Condition stated in the Contract Data
unless the Key Date or Condition is later changed in accordance with the contract (clause
11.2(11)). There is a sanction on the Contractor if the work does not meet the Condition stated
for a Key Date and the Client incurs additional cost as a result (clause 25.3).

2.2.7 Secondary Option This Option needs to be chosen where the Client wishes to take over any part of the works
X5 – sectional before Completion of the whole of the works.
completion

2.2.8 Planned Planned Completion is the date when the Contractor plans to complete the works. The
Completion Contractor is required to show both planned Completion and the Completion Date on its
programme.

At the outset of the contract, the Contractor’s planned Completion will be a date earlier than
the Completion Date given by the Client in Contract Data part one. During the contract, the
Contractor’s planned Completion and the Completion Date will be adjusted. The Completion
Date will be adjusted for admissible compensation events, to give a revised Completion Date
and the Contractor’s planned Completion. The Contractor’s planned Completion will also be
adjusted for matters that are at the Contractor’s risk under the contract. It is therefore possible
for the planned Completion to be later than the Completion Date, which may expose the
Contractor to delay damages.

2.3. What is the The programme is not a key feature in Joint Contracts Tribunal (JCT) or Institution of Civil
programme? Engineers (ICE) contracts. Traditionally, an air of mistrust seems to surround the preparation
and review of programmes, with the contractor not wishing to show too much information
in the programme for fear that the engineer or architect will manipulate it to their advantage
in the event that variations or other changed circumstances arise for additional or reduced
works.

With traditional contracts, the contractor is not particularly motivated to prepare and
regularly update programmes for joint agreement with the employer’s representative, since
there are few or no sanctions that can be applied to the contractor apart from warnings that
the lack of an approved programme may jeopardise the assessment of claims for extensions
of time.

17
18
Figure 2.1 A traditional clause 14 programme from the ICE CoC 6th Edition

CIVIL ENGINEERING LTD CONTRACT NO: 13512

WEST ROYSTON – PIPE JACKING DRAWN BY: BGT

DATE: 28 March 20XX

CLAUSE 14

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
W/C
31/1 7/2 14/2 21/2 28/2 7/3 14/3 21/3 28/3 4/4 11/4 18/4 25/4 2/5 9/5 16/5 23/5 30/5 6/6 13/6 20/6

X1 Access/reinstate
Drive pit
Rec pit
Micro 450 Ø 60 m
Threading
Finishing
X2 Access/reinstate
Drive shaft
Rec shaft
Micro 450 Ø 94 m
Threading
Finishing
X3 Access/reinstate
Drive shaft
Rec shaft
Micro 450 Ø 100 m
Threading
Finishing
X4 Access/reinstate
 Control of time

The fact that the programme may be submitted at the tender stage and is not updated or
referred to again in traditional contracts denies the project manager access to a valuable
tool.

The programme is regularly updated, unlike traditional forms of contract.

The programme in the ECC is far more than a simple bar chart showing the intended order
and duration of activities to be completed. The programme includes the resources that are
used for each activity, including labour and Equipment, and therefore becomes a base compari-
son for any compensation events. It is a project management tool, and as such is updated
regularly.

An example of a traditional clause 14 programme from the ICE Conditions of Contract (CoC)
is shown in Figure 2.1. Compare the lack of information in this programme to the requirements
of the ECC.

2.4. Definition of The Accepted Programme is the latest programme accepted by the Project Manager
the Accepted (clause 11.2(1)).
Programme

The Project Manager decides whether to accept a programme submitted by the Contractor.

The programme is submitted regularly by the Contractor to the Project Manager for acceptance,
and upon its acceptance it becomes the Accepted Programme. Each subsequent programme
submitted by the Contractor to the Project Manager becomes the Accepted Programme upon
acceptance, superseding the previous programme.

2.4.1 When the The Client may choose to receive a first programme from the Contractor either at the tender
programme is submitted stage or after award of the contract:
for acceptance
g Usually the Client will request a programme to be submitted by the Contractor with their
tender in the detail required in clause 31.2. In this instance, the Client will not include
the optional statement for the programme in Contract Data part one, but will include the
optional statement for the programme in Contract Data part two, and the Contractor
will complete the statement and submit the completed Contract Data part two at the
time of tender.

Contract Data part two by the Contractor

If a programme is to be identified in the Contract Data

g The programme identified in the Contract Data is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[the tenderer inserts the name of the programme here, and includes the programme as
part of their tender]

g The alternative is to require the Contractor to submit a programme after the start of the
contract; that is, within a period of time after the Contract Date identified by the Client
in Contract Data part one. This alternative is included because it is recognised in the
ECC that in certain instances, for example on a cost-reimbursable contract, a fully
developed and detailed programme may not be possible prior to the award of the
contract. This alternative therefore provides flexibility. In addition, if the Client has
included a completion date and, where required, Conditions and Key Dates, in Contract
Data part one, then the Contractor is still bound to adhere to these dates, even if the
detailed programme is only submitted after the start of the contract.

19
Managing the Contract

Contract Data part one by the Client

If no programme is identified in part two of the Contract Data

g The period after the Contract Date within which the Contractor is to submit a first
programme for acceptance is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [e.g. 2 weeks]

Where possible, however, it is a good policy to have a programme submitted and agreed before
contract award as this puts both Parties in a far better position in terms of what is required and
when. It also enables the Client to ensure that the information and dates stipulated in the
invitation to tender have been adhered to. This is particularly relevant for priced contracts.
With cost-reimbursable contracts the programme is likely to develop over the course of the
project and therefore it may not always be possible for a detailed programme to be submitted
at tender stage.

The Client could request a first programme from the Contractor either at tender stage or
after contract award.

There is, though, a third option to consider: the Client could require a detailed programme to be
submitted after the Contract Date, but still ask for an outline programme, or perhaps a detailed
programme of just one aspect of the works, to be submitted as part of the tender, and these can
be evaluated by the Client and scored without compromising the need for an ECC-compliant
programme to be submitted after the Contract Date. In this case, the Client would include the
relevant statement in Contract Data part one, and the instructions to tenderers would describe
the programme to be submitted with the tender.

2.5. The purpose In keeping with good project management practice, the ECC recognises the programme as being
of the Accepted an essential tool for managing the works. It enables the Project Manager and the Contractor to
Programme monitor progress and to assess the delaying effects of any compensation events that arise. It also
enables the Project Manager to see what the time effects will be of a proposed instruction that
they might be considering.

It is important always to know what the Completion Date is, if the Client’s right to delay
damages is not to be frustrated. Good programme management by the Contractor could protect
them from delay damages being levied by the Client.

The programme is used for more than just tracking the progress of the project – although this is
clearly its primary function.

2.5.1 What the Accepted The programme can be used for the following.
Programme can be
used for

2.5.1.1 Resources The programme includes a statement of how the Contractor plans to do the work; that is, a list
for each activity of the resources that are intended to be used. Clearly this list will initially be
based on the scope of work at the time the programme is drafted – either at the tender stage,
or shortly after the start of the contract. This resource statement then becomes useful
during the project, as it provides the baseline for how the Contractor intends to resource the
works.

The list of resources for each activity facilitates the estimating of the job by the Contractor. Since
they will be going through the exercise of forecasting the resources, including the Equipment,
used for the job in order to calculate the tender price, this list of resources can be included
in the programme, as required by main bullet point 8 of clause 31.2, without further work being
required.

20
 Control of time

The programme is an essential part of assessing compensation events.

The list of resources also facilitates the assessment of compensation events, both for the
Contractor and the Project Manager. The resources and duration that were expected for the
activity can be used as a base when considering the changes as a result of a compensation event.
The Contractor is able to use those resources estimated in considering the impact of the com-
pensation event, and the Project Manager can assess the quotation in the light of the resources
estimated originally.

2.5.1.2 Costs Because of the resources attached to the programme, the costs of the project become clearer,
and the Project Manager is able to view the programme both from a scheduling point of view
and a cost perspective.

This becomes particularly important where the Project Manager assesses a compensation event
(clause 64), since they will use the tools available to them to do so, and may therefore use the
latest Accepted Programme to assess the changes to the Prices as well as the delay to the
Completion Date.

2.5.1.3 Project The progress of the project is noted on each revised programme so that the Project Manager is
management able to project manage the works through the regularly updated programmes by noting whether
the project is progressing on time and to budget, using not only the scheduling aspect of the
programme but also the resource and cost aspects.

The effect of a compensation event in the programme is more easily assessed since the
Contractor can immediately see the impact of any delays on their programme. If the Project
Manager assesses the programme (under clause 64), they will use those tools available to them,
including the Contractor’s programme. If the programme is not up to date, the Project Manager
could assess the compensation event based entirely on their own experience. The Contractor is
thus incentivised to keep their programme up to date and accurate.

2.6. What is included Each programme that is submitted for acceptance must include the following information
in the programme? (clause 31.2):
2.6.1 All programmes
g Dates:
– starting date
– access dates
– Key Dates
– planned Completion
– Completion Date
– dates when the Contractor plans to meet each Condition stated for the Key Dates
– dates when the Contractor plans to complete work needed to allow the Client and
Others to do their work
– dates when the Contractor will need
W access (access to a part of the Site if later than its access date)
W acceptances
W Plant and Materials and other things to be provided by the Client
W information from Others.
g The order and timing of the operations that the Contractor plans to do. Operations may
be things that the Contractor has to undertake in order to do the work; for example, the
design or manufacture of bathroom pods for hotels that will be manufactured/designed
off Site, with the work on Site being their positioning in place by crane and final
connections and testing.
g The order and timing of the work of the Client and Others as last agreed with them by
the Contractor or, if not so agreed, as stated in the Scope.
g A statement of how the Contractor plans to do the work. See the next item.
g A resource statement: ‘for each operation, a statement of how the Contractor plans to do
the work identifying the principal Equipment and other resources which will be used’.

21
Managing the Contract

g Provisions for
– float
– time risk allowances
– health and safety requirements
– the procedures set out in the contract.
g Other information that the Scope requires the Contractor to show in a programme
submitted for acceptance.

2.6.2 All programmes In addition to the above information, each revised programme must also include the following
except the first information (clause 32.1):
programme
g the actual progress achieved on each operation, and its effect upon the timing of the
remaining work
g how the Contractor plans to deal with any delays and to correct notified Defects
g any other changes which the Contractor proposes to make to the Accepted Programme.

The first bullet point is essential for facilitating the Project Manager’s reviewing of progress.

The final bullet point is of interest because it allows the Contractor to reprogramme works to
suit any changes they might have with regards to how they will Provide the Works. For example,
a Contractor could find themselves in a position where they realise that their original planned
sequence of operations is no longer realistic or practicable, and they decide to resequence the
work. If they do this, and they are at liberty to do so, under Options A and C the revised list
of new or amended activities and the programme must correlate. The prices of the individual
activities will also need to be amended so that they tie up.

2.6.3 Notes on the The starting date, access dates and Completion Date are all stated in Contract Data part one,
programme inclusions and should be included in the programme. The ECC also requires Key Dates to be shown as
2.6.3.1 The starting date, well as the Condition to be met by each Key Date.
access dates, Completion
Dates and Key Dates

2.6.3.2 Planned Planned Completion is required to be shown in the programme separately from the Completion
Completion Date. Planned Completion shows that date when the Contractor is planning to complete the
works. The date for planned Completion will at the outset of the contract be a date earlier than
the Completion Date.

During the contract, however, the Contractor may experience problems or encounter risks that
are at their risk under the contract, and this may lead to planned Completion being later than
the original or adjusted contract Completion Date. In such instances the Contractor will be at
risk for delay damages, and they will be required to show in revised programmes how they plan
to recover the delay.

For the purposes of assessing compensation events, the terminal float (the period between
planned Completion in the programme and the Completion Date) is retained by the Contractor,
as stated in clause 63.5 (delays to Key Dates are assessed on the same basis), where any delay to
the Completion Date due to a compensation event is assessed as the length of time that planned
Completion is later than planned Completion on the Accepted Programme that is current at the
time.

However, even now that there is a facility for planning to complete earlier than the Completion
Date stated in the contract, few Contractors appear to be including a planned Completion Date
in their programme.

It should also be pointed out that the Completion Date for the contract is something
different from Completion. Completion is a status (for more information, see Chapter 1 of
Book One is this series) that is achieved when the Contractor has fulfilled their duties as
described in the contract. Completion could therefore be achieved on, before or after the
Completion Date.

22
 Control of time

The ECC includes the concept of Key Dates (which are defined in clause 11.2(11) as ‘the date
by which work is to meet the Condition stated’) and states in clause 63.5: ‘A delay to a Key Date
is assessed as the length of time that, due to the compensation event, the planned date when
the Condition stated for a Key Date will be met is later than the date shown on the Accepted
Programme current at the dividing date’.

In addition, the Contractor must make sure that any changes to their methods of working
do not affect the correlation of the Accepted Programme and the Activity Schedule in an
Option A contract.

In the ECC, the wording of clause A55.3 reads as follows:

‘If the Contractor

g changes a planned method of working at its discretion so that the activities on the
Activity Schedule do not relate to the operations on the Accepted Programme or
g corrects the Activity Schedule so that the activities on the Activity Schedule relate to
the Scope

the Contractor submits a revision of the Activity Schedule to the Project Manager for
acceptance.’

2.6.3.3 Other dates to It is important for the Client to advise the Contractor of the dates when they require the
be shown on the Contractor to complete particular works (but for use not take over, i.e. not a section of the
Programme works) or the degree to which they need it to be completed to enable the Client and Others,
whose names or allocations must also be included in the documents, to do their work.

An example may be a statement such as:

The Contractor shall complete the proposed new road between chainages 0 to 100 m by the
10th December 20XX to allow access for the Client to the existing warehouse adjacent to
the new road. It is a requirement that the road be complete up to base course level with all
adjacent kerbs, drainage and street lighting.

The statement needs to be clear and unambiguous: the Contractor should not be in any doubt as
to what it is they have to do by the key date (the term Key Date(s) is a defined term, and
the Client identifies the condition of work to be completed by the key date in the Contract
Data). In the ECC, the box above is an example of the condition of work to be completed
by a key date.

2.6.3.4 Access to a part The importance of this is that the Contract Data part one should include the dates when the
of a Site if later than its Client can give access to parts of the Site.
access date

The access dates are

part of the Site date
(1) ...................................................... ...........................
(2) ...................................................... ...........................
(3) ...................................................... ...........................

These dates have to be shown on the Contractor’s programme. If the Contractor decides that
they do not need to access a part of the Site on the access dates given, then they can decide
to include a later access date in their programme. The Client’s contractual obligation is to give
access changes to this later date shown on the Contractor’s programme.

23
Managing the Contract

Figure 2.2 Access dates

SD AD CD
SD starting date
A
AD access date
AD PC CD CD completion date
PC planned Completion
B
AD PC CD
C

Figure 2.2 shows in a simple form the consequences of giving a later access date than that given
in Contract Data part one. Line A shows the dates for the starting date, access date and
completion date, all of which are provided by the Client in Contract Data part one and all of
which the Contractor must show on their programme. Line B shows the Contract Data part one
starting date and completion date on the Contractor’s programme. The Contractor’s programme
also shows the date on which they need access to the Site, as it is later that the access date, and
their planned Completion that they are obliged to include in the programme.

As the access date in Line B is a later date than in Line A, that date becomes the contractual
date for access.

Line C shows an access date earlier than the access date given in the Contract Data and a
Completion Date later than that given in the Contract Data. The Project Manager will not
accept this programme because it does not show the information that this contract requires, and
because it does not allow the Client, other contractors and Others to start, carry out and
complete their works as they intended and as stated in the Scope.

2.6.3.5 Acceptances If the Contractor is designing part or the whole of the works, then the Contractor will need to
show in its programme the dates when it requires its Contractor design to be accepted by the
Project Manager, which includes both permanent and temporary works.

In some instances the Scope may contain a requirement for the Contractor to submit particulars
of the design of an item of Equipment (temporary shoring to a building façade, crash deck,
etc.). The Client may feel that it is wise to do this because the failure of such Equipment may
potentially pose a significant health, security, safety, operational, environmental, public or
people fatality risk.

In such instances the Client will wish to demonstrate that if such failure occurs they acted in a
manner that mitigated or reduced such risks. The Project Manager may also (clause 23.1)
instruct the Contractor to submit particulars of their design of Equipment during the contract.
Again, in such an instance this will need to be shown in any revised programmes submitted by
the Contractor for acceptance by the Project Manager.

On some projects the acceptances given by the Client will need to be approved by third parties –
for example, the utilities or statutory bodies. In these instances the Client needs to ensure that
they have adequate time allowances built into the acceptance system for Contractor-designed
work. It also needs to be clear in the Scope who has the responsibility to liaise and interface
with such third parties.

2.6.3.6 Plant and The Contractor must show in their programme the dates when they require Plant and Materials
Materials and other which the Scope states the Client is to provide.
things
This will cover situations where the Client might be a company that has items such as standard
fittings or furnishings that they have for all their stores, factories or facilities. In some instances,
the Plant and Materials will be available or will be provided from the Client’s own stores.

A practical example of this is where the Client has placed a contract with a Contractor to carry
out some utility diversion work. In order for the overall programme for the works to be
achieved, it was necessary for the Client to pre-order the pipework and fittings because they are
on a long lead-in time to purchase of 18 weeks.

24
 Control of time

The Scope should also state a date after which the Client-supplied materials will be available for
call-off by the Contractor.

2.6.3.7 The order and The ‘operations’ referred to in clause 31.2 do not necessarily equate to an activity schedule or bill
timing of the of quantities item, as there may be several operations to such an item. For example, there may be
Contractor’s work an item in the activity schedule that reads as follows:

Activity No. Description Price

300 Foundations up to DPC Level £25 000

This one activity has several operations:

1 excavate for strip foundations

2 earthwork support
3 dispose of excavated material
4 level and compact bottom of excavations
5 concrete strip foundations
6 brickwork, including damp proof course (DPC) and cavity fill
7 backfilling, including level and compact.

In this example, the Contractor must show in their programme the order and timing of all the
operations that the Contractor plans to do to Provide the Works, and not just the headline activity
– Foundations up to DPC Level – as well as the information that shows how each activity on the
activity schedule relates to the operations in each programme submitted (clause A31.4).

Compatibility of the activity schedule and the Accepted Programme

It is essential that the activity schedule and the Accepted Programme correlate and that each has
the same list of activities.

The Contractor must provide information that shows how each activity on the activity schedule
relates to the operations in each programme that the Contractor submits for acceptance.

If the documents received from the Contractor are not compatible, then they should be made to
be so. Clause A55.3 requires that where a Contractor changes a planned method of working at
their discretion so that the activity schedule does not comply with the Accepted Programme, it
submits a revision of the activity schedule to the Project Manager for acceptance.

Incompatibility is a reason for the Project Manager not accepting the programme (the pro-
gramme does not show the information that the contract requires).

If the documents do not correlate, then it will be impossible to monitor the true effects that
compensation events will have (or have had) upon the Accepted Programme, and hence the time
aspects of the project will not be manageable.

2.6.3.8 The order and The Client needs to ensure that any constraints on how the Contractor Provides the Works are
timing of the Client’s stated in the Scope. The Contractor will then need to reflect these constraints in their planning of
part of the works the order and timing of the works.

To introduce constraints at a later date once work has commenced would be a change to the
Scope, and consequently a compensation event.

The same rule applies for

g any work that the Client is to carry out

g any work to be undertaken by Others
g Key Dates (a defined term – see clause 11.2(11)) by which the Client or Others need to
complete their work.

25
Managing the Contract

This emphasises the requirement for the Client to provide precise and accurate information.

2.6.3.9 The importance The Contractor’s programme is required to show not only the order and timing of their own
of dates in the work but also that of the Client and Others, and the dates when the Contractor needs access,
programme acceptances and things to be provided by the Client. This allows the Contractor to plan their
operations and to be proactive in their requirements. It enables the Contractor to assess any
impact on the programme of the Client not doing their work, or not providing something for
any resulting compensation event.

The dates to be included in the programme (e.g. dates when the Contractor plans to complete
work to allow the Client and Others to do their work and dates when the Contractor will need
access, acceptances and things provided by the Client) become more important if a compen-
sation event arises.

Because one of the important aspects of the programme is that it provides forensic evidence, the
Contractor can use the programme to prove delays. They can only do this, however, if the dates
when they required things were included in the programme.

The programme can help both the Client and the Contractor in assessing compensation
events.

The programme enables the Client to carry out what-if scenarios.

Several of the compensation events listed in clause 60.1 relate back to the programme and the
information that the Contractor has included in the programme. For example, the following are
compensation events:

g The Client does not allow access by the later of an access date and the date for access
required by the Accepted Programme (clause 60.1(2)). This relates back to the
programme requirements for the Contractor to show
– access dates (the date when the Client is allowing the Contractor access to and use of
the Site)
– the dates when they will need access to a Site if it is later than the access date.

Since the access dates are included in the Contract Data, the non-inclusion of those dates in the
programme will not necessarily result in the Contractor being denied this compensation event.
Similarly, if access is required later than the access date, non-inclusion of this date will also not
necessarily affect the Contractor’s right to the compensation event, since the trigger could still be
the access date as stated in the Contract Data.

g The Client does not provide something, which it is to provide by the date shown in the
Accepted Programme (clause 60.1(3)). This relates back to the programme requirements
for the Contractor to show the dates when the Contractor will need Plant and Materials
and other things to be provided by the Client.
The obvious question to ask is what happens if the Client is to provide things to the
Contractor but the Contractor has failed to include these elements in the programme?
Clearly, if the Client fulfils their obligations, there will be no repercussions. If, however, the
Client is late in their provision of an item, and the Contractor wishes to claim
compensation, the event is not a compensation event because the Contractor has not fulfilled
their obligations in including the dates in their programme. It appears that such neglect on
the part of the Contractor is not envisaged by the contract, since the contract probably
expects the Contractor to do whatever is within their power to complete the contract
successfully. It may be interpreted that the Contractor has no recourse under the contract.
However, it is likely that the Client’s failure and the Contractor’s failure do not make it right
to deprive the Contractor, when it would not be justified. The Contractor may be able to
produce a forensic analysis of their programme, working backwards in time to show when
they would have expected the Client’s item in order to carry out succeeding operations.

26
 Control of time

However, it would be much simpler, less expensive, more effective and more co-operative just
to include the information and dates in the programme.
g The Client or Others do not work within the times shown on the Accepted Programme
(clause 60.1(5)). This relates back to the programme requirements for the Contractor to
show
– the order and timing of the work of the Client and Others either as stated in the Scope
or as last agreed with them by the Contractor.
The comments for the previous compensation event apply here as well.

All these elements of the programme emphasise the importance of the programme for the
Contractor and for the mutual operations of the Parties. The proper and full drafting of the pro-
gramme affects the smooth running of the project and the Contractor’s ability to notify compen-
sation events and maintain their profit.

The programme is an essential part of assessing compensation events.

2.6.3.10 Statements of When the contract talks about the programme, it includes method statements; therefore, each
how the Contractor activity that may have several operations will require several method statements. Although the
plans to do the work ECC refers to ‘a statement of how the Contractor plans to do the work identifying the principal
Equipment and other resources which will be used’ (clause 31.2), this book refers to a method
statement and a resource statement throughout, for ease of reference.

It should also be noted that the activities on the Option A activity schedule should relate to the
operations of each programme.

Statements ‘of how the Contractor plans to do the work’ are part of the programme.

When to call for a statement of how the Contractor plans to do the work and the like
Section 3 of the core clauses of the conditions of contract requires the Contractor to submit a
great deal of information. It then becomes a management exercise to decide when to call for
the information that supports the Accepted Programme, taking into account the main Option
applicable to the contract.

On large projects, it may be impractical to call for all the method statements at the beginning of
the project, and a systematic approach to the submission and acceptance of method statements
should be set up that allows adequate time for all the documentation to go through the Client’s
and Contractor’s quality systems.

On small projects, it might be quite feasible to have all the information required submitted at
the beginning of the project, perhaps prior to work commencing on Site.

2.6.3.11 The resource The resource statement is something other than a method statement (which is also required with
statement the programme) although it could be included in it as envisaged by clause 31.2. The resource
statement is a description of the resources that the Contractor intends to use for each activity,
such as labour and Equipment. It is a part of the programme, and is incorporated into the pro-
gramme and is therefore required with every programme submitted, including those submitted
as part of a quotation for a compensation event.

A resource statement could help the Contractor in their pricing, particularly if Option A (which
uses an activity schedule) is the chosen pricing mechanism. Including the method and the
resources required for each operation also allows the Contractor to plan their resources
effectively and to be proactive in their procurement of those resources. Lastly, the effect of a
compensation event on the programme is more easily assessed since the Contractor can immedi-
ately see the impact of any delays on their programme. If the Project Manager assesses the
programme (clause 64), they will use those tools available to them, including the Contractor’s

27
Managing the Contract

programme. If the programme is not up to date, the Project Manager may assess the compen-
sation event based entirely on their own experience. The Contractor is thus incentivised to keep
their programme up to date and accurate.

For operation 300(i), a resource statement might read as follows:

Activity No. Description

300 Foundations up to DPC Level
Schedule of Equipment and other resources
g JCT 3XC driver
g 3T dumper driver
g Excavation gang
g 1 ganger
g 2 labourers

2.6.3.12 Float It should be noted that the Contractor is required to show float and time risk allowances. Once
these elements have been accepted by the Project Manager and incorporated into the Accepted
Programme, they would tend to remain for the duration of the project.

There are a number of different types of float in programming. There is ‘free’ float between non-
critical activities, ‘total float’, which is float on an activity, and ‘terminal float’, which is any
float that exists between planned Completion and the Completion Date.

g Free float The amount of time a task/operation can be delayed before affecting any
other task.
g Total float The amount of time a task can be delayed without affecting planned
Completion or reducing the terminal float (where this has been examined
by the Project Manager and accepted as realistic).
g Terminal float Float attached to the whole programme and to sectional Completion
(i.e. any float between planned Completion and the Completion Date).

The ECC clears up the old argument about ‘entitlement’, in that the terminal float belongs to
the Contractor. Free float and total float are available to accommodate the time effects of com-
pensation events in order to mitigate or avoid any delay to planned Completion, and could
therefore be said to belong to the Client. Time entitlement is also based upon entitlement, and
not need as it is with traditional contracts, such as the ICE and JCT contracts.

The Contractor owns the terminal float.

The assessment of time is based upon entitlement, not need.

Therefore, any compensation event that delays any activity on the critical path (i.e. an activity
with zero float) must as a consequence delay planned Completion, giving rise to a commensu-
rate delay to the Completion Date.

Let us run through an example. Figure 2.3 shows an outline programme for a project. The
critical activities are shown by open boxes, and the non-critical by solid boxes. It can be seen
from the diagram that the time between the planned Completion and the Completion Date is
called the ‘terminal float’, and this float belongs to the Contractor.

2.6.3.13 Time risk The Contractor is required to show time risk allowances in their programme. Once they have
allowances been accepted by the Project Manager and incorporated into the Accepted Programme, they
would tend to remain for the duration of the project. Time risk allowances are owned by the
Contractor as part of their realistic planning (note the phraseology, which relates directly back

28
 Control of time

Figure 2.3 Assessment of the time effects of change

SD SD starting date
Activity 001 PC planned Completion
CD Completion Date
Critical activity
Activity 002
Non-critical activity
Activity 003

Activity 004

Activity 005

Activity 006

Activity 007

Activity 008

Activity 009
PC CD

Activity 010
Terminal float
Time

to one of the Project Manager’s reasons for non-acceptance of the programme in clause 31.3) to
cover their risk.

An example of this is the allowance that the Contractor builds into their programme for down
time occurring due to undertaking earthworks during the winter. The allowances should either
be clearly identified in the programme as allowances, or be included in the time periods
allocated to the specific activities.

2.6.3.14 Health and Some Clients might have additional health and safety requirements (clause 27.4) that impact on
safety requirements the Contractor’s programme. These kinds of requirements should be clearly laid out in the
Scope and incorporated by the Contractor into their programme.

The Contractor should be able to demonstrate any allowances that they have made in their pro-
gramme for health and safety requirements. An example of this is time allowances for workmen
to prepare themselves at the beginning of a shift and for washing themselves down and cleaning
equipment when removing blue asbestos, which necessitates ‘decontamination zones’, ‘sealed
areas’ and so on.

The Construction (Design and Management) Regulations 2015 underline that this is a very
important and serious consideration for the Contractor, who in the case of an accident might
have to demonstrate to the Health and Safety Executive that they had allowed adequate time
to undertake the work safely.

In some instances, it may be difficult to show the allowances made in the programme. However,
it is not impossible. Depending on the type of planning software used and the competence of the
user of the planning tool, planners can produce programmes that can be very detailed, showing
time-risk allowances, float, critical path and so on. These programmes can then be rolled up
into a higher-level programme.

Where the use of the more sophisticated planning tools are felt not to be appropriate, then in
these instances the contract intends that these allowances should be shown in the statements of
how the Contractor plans to do the work and that are part of the programme in the contract.

2.6.3.15 Procedures set This is a bit vague for the ECC but is probably unavoidable in that the contract cannot cover all
out in the contract the possible alternatives. It is therefore very important for the drafters of the documents to
ensure that they clearly and concisely spell out any other special requirements they have in the
Scope.

29
Managing the Contract

It is also highlighting the need to recognise such things as the period for reply, and is conse-
quently warning the Contractor to allow for such things in the programme as the period that
the Project Manager has for accepting Contractor designs.

2.6.3.16 Other Other information is a very broad area, and it is important that the Client states in the Scope
information required any information they want to see, bearing in mind that the Scope is not only the information
by the Scope included in the said document but could also be an instruction given to the Contractor in
accordance with the contract (clause 11.2(16)).

For example, this could cover

g dates when, in order to Provide the Works, the Contractor is planning to obtain consents
or
g dates when they are planning to submit any design to the Project Manager for
acceptance.

This information can be useful to the Project Manager in planning when they need particular
resources available, such as designers.

It could also cover the dates when the Contractor needs the completed Scope. This will cover
situations where the Client has been unable to complete all the Scope required by the Contractor
in order for them to Provide the Works. This type of situation might occur where the Client
wishes to start a project quickly and has been unable to complete certain elements of the Scope
– items such as consents or approvals. In such instances, the Client should include assumptions
within the Scope.

Information release schedules should be included in the Scope, and the Contractor should be
required to reflect in their first programme for acceptance the dates contained on the schedule.
This way, as long as the Client meets the dates, there will be no case for a delay to the Com-
pletion Date (unless of course the information is different from that assumed).

2.6.3.17 Actual progress In addition to the items required by clause 31, clause 32 requires the Contractor to include other
items into their revised programme, such as actual progress and its effect on the remaining
work, delays and notified Defects. In this way, the Project Manager is aware of whether the
project is on time and, to a certain extent, on budget, and the Contractor is able to plan their
programme and resources based around contractual events. The Accepted Programme forms
the as-built programme as time goes by, so that forensic analysis is facilitated through the
resources and timing available in the programme.

2.7. Submission of The ECC requires a first programme to be submitted by the Contractor to the Project Manager
the first programme for acceptance either at the tender stage (where the optional statement is included in Contract
Data part two) or shortly after the start of the contract (where the optional statement is
included in Contract Data part one) – see the discussion in Section 2.4.1 of this book. Once the
programme has been accepted, it becomes the Accepted Programme, and both Parties work
from this programme until the next programme is accepted and becomes the Accepted
Programme.

The first programme is submitted with the tender or within a stipulated time (e.g. 4 weeks)
after the award of the contract.

If the Contractor does not submit their first programme within the time required, the Project
Manager retains 25% (clause 50.5) of the Price for Work Done to Date to the Contractor
until the first programme has been submitted (note that it is the submission of the programme
that is important, not the acceptance of the programme by the Project Manager). This is clearly
a powerful incentive to the Contractor, and emphasises the importance attached to the
programme by the ECC. Many employers prefer to see a programme with the tender
submitted.

30
 Control of time

The Project Manager may withhold a quarter of monies due (Price For Work Done To
Date) if the Contractor does not submit a first programme.

A further note regarding the retention of the amount is that, as with other aspects of payment,
such as delay damages, the retention of monies in this vein is not an option that may be exer-
cised by the Client. It is an obligation of the Project Manager to carry out their actions under
the contract and to retain the 25%. They are not given the choice by the use of the word ‘may’.

For some of the main Options in the ECC, the requirement to submit a programme with the
tender may not be as informative as the Client would like it to be, particularly where
information is minimal or where both Parties know that the information will be changing as
drawings are amended or as other information is revealed. Some companies still refer to a
programme submitted with the tender as the ‘tender programme’ and a revised programme sub-
mitted after the contract as the ‘contract programme’. The ECC does not recognise this kind of
terminology, which tends to imply that the tender programme is of less importance than the
contract programme, whereas in the ECC, once accepted, each programme is important.

2.8. How often is the The Contractor submits a revised programme to the Project Manager for acceptance on four
programme revised? different occasions:

g Every regular period during the contract (clause 32.2). Contract Data part one dictates the
period within which the programme has to be revised. This could be 4 weeks or 8 weeks,
or even 3 months, depending on the complexity and length of the project. Some Project
Managers even ask for two different types of programme, one of which is more complex
and is to be submitted less frequently. Some Project Managers also require a summary
programme at weekly progress meetings. Although this will clearly be based on the
Accepted Programme, its requirement is more likely to be described in the Scope.

The Contractor updates the programme regularly.

It is recommended that Project Managers take heed of the complexity and duration of the
project in deciding how frequently they wish to see the programme. Although the pro-
gramme is a pivotal project management tool, it can also be an onerous and possibly
expensive document for the Contractor to produce, and Project Managers should try to
avoid making the task more difficult for Contractors in requesting very frequent revisions
unnecessarily.
g If they choose to do so (clause 32.2). The Contractor may choose to submit a programme
for acceptance to the Project Manager outwith the obligatory regular period. An example
is where they have amended sequencing or they have changed the method or resourcing
of an activity. The Project Manager is obliged to reply to the Contractor with their
acceptance or otherwise of the programme within 2 weeks of the Contractor having
submitted it.
g When they have been instructed to do so by the Project Manager (clause 32.2). If the
Project Manager instructs the Contractor to submit a revised programme for acceptance,
the Contractor is obliged to submit the programme within the period for reply.
g If a compensation event has affected the programme (clause 62.2). A quotation for a
compensation event comprises changes to the Prices and a delay to the Completion Date.
Where the compensation event has had (or will have) the effect of changing the
programme, then the Contractor has to submit a revised programme with their quotation
showing the alterations to the Accepted Programme. If the programme is affected simply
because a statement of how the Contractor plans to do the work or resourcing changes,
but the Completion Date remains the same, a revised programme still has to be
submitted since both the resources and the method are a part of the programme. The
time periods for the submission are as described in the compensation event procedure,
but, in general, the Contractor has 3 weeks to submit a quotation from being instructed
to do so (clause 62.3). Note that if the Contractor does not submit a revised programme

31
Managing the Contract

with a compensation event quotation as required, the Project Manager may make their
own assessment of the compensation event (clause 64.1).

2.9. Acceptance of The Project Manager may accept or not accept the first programme and each subsequent
the programme programme submitted for acceptance by the Contractor based on various criteria stated in the
contract. It is only when a programme is accepted that it becomes the Accepted Programme.

If the Project Manager does not accept the programme for any reason other than the four
stated in clause 31.3, it is a compensation event (clause 60.1(9)).

Note that if there is no Accepted Programme – that is, if the first programme submitted by the
Contractor has not been accepted – the Project Manager may use their own assessment of the
programme for work that is affected by a compensation event (clause 64.2). The Project
Manager may do the same if the Contractor has not submitted a revised programme (or altera-
tions to a programme) for acceptance as required by the contract.

2.9.1 Reasons for There are only four reasons for the Project Manager to refuse acceptance of the programme.
non-acceptance They are as follows (clause 31.3):

g the Contractor’s plans that it shows are not practicable

g it does not show the information that the contract requires
g it does not represent the Contractor’s plans realistically
g it does not comply with the Scope.

Although in general the clauses of the contract are very clear, it would be fair to say that one or
two of the above reasons for refusing acceptance of a programme could be interpreted in
various ways. In particular, realistic or practicable planning tends to be subjective, and therefore
any non-acceptances based on these reasons should be carefully considered. The following
subsections discuss the reasons in more detail.

2.9.1.1 The Contractor’s The first reason refers to the Contractor’s plans only. An example is where the Contractor’s
plans in the programme programme shows their planned progress on a tunnel to be 90 m/week. The Contractor’s
are not practicable original accepted programme shows them achieving 10 m/week, and their actual rate of progress
is 50 m/week. The best output ever achieved by a Contractor on a tunnel of this type under
similar conditions is 75 m/week. The Contractor’s plans are therefore not realistic.

When assessing tender submissions, data relating to output rates/production rates may be very
useful to benchmark the tenders received.

2.9.1.2 The programme The second reason refers to the contract, and it should be noted that references to the contract
does not show include not only the ECC conditions of contract but also the Scope and whatever other infor-
information that the mation and documentation has been incorporated into the contract. An example of this is where
contract requires the programme does not show the access date or sectional Completion Dates.

Can the Project Manager refuse to accept a programme because the Completion Date shown in
the submitted programme is later than the Completion Date shown in the Accepted Pro-
gramme, but there is no compensation event or other reason for the date to have been delayed?
One could argue that the reason for non-acceptance of ‘does not show information that this
contract requires’ could apply, since the contract requires the Completion Date to be shown,
whereas the date shown as the Completion Date in the programme is not the Completion Date.
The same reason could be argued where the actual progress has not been measured accurately
against planned progress in the programme.

2.9.1.3 The programme An example of the third reason is where a Contractor’s programme assumes use of driven piles
does not represent the and the Project Manager is aware that the Site team is using bored piles.
Contractor’s plans
realistically

32
 Control of time

Figure 2.4 Secant piled lift shaft box

Ground level
100.00 m Capping beam

Stage 1

1 m × 1 m ring beam
95.00 m
Stage 2 600 mm sealant piles
At 1 m centre to centre
90.00 m

Stage 3

85.00 m

Stage 4

80.00 m 1 m base sheet

Another example is where a Contractor’s programme shows commissioning/testing a bank of

six lifts at the same time, requiring all the available commissioning engineers to be used at one
time.

2.9.1.4 The programme An example of the fourth reason is that the programme has not taken into account any design
does not comply with constraints stated in the Scope. An illustration of this could be where the Contractor cannot
the Scope undertake a certain item of the works until certain other things have been completed.

Let us say that a new secant piled lift shaft box is to be constructed top down (Figure 2.4). The
Scope might stipulate that the lift shaft box is to be constructed top down in a series of stages as
follows:

Stage 1: level 100.00 to 95.00 m

Stage 2: level 95.00 to 90.00 m
Stage 3: level 90.00 to 85.00 m
Stage 4: level 85.00 to 80.00 m.

No excavation work can commence until the previous stage is complete and the 1 × 1 m
concrete ring beam at each level has been left to cure for a minimum of 14 days after the last
concrete pour.

If the Contractor shows an activity in their programme allowing only 7 days for curing before
excavating the next level, then the work is not in accordance with the Scope.

2.9.2 Resubmission of an If the Project Manager does not accept a programme, the Contractor is obliged to resubmit the
unaccepted programme programme within the period for reply (clauses 13.4 and 32.2). Once the Contractor receives
notification of non-acceptance, they should automatically set about drafting a revised pro-
gramme for submission to the Project Manager.

2.9.3 Timing of the The Project Manager has 2 weeks to reply to the Contractor after the Contractor submitted their
acceptance or programme for acceptance.
non-acceptance
If the Project Manager does not reply within the allotted timescale, then the Contractor may
choose to notify the Project Manager that it [the Contractor] has not received a reply within the
required 2 weeks. If the Project Manager has still not replied within a further 1 week, then the
Contractor can safely assume that their submitted programme has been accepted.

In addition, it is a compensation event (clause 60.1(6)) if the Project Manager does not reply to
a communication within the time period stated in the contract. The Contractor therefore

33
Managing the Contract

becomes entitled to an assessment of time and money for the Project Manager’s tardiness. This
sanction for a late reply reinforces the view that a non-reply is deemed to be acceptance.

2.10. Completion The Contractor is required to Provide the Works so that Completion is on or before the
Completion Date (clause 30.1). Time is therefore of the essence in ECC contracts.

Completion takes place when the Project Manager decides that Completion has been achieved
(clause 30.2). This could be on, before or after the Completion Date. The Contractor is not
required to notify the Project Manager that they consider the works to be complete. The Project
Manager need not take heed of any such notice that the Contractor chooses to submit. The
Project Manager would clearly take into account the details in the Scope about when
Completion takes place. In addition, Completion cannot take place if there are still uncorrected
Defects that would prevent the Client from using the works and Others from doing their work
(clause 11.2(2)).

The Project Manager is required to certify Completion within 1 week after they decide that
Completion has taken place.

2.10.1 Take over and Take over and Completion are linked by time and circumstance. Take over generally follows
Completion Completion; however, sometimes take over could occur before Completion. The ECC details
the procedures to be followed in all cases.

2.10.1.1 Take over If the Client starts to use any part of the works before Completion has been certified, then it is
before Completion deemed to have taken over the works. The exception to this is where the take over has occurred
because of a reason stated in the Scope or to suit the Contractor’s method of working
(clause 35.2).

2.10.1.2 Take over after The Client takes over the works not more than 2 weeks after Completion (clause 35.1).
Completion
Note that the Client need not take over the works before the Completion Date if they have
stated in the Contract Data that they are unwilling to do so. This is different from taking over
before Completion. The former case refers to the situation where the Contractor has completed
the works before the Completion Date stated in the contract, but the Client is not willing to take
over the works earlier than they would have if the Contractor had completed on time.

2.11. Take over by ‘Taking over’ is the term used by the ECC to signify that the Client has taken over the works or
the Client a part thereof.
2.11.1 How it happens
The Project Manager certifies take over of any part of the works within 1 week of the date of
take over (clause 35.3).

2.11.2 What it means Take over means that access to the Site or part thereof returns to the Client. The Contractor no
longer has a right to access the Site, and the Client has to make arrangement for access for the
Contractor in order for them to correct Defects that occur.

It also signifies a risk transfer in terms of liability for loss/damage to the works from the
Contractor to the Client.

2.12. Acceleration Acceleration under the ECC deserves a special mention because it is treated differently from
traditional contracts.

Acceleration is described in the contract as being an instruction from the Project Manager to
achieve Completion before the Completion Date. This description of acceleration is not request-
ing the Contractor to speed up their progress in order to achieve Completion on the Completion
Date, which is something else entirely.

Acceleration is a useful provision for those clients for whom time is critical. For example, retail
companies have critical times such as Easter and Christmas, on which they might wish or need
to be open.

34
 Control of time

The price to the Client for achieving acceleration is whatever the Contractor chooses to quote to
the Client (clause 36.1). Acceleration is not a compensation event, and therefore the basis of the
quotation does not have to be the Defined Cost.

Clause 36 allows both the Contractor and the Project Manager to propose an acceleration to
achieve Completion before the Completion Date, and the procedure only goes ahead if both
of them are prepared to consider the proposed change.

If both are prepared to consider the proposed change, then the Project Manager instructs the
Contractor to submit a quotation, and the Contractor must do so within 3 weeks of the instruction.

The Contractor is not obliged to accelerate.

There is an alternative way of maintaining the Completion Date when changes occur to affect
the programme. In the compensation event procedure, the Project Manager may instruct the
Contractor to submit alternative quotations based on different ways of dealing with the com-
pensation event, after discussing with the Contractor different ways of dealing with the compen-
sation event that are practicable. If the Project Manager wishes to maintain the Completion
Date despite a compensation event that could have delayed the Completion Date, they could
instruct the Contractor to submit an alternative quotation maintaining the Completion Date.
This could involve overtime or a change to the sequencing of the programme, or both, and is
likely to cost more than a simple change to the Prices combined with a delay to the Completion
Date. In any case, the Project Manager then has the choice of quotations.

2.13. Other aspects It is important to understand that the programme is the Contractor’s programme. The Project
of programming in Manager does not have the same powers to amend the programme as in traditional contracts.
the ECC There is no statement in the ECC that the Contractor must use best endeavours to progress the
2.13.1 The Contractor’s works, nor does the Project Manager have the ability to instruct the Contractor to speed up their
programme progress to ensure that Completion is on or before the Completion Date.

If the Contractor’s actual progress is lagging behind their planned progress, there is not much
that the Project Manager can do to encourage the Contractor to complete on time other than
instruct the submission of another programme. This probably works on the assumption of
mutual trust and co-operation and also that it is not really in the Contractor’s interests to work
slowly since (depending on the payment option) this could cost the Contractor money, especially
if Option X7 (delay damages) has been selected.

The Project Manager has the choice of not accepting a subsequent programme if it does not
show the Contractor’s plans realistically (where the programme still shows progress on schedule)
but this does not necessarily achieve what the Project Manager really wants, which is for the
Contractor to speed up (as opposed to accelerate).

Some employers therefore include in the contract that the Project Manager may instruct the
Contractor to speed up their progress. If the payment Option is C, D or E, the Client might even
include the cost of this speeding up as a Disallowed Cost (by amending the Disallowed Cost
definition in clause 11.2(26).

2.13.2 The Client’s Some Clients call the master plan or schedule that they have drafted the ‘programme’, and the
programme Contractor is expected to conform to the Client’s programme.

This is all very well, but it is unlikely that the Client’s programme includes all the aspects of the
programme as described above and that the Contractor is obliged to include in their pro-
gramme. The Contractor might buy into the Client’s programme as the master programme for
the overall project, but would be obliged under the contract to produce their own programme
that would provide for their notifying compensation events and would provide the information
that the Project Manager needs in order to manage the project effectively.

The above also applies to Subcontractors when working for Contractors.

35
Managing the Contract

2.13.3 The programme The programme may affect the cash flow, particularly for Option A contracts, where the
affecting cash flow Contractor is not paid for an activity until they have completed that activity. The Contractor
therefore needs to ensure that the activities described in the programme can be completed before
an assessment date (see Chapter 2, section 2.4.1.3, in Book Two of this series; clause A11.2(29),
so that they (the Contractor) are always assured of completed activities and therefore payments.

The problem is that the shorter the activities, the more opportunity there is for Completion of
those activities and therefore payment, but the longer it takes to produce the programme. The
Contractor should therefore try to reach a balance between the length of the activities and the
need for cash flow.

2.13.4 A moving target The Accepted Programme as a management tool under the ECC is a moving target, and as such
it needs to be regularly updated and reviewed. This review period will depend upon the size/
scope of the project: on major projects, it could be done weekly, whereas on short-term, fast-
track projects, (e.g. shop fit-outs), it may need to be daily.

There are tight timescales to be met on its submission and acceptance, and sending programme
information backwards and forwards between the Contractor’s and the Client’s planners wastes
valuable time.

To make it work to its full potential, an integrated programme is required and a planning team
that monitors, reviews and agrees changes to the Accepted Programme on a continuous basis so
that the submission of the programme as stated in the Contract Data becomes a mere formality.

The Client could also ensure that the Scope details the programme IT software requirements so
that both sides are using the same software, facilitating quick and easy information transfer
between them.

Because the programme is a moving target, the Client’s planner needs to constantly check the
dates by which, in order for the Contractor to Provide the Works, the Client is required to
provide facilities, access, an updated Scope and so on. It should be noted that the Client has
no obligation to provide ‘things’ earlier than the dates stated in the Scope.

If the Contractor should propose earlier dates than those shown for the Client to provide infor-
mation or possession and so on, then the Project Manager should accept these earlier dates if it
is acceptable to the Client. If it is not, and the Project Manager accepts a programme showing
earlier dates, then failure to meet these earlier dates will give rise to a compensation event.

2.13.5 What happens if If you had a contract to build 2 km of new road and it was decided to reduce this to 1.9 km, then,
the scope of the works all things being equal, planned Completion on the Accepted Programme would be earlier.
is reduced or increased?
In Figure 2.5, line A shows the original starting date, access date, planned Completion and the
Completion Date. In line B with the reduced scope, it can be seen that planned Completion
moves forward, increasing the terminal float that is owned by the Contractor. The Completion
Date does not move.

If later it is decided to increase the scope of the works back to the original scope then it can be
seen in line C that planned Completion reverts to the date shown on the original programme,
but because the Contractor owns the increased float, the Completion Date moves by the same
amount as the planned Completion Date.

This is another subtle message to the Client to ensure that they know exactly what the scope of
the work is.

2.13.6 What happens The contract requires that the activities on the activity schedule must relate to the programme
if the activities on the (Options A and C only). If they do not, then there exists the potential problem whereby delays
revised programme do could occur to an activity that is listed on the activity schedule but that does not appear in the
not match the activity programme. At this point the programme fails to be a useful management tool.
schedule?

36
 Control of time

Figure 2.5 Reducing and increasing the scope of the works

Float
SD starting date
Line A SD AD PC CD AD access date
2 km PC planned Completion
CD Completion Date
Line B SD AD PC Float CD
1.9 km

Line C SD AD PC Float CD
2 km

If this occurs, the Project Manager should not accept the revised programme, assuming that
the start and finish date of each activity are shown. They should ask the Contractor under
clauses 32.2 and 55.2 to submit a revision of the activity schedule to the Project Manager for
acceptance.

The Contractor is at a disadvantage at this stage because if the Project Manager has not
accepted a revised programme, they can make their own assessment of a compensation event.

2.13.7 What happens if In this instance, the onus to maintain an up-to-date programme would seem to fall upon the
the Contractor fails to Project Manager. It is not a strict contract requirement, but programme maintenance is necess-
maintain an Accepted ary for the Client’s right to levy delay damages, otherwise they will be frustrated. The Project
Programme? Manager will need to have the capability to manage the programme so that they can make
Project Manager’s assessments for compensation events. In this instance, the Project Manager
can reject all quotations submitted by a Contractor because they have not maintained an
Accepted Programme.

2.13.8 The importance Good site records (see Chapter 1 of Book Five for more information on site records) are an
of good site records essential tool in the management of time, and it is essential that the Supervisor realises the
importance of keeping good site diaries and how this information assists in the overall manage-
ment of the contract.

For example, the site diary can be invaluable in establishing the events that took place on any
particular day in the case of compensation events over causes of and responsibility for delay
and/or disruption.

Good site records can prove invaluable in establishing the facts and events when assessing
compensation events.

37
 Managing the Contract
ISBN 978-0-7277-6186-6

ICE Publishing: All rights reserved

http://dx.doi.org/10.1680/mc.61866.039

Chapter 3
Control of quality

Synopsis This chapter discusses

g the quality framework embedded within the ECC

g the Contractor’s obligations
g role of the Client’s representatives
g subcontracting
g quality control.

39

Managing Reality: Book Three

 Managing the Contract

3.1. Introduction Construction contracts have traditionally had embedded within them a ‘quality framework’
providing the following features:

g rights of access for the client or their representative

g powers and duties given to the client or their representative relating to quality control
g powers for the client or their representative to deal with defective work
g powers of enforcement in case the Contractor does not respond.

This quality framework is the contractual approach to assuring quality. It is intended to estab-
lish quality requirements, ensure compliance and avoid defects as far as possible and to deal
with defects without recourse to legal proceedings.

The latest extension of quality management principles in construction is a movement towards

increasing reliance on inspection and testing by contractors, whether of their own work or of
work produced by their subcontractors.

The rest of this chapter sets out to analyse how quality standards are set down in the ECC and
to consider how comfortably this sits with the quality management principles and practices
reflected in the current quality standards (BN EN ISO 9001, 9002 and 9003).

3.2. The ECC and It is intended to analyse the particular clauses constituting the quality framework contained
quality within the ECC under the following main headings:

g The Contractor’s obligations

g The role of the Client’s representatives with respect to quality
g The Client’s supply
g Subcontracting
g Quality control
g Defective work
g Certification
g Enforcement.

Figure 3.1 shows these elements of control of quality on an ECC contract in diagrammatic
form.

Figure 3.1 Control of quality in the ECC

Client's supply of
Plant and Materials
and Equipment

Enforcement Role of the Client

Control of quality
in the ECC
Defective work Subcontracting

Certification Quality control

Contractor's obligations

3.3. The Contractor’s The Contractor’s general responsibility for quality is part of their wider duty to Provide the
obligations Works in accordance with the Scope (clause 20.1). Expanding this duty in line with the defined
3.3.1 General obligations terms, the Contractor is responsible for doing ‘the work necessary to complete the works in
accordance with the contract and all incidental work, services and actions which the contract
requires’ (clause 11.2(15)).

The Scope is part of the contract, its purpose being to specify and describe the works and to
describe any constraints on how the Contractor Provides the Works. It follows, therefore, that

40

Managing Reality: Book Three

 Control of quality

the quality standards to be achieved by the Contractor should be specified in the Scope prepared
by or on behalf of the Client, and these standards are vitally important to quality control since
they provide the basis upon which the existence of a Defect is judged (see Section 3.7.3 below on
tests and inspections).

In addition, the Scope is required to describe the following aspects of quality control:

g a quality management system

g the quality policy statement and quality plan.

The Contractor is required to submit a quality policy statement and quality plan to the Project
Manager for acceptance, and a revised quality policy statement and quality plan if it (the
Contractor) makes any changes. The Project Manager will monitor compliance with the quality
plan, and can instruct the Contractor to correct a failure in the quality plan.

The Contractor’s general responsibility is to Provide the Works in accordance with the
Scope.

The quality standards to be achieved by the Contractor should be specified in the Scope.

One of the objectives set by the NEC’s drafting panel was that the contract should contribute to
a reduction in the incidence of disputes. One of the improvements it sought to introduce in
pursuit of this objective was clarity. It therefore follows, if the objectives of the contract are not
to be undermined, that the quality standards described in the Scope should be expressed so that
compliance is capable of objective assessment. This approach is entirely compatible with the
principles of quality management, which demand that the supplier (Contractor or Subcontrac-
tor) should be able to verify compliance directly without reference to the purchaser (Client or
their representative). Consequently, as far as it is practicable, the traditional specifying of
requirements by reference to the opinion of the Client (or their Supervisor) should be eliminated
from the Scope.

The quality standards described in the Scope should be expressed so that compliance is
capable of objective assessment.

Specifying requirements by reference to the opinion of the Project Manager should be

eliminated from the Scope.

3.3.2 Ambiguities and A difficult area concerns identification by the Contractor of discrepancies in the contract docu-
inconsistencies mentation. As a general principle, the economic achievement of quality is assisted by the
(discrepancies) in or identification of such shortcomings at the earliest possible stage of the construction process. The
between the contract ECC is entirely consistent with this principle, placing upon both the Contractor and the Project
documents Manager in clause 17.1 the obligation to give a notification as soon as one or other of them
becomes aware of an ambiguity or inconsistency in or between the documents comprising the
contract. The Project Manager then has the responsibility for instructing the resolution of the
ambiguity or inconsistency.

There is an obligation on the Contractor and Project Manager to give a notification as soon
as they become aware of an ambiguity or inconsistency.

The Project Manager resolves any ambiguities and inconsistencies between contractual
documents by giving an instruction.

Provisions in some standard forms of contract for reimbursement to the contractor because of
such discrepancies in contract documentation act as a disincentive to the contractor to comment
before the contract is let, and a possible disincentive to early reporting after the contract is let.

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Likewise, when using some standard forms of contract, which envisage the same organisation
preparing the contract documentation and administering it, there may be reluctance on the part
of individuals to draw attention to discrepancies in documentation which their company
prepared.

The ECC encourages both Parties to notify as soon as they become aware of anything that may
affect the cost, time or quality of the works. The Contractor is incentivised to notify as soon as
they become aware of these matters. The sanction for failure to do so is that they run the risk of
losing their full entitlement to the time and cost consequences of the event.

The Client’s sanction is that they could spend more time and more money and not get the
quality they were hoping for. For the Project Manager and Supervisor, there is no hiding place
and their actions/inactions will be highly visible.

A concept not found in the ECC is a hierarchy of the documents forming the contract. Such a
hierarchy is used in some standard forms as a means of resolving ambiguities and discrepancies
by giving precedence to documents higher up the contractual hierarchy. With one exception to
this general rule (see below), the ECC contains no such hierarchy. Instead, very simply, having
been notified of an ambiguity or inconsistency, the Project Manager resolves the problem by
instructing a change to the Scope. This of course is a compensation event, and by the operation
of clause 63.8 any assessment is based on the interpretation most favourable to the Party not
responsible for the ambiguity/inconsistency; that is, the contra proferentem rule operates, which
interprets a clause containing an ambiguity or inconsistency against the Party responsible for
drafting the document in which it occurs.

In the ECC the concept of ‘Key Dates’ is added to ‘the Prices’ and ‘the Completion Date’
as a matter for early warning.

The one exception to the ‘no-hierarchy’ concept is where an inconsistency becomes apparent
between the Scope provided by the Client and a design that is part of the Scope provided by
the Contractor and referenced in Contract Data part two. On the assumption, in this instance,
that having been notified of the ambiguity/inconsistency, the Project Manager’s instruction
required the design to comply with the Client’s Scope, such a change would not be a compen-
sation event (see the second bullet point of clause 60.1(1)). This effectively gives precedence to
the Scope provided by the Client over the Scope provided by the Contractor.

There is no hierarchy of documents in the ECC.

The contra proferentem rule applies to the Scope.

3.3.3 The Contractor’s There is no ‘Contractor design’ version of the ECC. That is not to say the contract does not
design provide specifically for all or part of the works to be designed by the Contractor: on the
contrary, it offers the flexibility of being suitable for both ‘traditional’ arrangements where the
permanent works are designed by or on behalf of the Client and for ‘design-and-build’ arrange-
ments where the Contractor designs and builds the whole of the works in accordance with
criteria set down by the Client. Between these two extremes it is suitable for the many instances
where the Contractor does some design and some is done by, or on behalf of, the Client.

But how is this flexibility achieved? Very simply, the ECC requires the Scope to state the parts of
the works that the Contractor is to design and the criteria to which such designs are required to
conform. Such criteria could include details of the form, geometry, dimensions, specifications,
codes of practice, standards and environmental criteria, or alternatively could comprise a
performance specification where the Contractor is responsible for the majority of the design.
If, after having let the contract, it is decided to increase or decrease the areas of the works that
the Contractor is to design, or to change the criteria to which they are already designing, such
changes would be in the form of instructions changing the Scope and would consequently be a
compensation event.

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The Scope should state the parts of the works that the Contractor is to design.

3.3.4 Supervision/ Contrary to many quality assurance practitioners’ belief, quality is not achieved by procedures,
employees it is achieved by people. Procedures do not take decisions, people do.

You could have the best procedures in the world and still not achieve quality – there has to be
a combination of both people and procedures to achieve the desired quality.

Neither the traditional standard forms of contract nor the published quality standards have
placed enough emphasis on the competence (quality) of people. Competency is a function of
knowledge and skills gained from education, training and/or experience.

The ECC (clause 24.1) places an obligation on the Contractor to employ the key persons named
by the Contractor in Contract Data part two to do the jobs designated to them therein. If
maximum value is to be gained from this feature of the ECC, the Client should indicate in the
instructions to tenderers the key persons for whom details (including job description, responsi-
bilities, qualifications and experience) are required. Such information when received with
tenders should then be assessed as part of the wider tender evaluation (see Appendix 1 of
Book Two).

Clause 24.1 also requires that if the Contractor wishes to provide replacement people, they must
provide people of equal quality and ability. This feature has been introduced so that the
Contractor provides the required quality of people, such as the ‘A’ team as outlined in their
tender submission. Very often in the past, contracts were awarded on the basis of the curricula
vitae put forward, only for the Client to find that these people did not put in an appearance on
the contract.

People achieve quality.

The Client should indicate in the instructions to tenderers the key persons for whom details
are required.

The ECC in clause 24.2 also recognises that the Project Manager should be able to have an
employee removed from the project.

3.3.5 The mode and It is often overlooked that any reference in the ECC to the programme includes method
method of construction statements. Clause 31.2 requires the Contractor to include for each operation a statement of how
the Contractor plans to do the work, identifying the principal Equipment and resources
they plan to use. This book refers to these statements as method statements and resource
statements.

Any reference in the ECC to the programme includes the Contractor providing a statement of
how they plan to do the work.

The traditional reason for asking for method statements, particularly in civil engineering
contracts, is to allow the designer of the permanent works (traditionally the engineer) to check
that the proposed methods of construction will not have a detrimental effect on any partly
completed permanent works. It is often overlooked by the drafters of ECC-related contract
documentation that, unless the Scope specifically precludes particular methods of construction,
any constraints subsequently introduced would under the ECC constitute a change to the Scope
and would consequently be a compensation event. This is particularly relevant on works invol-
ving heavy foundation engineering where the trend is to reduce the need for (and accordingly
the cost of) temporary earthwork support systems by exploiting the ability of the permanent
structure to provide such support during construction. This applies notably to the technique
of ‘top-down’ construction and the use of embedded peripheral walls (e.g. secant/contiguous
piled walls and diaphragm walls).

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The Management of Health and Safety at Work Regulations 1999 (and subsequent amend-
ments) provides that if Contractor is to carry out work that has risks to health and safety (and
most construction activities do), they have a legal duty to carry out a risk assessment. Although
not required by law, preparing a written method statement after carrying out a risk assessment
has proved to be an effective way of producing an action plan identifying the necessary health
and safety measures to be employed to control the risks identified. If it is likely that the Project
Manager will want to see safety method statements (as evidence that the required risk assess-
ments have been undertaken), then it is probably wise to include a statement to this effect in
the Scope describing the health and safety requirements (clause 27.4).

It is worth re-emphasising that the ECC treats method statements submitted by the Contractor
as part of the programme, and consequently the reasons for not accepting the programme apply
equally to these method statements, the reasons being that the method statements

g are not practicable

g do not show the information that the contract requires (e.g. they do not identify the
Equipment and other resources that the Contractor plans to use)
g do not represent the Contractor’s plans realistically
g do not comply with the Scope; for example, they may show that the Contractor plans to
employ a method of construction that is expressly precluded by the Scope.

Acceptance of a programme (and therefore method statements), unlike acceptance of the

Contractor’s design, is not a condition precedent to the Contractor proceeding with the work.
Failure by the Contractor to submit at the required times, or a decision by the Project Manager
not to accept a revised programme (and therefore revised method statements), does not require
the Contractor to stop work. A lack of attention, however, by the Contractor to their obligations
regarding programmes and method statements does under the ECC expose the Contractor to
the risk of the Project Manager carrying out their own assessments of any compensation events
that arise (refer to clause 64.1, third and fourth bullet points).

3.3.6 Setting out Unlike most other standard forms of contract, the ECC does not contain an express condition
making the Contractor responsible for the setting out of the works. It is arguable that the
definition of ‘to Provide the Works’ (clause 11.2(15)) is sufficiently wide to include setting out,
since it includes all incidental works and services. Since the Contractor is required to Provide the
Works ‘in accordance with the Scope’ (in clause 20.1, describing the Contractor’s primary
obligation), it is recommended that the Scope makes it clear that the setting out of the works
is the Contractor’s responsibility.

The Scope needs to include a statement with regard to the Contractor’s responsibility for
setting out the works.

3.3.7 Quality Clauses 40.1, 40.2 and 40.3 of the ECC require the Contractor
management systems
g to operate a quality management system complying with the requirements stated in the
Scope
g to submit to the Project Manager for acceptance (within the period in the Contract Data)
a quality policy statement and a quality plan that must allow the Contractor to Provide
the Works
g to comply with any instruction from the Project Manager to correct a non-compliance
with the quality plan, and this instruction will not be a compensation event.

Bearing in mind these requirements, the following observations are made:

g Unless the Scope describes both the requirements for the quality management system and
states the information that the quality policy statement and quality plans are to include
so that the Contractor knows what is needed to Provide the Works, the clauses will be of
limited effect.

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g The Contractor can change the quality plan, but it must then submit the changed quality
plan to the Project Manager for acceptance.
g As with all other instances where the Project Manager’s acceptance is required, if they
withhold acceptance for a reason other than one stated in the contract, a compensation
event arises (clause 60.1(9)).
g Acceptance by the Project Manager of the Contractor’s quality policy statement and
quality plan is not intended to change the Contractor’s liabilities or their responsibilities
to Provide the Works (clause 14.1). This is very important with respect to quality plans:
there is no guarantee that the end-product requirements for the works (as described in
the Scope) would be met just because the Contractor faithfully adheres to the
documented procedures and instructions.
g The period stated (calculated from the starting date) for submission by the Contractor of
the quality policy statement and quality plan should be mindful of the need to have these
documents in place before any serious work is commenced. To speed up the process, it
may be worth considering asking Contractors to include with their tender submissions an
overall outline quality plan and a detailed quality plan covering the first 6 weeks’
activities (see Appendix 1 of Book Two).
g The Scope should set out the degree of involvement of the Project Manager in terms of
their ‘external supervision’ of the Contractor’s quality management system (external
audits, hold and witness points expressly required, etc.).
g Non-compliance with the quality management system, such as a failure to keep records,
does not necessarily cause any material loss or damage or give rise to a Defect, but
confidence in the system demands full compliance. Consequently, the wording of clause
40.3 that allows the Project Manager to instruct the Contractor ‘to correct a failure to
comply with the quality plan’ facilitates correction of a non-compliance with the quality
plan even though there may be no evidence of a Defect as defined by the contract (clause
11.2(6)). Of course, if the Project Manager considers that the nature of the non-
compliance is highly likely to have given rise to a Defect, they can ask the Supervisor to
instruct a search (refer to clause 43.1, and Section 3.4.2 below).

3.4. The role of The ECC envisages two ‘Client’s representatives’: the Project Manager and the Supervisor.
the Client’s
representatives with The Project Manager’s role is to manage the contract on behalf of the Client with the intention
respect to quality of achieving the Client’s objectives (usually expressed in terms of a budget, a programme and a
brief setting out the requirements for the end-product). The Project Manager’s authority under
the contract is expressed in terms of the actions that the contract prescribes to them, and
includes authority to change the Scope, to instruct the Contractor to do various things, includ-
ing to correct a failure to comply with the quality plan, and to generally exercise their
managerial and engineering judgement.

The Supervisor has a much more restricted role, effectively limited to ensuring that the works are
constructed in accordance with the Scope. The importance of the role should not be under-
estimated, given its obvious connection with one of the Client’s objectives: namely to ensure
that the end-product meets the requirements set out in the Client’s brief. The ECC Guidance
Notes do not explain why the drafters of the contract considered it necessary to split duties
between the Project Manager and the Supervisor, although it is likely that they considered there
to be a potential conflict between getting the works constructed to budget and time while at the
same time achieving the required quality.

The practical effect of splitting the role, however, would appear to require the Client to resolve
any such conflicts given the direct reporting lines that both the Project Manager and Supervisor
enjoy, and the ECC Guidance Notes do concede ‘that the roles of the Project Manager and the
Supervisor may be combined where the objectives of the Client are served by so doing’.

It is not intended to go into great depth in this part of the chapter as to the role of the repre-
sentatives in the context of ‘control of quality’ other than to list the actions (see Appendix 2 of
Book One) which they are required to take, more of which is discussed in the relevant parts of
this chapter. See also the publication NEC4: The Role of the Supervisor, by Mitchell and Trebes
(ICE, 2018).

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3.4.1 The Project The Project Manager’s actions with respect to quality include
Manager
g giving instructions changing the Scope
g giving instructions resolving ambiguities or inconsistencies between the documents that
are part of the contract
g acceptance of the Contractor’s design for any parts of the works and for items of
Equipment
g acceptance of replacement key persons
g acceptance of Subcontractors, the proposed subcontract documents (in certain
circumstances) and the proposed pricing information (in certain circumstances)
g acceptance of method statements and the rest of the programme
g giving instructions to stop or not to start any work
g deciding the date of and certifying Completion
g acceptance of the Contractor’s quality policy statement and quality plan
g giving instructions to the Contractor to correct a failure to comply with the quality plan
g assessing amounts payable by the Contractor to the Client in respect of costs incurred by
the Client and Others resulting from a test or inspection having to be repeated after a
Defect is found
g arranging for the Client to give access to the Contractor to parts of the works already
taken over by the Client if needed to correct Defects
g proposing changes to the Scope so that Defects do not have to be corrected
g arranging to have Defects corrected by people other than the Contractor where the latter
has not corrected them within the defect correction period
g requesting proof of the Contractor’s title to documents, Equipment, Plant and Materials
prior to inclusion of the value of same in assessments of the amount due
g giving instructions on how to deal with objects of value or of historical or other interest
found within the site.

3.4.2 The Supervisor The Supervisor’s actions with respect to quality include

g notifying the Contractor of any tests and inspections that the Supervisor wishes to carry
out
g watching any tests done by the Contractor
g notifying the results of tests and inspections
g notifying the Contractor that Plant and Materials outside the Working Areas have passed
any tests or inspections that the Scope makes a precondition for their being brought to
the Working Areas
g giving instructions to search that may include
– uncovering, dismantling, recovering and re-erecting work
– doing tests and inspections that the Scope does not require
g notifying the Contractor of any Defects found
g issuing the Defects Certificate
g marking documents, Equipment, Plant and Materials outside the Working Areas in order
to secure for the Client whatever title the Contractor has.

3.4.3 The Client The Client’s actions with respect to quality include

g providing facilities, materials and samples for tests and inspections done by the
Supervisor as stated in the Scope
g giving access to the Contractor to parts of the works already taken over by the Client if
needed to correct Defects.

3.5. The Client’s It is not unusual for Clients to provide things to the Contractor, either for inclusion in the works
supply or to be used for (but not included in) the works. The terms used for these two categories of
3.5.1 Plant and things by the ECC is ‘Plant and Materials’ and ‘facilities and services’, one definition of the
Materials, facilities latter being ‘items provided by the Client for use by the Contractor to Provide the Works but
and services which the Scope does not require the Contractor to include in the works’, such as common-user
construction plant and welfare facilities. Note that Equipment is provided by the Contractor by
definition (clause 11.2(9)), and therefore items of plant provided by the Client for use by the

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Contractor to Provide the Works but that the Scope does not require the Contractor to include
in the works cannot also be called Equipment.

The provision of Plant and Materials or facilities and services by the Client brings with it
attendant risks, which, like all risks, are best avoided unless the benefits justify such a course
of action. The ECC recognises that there may be times when the Client wishes to provide things
to the Contractor but makes it clear where the risk lies in the event that things do not go accord-
ing to plan. The two risks the Client carries are

g that the Client does not provide something they are to provide by the date shown in the
Accepted Programme (Compensation event in clause 60.1(3))
g a Client’s liability event occurs (compensation event 60.1(14)), which in this context could
be ‘loss of or damage to [things] supplied to the Contractor by the Client, or by Others
on the Client’s behalf, until the Contractor has received and accepted them’ (clause 80.1).

The ECC sensibly leaves it to the Scope to describe the ‘things’ to be provided by the Client and
a ‘no earlier than’ time for delivery. The Project Manager would then, as part of the tender
assessment, need to check that the dates for requiring such things shown in the programme
submitted by the tenderers with their tenders complied with the Scope before affording them
Accepted Programme status.

To protect themselves from the second of the risks identified above, the Client would be well
advised to ensure that the Scope includes, for things to be provided, clear procedures that leave
the Parties in no doubt as to the point in time when the Contractor is deemed to have received
and accepted the things (effectively the risk-transfer point in terms of responsibility for care).

3.5.2 Other contractors The ECC defines ‘Others’ as ‘people or organisations who are not the Client, the Project
Manager, the Supervisor, the Adjudicator or a member of the Dispute Avoidance Board, the
Contractor or any employee, Subcontractor or supplier of the Contractor’ (clause 11.2(12)).
Consequently, other contractors interfacing with the Contractor would be a sub-category of
Others as defined.

Clause 25.1 of the ECC describes the extent of the Contractor’s obligations with regard to the
interface with Others, namely

g to co-operate with Others in obtaining and providing information that they need in
connection with the works
g share the Working Areas with Others as stated in the Scope.

Interface management is discussed further in Chapter 4 of Book Two.

To summarise, the Contractor is not responsible for the failure of other Parties to carry out their
work in accordance with the Scope unless the Contractor’s non-co-operation causes the
failure.

The Scope should include interface schedules for the work of Others.

3.6. Subcontracting A Subcontractor is defined by the ECC (clause 11.2(19)) as follows:

‘A Subcontractor is a person or organisation who has a contract with the Contractor to

g construct or install part of the works,

g design all or part of the works, except the design of Plant and Materials carried out by
the supplier or
g provide a service in the Working Areas which is necessary to Provide the Works,
except for the
– hire of Equipment or
– supply of people paid for by the Contractor according to the time they work.’

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Given the tendency today for main contractors to subcontract a large part of the work, it is
clearly important for the purposes of quality that care is exercised over the selection of Sub-
contractors; particularly since quality management systems and quality assurance may not be
given sufficient emphasis in these organisations. It is not only the Client who needs to be aware
of the subcontracting arrangements. A Contractor will be fully liable to the Client for the faults
of a Subcontractor (clause 26.1), and although they may in turn have a right to recover from
the Subcontractor, if that Subcontractor has gone into liquidation or has insufficient assets, the
Contractor will be left to bear the liability, however expertly drafted the terms of the
subcontract.

It is therefore very much in a Contractor’s interest to minimise the likelihood of defects occur-
ring and to be able to demonstrate clearly that they have fulfilled their contractual obligations.
With these objectives in mind, the Contractor should not only implement a quality system
covering their own activities but also ensure either that their Subcontractors in turn implement
their own quality system (preferable) or that their own quality system is sufficient to verify the
Subcontractor’s work. Clause 26.1 of the ECC states, ‘if the Contractor subcontracts work, it is
responsible for Providing the Works as if it had not subcontracted’. This makes it clear that the
Contractor’s quality management system, quality policy statement and quantity plan must cover
any work that the Contractor chooses to subcontract.

In general terms, the ECC provides for the Contractor to subcontract all, some or none of the
works, provided that the Project Manager accepts the proposed Subcontractors. The appoint-
ment of a Subcontractor for substantial work before acceptance by the Project Manager is
expressly made grounds for termination of the contract (clause 91.2 (R13)).

Traditionally, one way that employers and their representatives have exercised a degree of
control through contracts over the ‘quality’ of Subcontractors, particularly for specialist work,
is by the process of nomination. The ECC however does not provide for the nomination of Sub-
contractors due, the ECC Guidance Notes explain, to ‘the legal and practical problems of
accountability which frequently ensue’, which in turn conflict with the principle (as embodied
in clause 26.1) that the Contractor should be fully responsible for every aspect of the work that
they have contracted for. Alternatives under the ECC to nominating Subcontractors suggested
by the ECC Guidance Notes include

g leaving the Contractor freedom to subcontract as they think fit, with the Project Manager
retaining some control over the identity of any proposed Subcontractors (see below)
g providing lists of acceptable Subcontractors in the Scope for particular parts of the works
g providing for separate contracts with the Client, with the Project Manager managing the
time and physical interfaces between them (not subcontracting within the accepted
meaning of the term).

If a Contractor, under the ECC, decides to subcontract a part of the works, it is not permitted
to appoint the proposed Subcontractor until the Project Manager has accepted both the
Subcontractor (in all cases) and the proposed subcontract documents (unless the proposed sub-
contract is an NEC contract that has not been amended other than in accordance with the
additional conditions of contract or the Project Manager has decided that it does not require
to see the proposed conditions). A reason for not accepting either the proposed Subcontractor
or the proposed conditions of contract is that they will not allow the Contractor to Provide the
Works.

It is open to some debate as to both why a Contractor would want to engage a Subcontractor
who would not allow them to Provide the Works and on what basis the Project Manager could
decide that a proposed Subcontractor would not allow the Contractor to Provide the Works. It
is suggested that one way to reduce possible disputes on the issue is to include in the Scope
minimum requirements in respect of procurement procedures to be followed by the Contractor
(to be developed by the Contractor as part of their quality plan) and minimum qualifying
criteria for Subcontractors. An example is given below.

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The Subcontractor must have in place its own quality management system or ensure all
employees are registered under construction skills certification schemes, or be able to
demonstrate a minimum of 5 years’ experience in their chosen field on subcontracts of an
equivalent magnitude.

Include in the Scope minimum requirements in respect of procurement procedures to be

followed by the Contractor; for example, ensure value for money through term contracts or
competitively tendering a minimum of three subcontractors.

3.7. Quality control Having defined, by way of the drawings and specification, the work to be undertaken and the
3.7.1 General standards of material and workmanship required, construction contracts have traditionally
included provisions setting out

g rights of access for the Client and their representatives

g powers and duties related to quality control
g powers to deal with defective work
g powers of enforcement and/or remedies in case the Contractor does not comply with their
obligation to correct defective work.

The ECC includes such provisions that will be discussed under the headings of

g access for the Client and their representatives

g tests and inspections
g investigating defects and additional testing
g quality procedures.

The provisions setting out the Client’s powers to deal with defective work and of enforcement
are dealt with in Sections 3.8 and 3.10, respectively, of this chapter.

3.7.2 Access for the The ECC (clause 27.2) provides very wide powers of access for the Project Manager, the Super-
Client and their visor and Others as instructed by the Project Manager, to work being done and Plant and
representative Materials being stored for the contract, wherever the work is being done. Such access is impor-
tant for the purpose of checking on progress and for witnessing or carrying out tests and
inspections.

3.7.3 Tests and The arrangements for inspection and testing should be clearly agreed between the Parties as
inspections part of the contract. The ECC seeks to achieve this by relying on the Scope to state the
following:

g the nature of the tests/inspections to be done

g the timing of specified tests/inspections
g where the tests/inspections are to be done (e.g. within the Working Areas or before
delivery to the Working Areas)
g who is responsible for doing the tests/inspections (e.g. the Contractor, the Supervisor or
an outside testing agency)
g who is responsible for providing materials, facilities and samples for tests/inspections
g the objectives of the tests/inspections, the testing procedures to be applied and the
standards to be satisfied.

Technical specifications (i.e. the Scope) should be prepared with a view to their function within
a quality management system. They should therefore be practicable, realistic and capable of
objective assessment by the Contractor without reference to the Client’s representative (the
Supervisor). This calls for great care in the drafting of the Scope and the elimination of phrases
such as ‘to the satisfaction of’ and ‘in the opinion of’ the Client’s representative.

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There is a very strong case to be made for the standardisation of the Client’s technical
specifications

g to ensure that the information the ECC requires to be included in the Scope is actually
present
g to facilitate the development of quality system procedures and processes by contractors
(as required by clause 40 of the ECC).

Clause 41 deals only with tests and inspections that are required by the Scope or the
applicable law.

It is important to realise that clause 41 in the ECC that deals with tests and inspections
only applies to tests and inspections required by the Scope or the applicable law (i.e. specified
or statutory tests). It does not therefore apply to tests and inspections that the Contractor
does at its own discretion or for its own purposes. This latter category of test/inspection
could be quite extensive on contracts where the Contractor has a well-developed quality
system in place where it is quite likely that the testing and inspection plan contained within the
quality plan would require more extensive verification than that required by the Scope and the
law.

The Project Manager, of course, does have the power to request additional tests and inspections
to those required in the Scope by issuing an instruction changing the Scope (clause 14.3), but
such an instruction would be treated as a compensation event (clause 60.1(1)).

In circumstances where the Supervisor is responsible for doing tests and inspections, clause 41.5
deals with the possibility that such tests or inspections cause unnecessary delay either to the
work in hand or to any payment that is conditional upon a test or inspection being successful.
Such an event becomes a compensation event if it can be established that the delay was
‘unnecessary’.

Clause 41.3 of the ECC requires the Contractor and the Project Manager to notify each other
before commencing tests and inspections and to notify each other of the results afterwards. This
is in keeping with the contract’s philosophy of ensuring that both Parties are kept informed of
events and can respond quickly if, for example, tests reveal that any work does not comply with
the standards specified in the Scope.

Clause 42.1 of the ECC deals with tests and inspections that the Scope expressly states are to be
carried out on off-site Plant and Materials before the latter are delivered to the Working Areas.
While this is a sensible provision designed to avoid the expense of transporting defective Plant
and Materials back to the place of manufacture, the clause places the onus on the Supervisor to
notify the Contractor that the particular Plant and Materials have passed the requisite tests and
inspections. In instances where these tests and inspections are the responsibility of the
Contractor, this will require the latter to first notify the Supervisor of the results of the off-site
tests and inspections but then to wait for the Supervisor’s acknowledgement (by way of
notification) that the off-site Plant and Materials have indeed passed the prescribed tests and
inspections.

3.7.4 Notifying and It is very important under the ECC to understand what the contract means when it uses the
investigating Defects term ‘Defect’. Clause 11.2(6) defines a Defect as
and additional testing
g a part of the works which is not in accordance with the Scope or
g a part of the works designed by the Contractor which is not in accordance with the
applicable law or the Contractor’s design which the Project Manager has accepted.

A Defect can only be determined with reference to the Scope or the law.

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There are a number of issues to appreciate from this definition:

g The quality standards stated in the Scope (prepared by the Client) provide the basis on
which the existence of a Defect is judged. The importance of careful drafting of the
technical standards is emphasised above.
g The definition excludes defects due to design for which the Client is responsible. Such
defects would have to be dealt with by way of instructions from the Project Manager,
and would invariably trigger the compensation event procedure.
g In instances where the Contractor is responsible for designing a part of the works and
the Project Manager inadvertently accepts a design from the Contractor that does not
comply with the Scope in some respect, contractually a Defect will still arise if the
works are constructed to the latter design. This is the effect of the ‘two-limb’
definition of a Defect and why it is vitally important that the Contractor ensures that
the Scope they prepare and submit for acceptance complies with the Scope prepared
by the Client.
g A Defect as defined may include a departure by the Contractor from procedures or
instructions set down in the Contractor’s quality management system (including the
quality plan) for the works, where the Contractor’s quality system is included in the
Scope provided by the Contractor.

Having established what the contract means by the term ‘Defect’, how does it deal with the
notification and investigation of Defects? Clause 43.2 states that ‘until the defects date the
Supervisor and the Contractor notify the other as soon as they become aware of a Defect’.
Simplicity itself, although, somewhat unusually for construction contracts, this places a contrac-
tual obligation on the Contractor to admit openly that they have got something wrong.
Although unusual for construction contracts, this is entirely consistent with both the quality
standards and the ECC philosophy of enabling problems to be identified as soon as possible
in order that they can be dealt with properly.

Both the Supervisor and the Contractor are obliged to notify each other of Defects.

If no Defect has been notified by the Contractor but the Supervisor suspects one may exist,
clause 43.1 gives the Supervisor the power to instruct the Contractor to ‘search’ for a Defect,
which may include

g uncovering, dismantling, recovering and re-erecting work

g providing facilities, materials and samples for tests and inspections done by the
Supervisor (which by implication are additional to any stated in the Scope)
g doing tests and inspections that the Scope does not require.

If a search is instructed and a Defect is discovered (i.e. non-compliance with the Scope), the
Contractor corrects the Defect, and no compensation event arises. Conversely, if no Defect is
discovered, the Contractor is entitled to a compensation event unless the search was needed only
because the Contractor gave insufficient notice of doing work obstructing a required test or
inspection (clause 60.1(10)).

3.7.5 Quality procedures Experience has shown that reliance on contracts alone as a means of assuring quality in
construction has not met with the expectations of many clients of the industry. Consequently,
forward-thinking clients have taken the lead in promoting the adoption, development and
implementation of quality management systems by their suppliers (contractors/consultants).
The quality management system and contractual approach to assuring quality are neither
mutually exclusive of one another nor mutually dependent; they are concurrent means of assur-
ing quality. However, an integrated approach is necessary to maximise the advantage and avoid
the potential disadvantages from adopting both. This demands careful drafting of contracts and
their supporting documentation (e.g. Scope) by professionals who understand both the funda-
mentals of quality systems and contracts and the interaction between the two.

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In order to make the most of clause 40, a Client will need several things:

g details of what they expect of the Contractor’s quality management system so that these
requirements can be included in the Scope
g a Project Manager (or perhaps an internal/external quality consultant to whom the work
in this clause has been delegated) who
– knows what to expect of the Contractor’s quality policy statement and a quality plan
that is submitted to them for acceptance
– who can determine whether the submitted documents will ‘allow’ the Contractor to
Provide the Works
– knows the Contractor’s quality plan well enough that they can recognise a failure to
comply with the quality plan and determine whether the failure is important enough
that they would instruct a correction of a failure to comply with the quality plan.

Although these requirements are the Project Manager’s duties, the Client may consider them to
be more in line with the Supervisor’s duties, and the Client may choose to include them in the
Supervisor’s personal contract along with liaison requirements with the Project Manager.

3.8. Defective work Defective work will be discussed under the following headings:
3.8.1 General
g rejection
g correction of Defects
g the defects liability period
g concessions.

3.8.2 Rejection of the The ECC does not contain any express provision for rejection of a part of, or the whole of, the
works works in the event that the performance of the same is wholly unacceptable when judged against
the requirements of the Scope. Such an occurrence could arise when a Contractor responsible
for designing and constructing the works fails to meet a performance specification expressed
in terms of the efficiency of the completed works (not uncommon in the process and plant
sector).

Instead, the ECC provides for various possible remedies, in that Defects are addressed depend-
ing on the seriousness of the failure. These include

g the Contractor is required to correct Defects (see Section 3.8.3 below)

g the Defect is accepted and the contract price is reduced (see Section 3.8.5)
g the Contractor is liable for the cost of having Defects corrected by Others
(see Section 3.10.4)
g low-performance damages secondary Option X17 (see Section 3.10.5).

3.8.3 Correction of The Contractor has an obligation (clause 44.1) to ‘correct a Defect whether or not the Supervisor
Defects notifies it’. This might seem like stating the obvious but it does emphasise the importance of the
quality standards specified in the Scope being capable of objective assessment, removing
reliance on the Client’s representatives as the arbiter of what is acceptable and what is not.

The Contractor is required to correct Defects whether or not the Supervisor has notified the
Contractor of them.

In terms of when the Contractor has to correct Defects, the ECC takes a practical approach, and
up to Completion (of either a section or the whole of the works) generally leaves the timing of
corrective works to suit the Contractor’s planning. There are, however, incentives for the
Contractor to correct Defects sooner rather than later. These are as follows:

g For the price-based main Options of the ECC, only completed activities/work that is
‘without notified Defects the correction of which will delay following work’ is taken into
consideration when assessing interim payments to the Contractor (clauses A11.2(29) and
B11.2(30)).

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g For cost-based options, Defects corrected after Completion are a Disallowed Cost.
g The Project Manager has no duty to certify Completion (of any section or the whole of
the works) until the Contractor has corrected Defects which would prevent the Client
from using the works (or Others from doing their work (clause 11.2(2)). This has the
double downside of both preventing the release of half of any retention held (where
secondary Option X16 is used) and increasing the likelihood of the Contractor’s exposure
to delay damages (where secondary Option X7 is used).
g The Contractor is required to show on each revised programme that they submit to the
Project Manager for acceptance how they plan to correct notified Defects.
g If there are many notified Defects, the Contractor might struggle to correct all of them
within the defect correction period after Completion. It could be more efficient for the
Contractor to correct the Defects at the time of notification while the resources are on
Site and working in that area.

If a test or inspection shows that any work has a Defect, clause 41.4 states that the Contractor
corrects the Defect and then repeats the test or inspection that led to its discovery.

Completion of the works (or any section of it) is a significant milestone in determining the time
within which the Contractor has to correct any Defects that still exist at that time or that sub-
sequently come to light. This is because clause 44.2 places on the Contractor an obligation to
correct notified Defects before the end of the ‘defect correction period’. The defect correction
period begins at Completion for Defects notified before Completion (other than those that
would prevent the Client from using the works, which by this time should no longer exist) and
when the Defect is notified for other Defects – that is, those notified after Completion. The
defect correction period being an italicised term in the ECC means that it must be given meaning
by an entry in the Contract Data. Typically, Clients prescribe a period of 2 or 3 weeks.

Invariably there will be instances when Defects are discovered after Completion when the Client
has taken over the works. Clause 44.4 of the ECC deals with such a situation by requiring the
Project Manager to arrange for the Client to give ‘access to and use of a part of the works which
has been taken over if it is needed for correcting a Defect’.

Defects notified before Completion must be corrected within the defect correction period
after Completion.

Defects notified before Completion that would prevent the Client from using the works
must be corrected before Completion.

Defects notified after Completion must be corrected within the defect correction period
after notification.

For maintenance contracts that use the ECC rather than the NEC4 Term Service Contract, it is
important that Defects are corrected at the time of notification and not left until after Com-
pletion to be corrected. If it is important that Defects are corrected at the time of notification,
clause 44.2 can be amended using Option Z (the second sentence in clause 44.2 is deleted and
replaced as follows: ‘This period begins when the Defect is notified’).

3.8.4 The Defects It should by now be realised that the term defect correction period as used by the ECC has a
liability period wholly different meaning from other similar phrases such as ‘defects liability period’ and
‘maintenance periods’ used in other standard forms. The defect correction period in the ECC
is simply the time that the Contractor has to correct notified Defects existing at or arising after
Completion.

So how does the ECC define the period within which the Contractor is contractually liable to
correct Defects arising in the works? It uses the expression ‘defects date’ that, given its italicised
status, requires it to be given effect by the Client inserting a period of weeks (typically 52 weeks)
in Contract Data part one, a period that runs from the date of Completion decided by the
Project Manager.

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There is no obligation on the Contractor to notify Completion.

3.8.5 Concessions Most traditional standard forms of contract do not cater adequately for rational decisions
about defective work based on engineering considerations. Consider an example where contig-
uous piles forming the embedded walls to a shaft have been sunk outside the vertical tolerances
required by the Scope. Most engineers will appreciate that the cost, time and effort necessary to
remedy this situation may be out of all proportion to the impact that the Defect has on follow-
ing work and, indeed, the completed works. Previously the Client’s representative, faced with
such a situation, had the following options:

g Turn a blind eye.

g Accept the Defect (although not permitted by the contract) with the consequent
attendant implications if the result is unsatisfactory.
g Play it ‘by the book’, demanding ‘unreasonable’ steps to correct the Defect out of all
proportion to the likely impact of the Defect on the finished works. Such a course of
action has the undesirable side-effect of encouraging the Contractor not to notify similar
Defects in the future.

The ECC fortunately sweeps all this away by incorporating a very practical provision, setting in
train the possibility of acceptance of a Defect if the Contractor and the Project Manager so
agree. Clause 45.1 simply permits either to propose to the other that the Scope should be
changed so that the Defect does not have to be corrected. The subtlety of this is that by chang-
ing the Scope in such an instance, the Defect ceases to exist and consequently any later adverse
implications of such ‘acceptance’ of the Defect are at the Client’s risk. Obviously, great care is
required on the part of the Project Manager, who would invariably seek advice from their
designers and/or engineers in such a situation. The machinery for such a concession is set out
in clause 45.2 and involves the following steps:

1 The Project Manager and the Contractor decide whether they are prepared to consider a
change to the Scope so that a Defect does not have to be corrected (in practice, the
proposal is likely to be initiated by the Contractor).
2 If they are, the Contractor submits a quotation for reduced Prices (a saving to the Client)
or an earlier Completion Date or both to the Project Manager for acceptance (effectively
the Contractor’s ‘consideration’ in return for the Client’s loss of value).
3 The Project Manager either
– accepts the quotation and instructs the necessary change to the Scope, the Prices, Key
Dates and the Completion Date accordingly and accepts the revised programme or
– does not accept the quotation, leaving the Contractor either to correct the Defect or
submit a revised (more favourable) quotation.
Any change to the Scope is not a compensation event by definition (clause 60.1(1)).

The process has to be streamlined in order to reach a solution quickly before succeeding con-
struction is superimposed on the ‘defective’ part.

3.9. Certification The ECC does not contain terms such as ‘practical completion’, ‘mechanical completion’ or
‘substantial completion’. Instead, it places on the Project Manager an obligation to decide the
date when the Contractor has

g done all the work that the Scope states they are to do by the Completion Date
g corrected notified Defects that would have prevented the Client from using the works or
Others from doing their work (clause 11.2(2)).

Having decided the date by which both of the above states have been reached (the date of Com-
pletion), the Project Manager then has a duty to certify Completion within 1 week of that date.

It is hoped that by expressly stating in the Scope the work that the Contractor is to do by the
Completion Date, the uncertainty associated with such terms as ‘substantial’ and ‘practical’
completion will be avoided. The state of Completion clearly has not been reached if there
remain uncorrected notified Defects that would prevent the Client from using the works.

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The ECC adds a default: if the work that the Contractor is to do by the Completion Date is not
stated in the Scope, Completion is when the Contractor has done all the work necessary for the
Client to use the works and Others to do their work (clause 11.2(2)).

Clause 11.2(7) defines what is meant by a Defects Certificate, which is either

g a list of Defects that the Supervisor has notified before the defects date that the
Contractor has not corrected or
g if there are no such Defects, a statement that there are none.

At first sight it might appear that the Defects Certificate is the equivalent of the certificate of
completion of making good defects under JCT forms of contract. It is not! Those certificates
are only issued when the Contractor has fulfilled their obligations to make good Defects,
whereas under the ECC the Defects Certificate is issued on a set date as a record of whether
or not the Contractor has fulfilled their obligations. If the Contractor has fulfilled their obli-
gations, the Defects Certificate will simply contain a statement that there are no Defects to
be corrected. If the Contractor has failed to fulfil their obligations, then the Defects Certificate
will list the particular Defects that the Contractor has failed to correct by the end of the last
defect correction period. The latter gives rise to the right for the Project Manager to have the
uncorrected Defects corrected by others (see Section 3.10.4 below).

The timing of the issue of the Defects Certificate by the Supervisor is stated in clause 44.3: the
Supervisor issues the Defects Certificate at the defects date if there are no notified Defects or
otherwise at the earlier of

g the end of the last defect correction period (which may be later than the defects date if it
commenced just before the defects date and therefore ends after it) or
g the date when all notified Defects have been corrected

The words:

‘The Client’s rights in respect of a Defect which the Supervisor has not found or notified are
not affected by the issue of Defects Certificate’ (clause 44.3) have been added to clarify that
no transfer of liability occurs through the issue of the Defects Certificate.

The purpose, then, of the Defects Certificate is to put on record the state of the works at the date
at which the Contractor’s obligation to correct Defects expires. It is not therefore to be taken as
a certificate of confirmation of fulfilment of the Contractor’s obligations. However, the effect of
the Defects Certificate is similar to that in other contracts, in that it triggers the release of the
final part of retention money (where secondary Option X16 is used) and sets the date for the
expiry of various other obligations.

It is appropriate at this time to consider the subject of latent defects; that is, defects that only
appear after the Defects Certificate has been issued. In common with other standard forms of
contract, the ECC does not expressly exclude the Contractor’s liability for latent defects, and
consequently the Contractor’s liability follows the law applicable to the contract (subject to
any limitation arising from clause X18.4 that only appears to apply to Defects due to the
Contractor’s design – not workmanship).

3.10. Enforcement The fundamental significance of contracts and the law in general is enforceability by the courts.
3.10.1 General The term ‘enforceability’ as used in this context, however, is somewhat misleading in that it does
not mean that the contract, or indeed ultimately the courts, will actually ensure that an agree-
ment is fulfilled as intended. For example, a contract or the courts will not ensure that a contract
to construct particular works will actually result in those works being constructed in accordance
with the specified requirements. Enforceability, from the viewpoint of the Client, means that in
the event of the works not being completed in accordance with the specified requirements, the
contract will provide certain remedies or the courts will award financial compensation in respect

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of any loss or damage suffered by the Client. It is left to the disappointed Client to actually deal
with the defects.

This final part of this chapter therefore deals with the contractual incentives and the remedies
available to the Client when things do not go to plan and it becomes necessary to take
‘enforcing’ action. These remedies will be dealt with in an order starting with what might be
considered the ‘least serious’ and working up to the ‘most serious’. They will be considered
under the following headings:

g incentivisation through certification

g removal of employees
g correction of Defects by Others
g low-performance damages
g termination of the Contractor’s employment.

3.10.2 Incentivisation Although it has already been noted that the timing of the correction of pre-Completion Defects
through certification is largely a matter for the Contractor, there are powerful incentives introduced through the
certification process (both of interim amounts due and of Completion) that make it in the
Contractor’s financial and commercial interest to correct Defects sooner rather than later (refer
to Section 3.8.3 above).

3.10.3 The removal of Since most quality problems can be traced back to people, be it due to the preparation of
employees inadequate quality procedures or a failure to ensure that procedures are adhered to, it is
reassuring to see that the ECC gives the Project Manager the power to instruct the Contractor
to remove any person, having stated their reasons for doing so (refer to clause 24.2). If there was
any doubt over whether the Project Manager’s powers extended to include employees of
Subcontractors, this is dispelled by the second sentence of clause 26.1, which states that ‘this
contract applies as if a Subcontractor’s employees and equipment were the Contractor’s’. The
Contractor is obliged to ensure within 24 hours of the Project Manager’s instruction that the
person in question has no further connection with the contract. The Contractor may also be
required to remove the person immediately.

3.10.4 The correction Clause 46.1 of the ECC is similar to the type of clause found in most construction contracts,
of Defects by Others entitling the Client to recover the cost of making Defects good if the Contractor has failed to
correct them within a prescribed time, in this case the defect correction period. Since in the
majority of cases uncorrected Defects will be a post-Completion issue, it will fall to the Project
Manager to offset the cost of having the uncorrected Defects corrected by other people, against
the release of the second half of the retention money, assuming Option X16 is included in the
contract. The retention percentage should consequently be sufficient to produce an appropriate
fund, which remains in the Client’s hands until the defects date when the extent of the cost of
uncorrected Defects is known.

Retention bonds, which are gaining in popularity with some Clients as an alternative to the
traditional retention arrangements, are not directly catered for by the ECC, although they could
be added through Option Z and by including the required form in the Scope.

3.10.5 Low-performance Under the ECC the possible Client’s remedies for low performance are as follows:
damages
g the Contractor is required to correct Defects (clause 44.1; refer to Section 3.8.3 above)
g the contract price is reduced following the ‘acceptance’ by the Project Manager of a
Defect that is not corrected (clause 45; refer to Section 3.8.5)
g the Contractor is liable for the cost of having Defects corrected by Others (clause 46.1;
refer to Section 3.10.4)
g low-performance damages (secondary Option X17).

The low-performance damages secondary Option is most likely to be used in circumstances

where the Contractor has full design responsibility and the Client has expressed their require-
ments for the completed works by way of performance criteria included in the Scope. They
feature most commonly in process and plant contracts, but are occasionally found in

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construction contracts. Option X17 states that ‘if a Defect included in the Defects Certificate
shows low performance with respect to a performance level stated in the Contract Data [part
one], the Contractor pays the amount of low performance damages stated in the Contract Data
[part one]’. The consequence of this is that where the performance of the works in use fails to
reach a specified level due to a design or other fault of the Contractor and the Defect is not
corrected (i.e. it is listed in the Defects Certificate), the Client should be able to recover the
damages they suffer in consequence, a genuine pre-estimate of which should be included by the
Client in Contract Data part one.

Any deduction of low performance damages is made in the assessment of the amount due when
the Supervisor issues the Defects Certificate, which again emphasises the need to consider
making provision for the existence of an adequate retention fund at this time from which to set
off any damages due.

3.10.6 Termination of the Although this would be a last resort, the ECC does provide for the Contract to be terminated if,
Contractor’s employment subject to a 4-week period to rectify a particular default, the Contractor has ‘substantially failed
to comply with its obligations’ (clause 91.2 (R11)). Although the language used is fairly general,
it could be that persistent failure by the Contractor to comply with the accepted quality plan,
particularly where in reliance on such compliance the Client has reduced the levels of external
supervision, would amount to a substantial failure by the Contractor to comply with their
obligations. It would of course be helpful to the Client’s case if they could demonstrate evidence
of an intolerable level of Defects resulting from the Contractor’s failure to comply with the
quality plan.

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Managing Reality: Book Three
Managing the Contract
ISBN 978-0-7277-6186-6

ICE Publishing: All rights reserved

http://dx.doi.org/10.1680/mc.61866.059

Chapter 4
Disputes and dispute resolution

Synopsis This chapter

g emphasises the importance of early dispute resolution to the successful outcome of a

contract
g considers the common sources of dispute
g considers how the ECC has been designed to reduce the incidence of disputes
g examines how the ECC provides for the resolution of disputes
g looks at the implications for the dispute resolution process as a result of the HGCR
Act as amended
g looks at ECC changes in relation to adjudication.

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4.1. Introduction Over time, the construction industry has built up a reputation for being adversarial. The indus-
try has spent millions of pounds in disputes that add no value to the construction process.

Most disputes at site level are founded on either

g differences in interpretation of the documents forming the contract (see Section 4.2.2
below) or
g differences of opinion over the financial and/or time effects of later events
(see Section 4.2.3).

Such disputes divert considerable resources, sometimes at the expense of the ongoing construc-
tion. They cause budgetary uncertainty for clients and financial difficulties to contractors (and
their subcontractors). Consequently, one of the few things that most people in the construction
industry do agree on is that disputes are not a good thing, and most initiatives over recent years
aimed at improving the performance of the construction industry have concluded that the
adversarial culture has to change.

It should therefore come as no surprise that one of the fundamental objectives of the ECC was
that its use should minimise the incidence of disputes and therefore improve the certainty about
the outcome of the contract for both Parties. However, the ECC sensibly recognises that as long
as two people can place different interpretations on or have different opinions on the same
issue, then disputes will continue to arise. At the same time, given the potential damage such
disputes present to the collaborative working principles upon which the ECC is founded, the
NEC drafting team realised that disputes, having arisen, need to be resolved quickly and by
a process that in principle is accepted as fair by both parties.

Fundamental objectives of the ECC are that its use should

g minimise the incidence of disputes

g improve certainty of outcome for both Parties.

4.2. How disputes Two of the main causes of disputes under the ECC are the Scope and the Site Information.
arise
4.2.1 Introduction It is important that the information provided to the Contractor at the tender stage is as complete
as it can possibly be. This means that a great deal of effort needs to be put into the preparation
of information that will form part of the contract documents.

These requirements lead to a need for openness in the preparation of documentation. If the
Client genuinely does not know about something, they should state so, and any later addition
can be managed through the compensation event procedure. Alternatively, the Client could give
assumptions upon which tenderers can base their bids. This philosophy is at odds with
traditional professional training that encouraged the use of ‘all-embracing’ preambles to
contract documents to cover everything stated and not stated. However, a Contractor is in no
better position to manage the ‘risk’ than the Client, so there is no point in ‘passing it on to
them’, because it will eventually come back to the Client to manage.

Another main area where risk arises is in the administration of the contract. An action/inaction
under the contract can be grounds for a dispute to arise.

Ensure that information provided to the Contractor at the tender stage is as complete as
possible.

Good documentation and good administration are essential in avoiding disputes.

The majority of disputes are probably avoidable but, before we consider how to avoid them, we
need to understand better how they arise.

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4.2.2 Interpretation of The first source of disputes mentioned earlier is a difference in interpretation of the documents
documents forming the contract.

The contract is drawn up to define what is required to be done in return for what payment; that
is, the duties and responsibilities to be undertaken by each Party and (to some extent) what is to
happen should they fail to exercise them. Where the definition of what is to be done is incom-
plete, the contract gives the Client’s representative certain powers to supply further information
and also to vary the work to be done. Risks, which may be encountered in the execution of the
works, are allocated (both contractually and financially) between the Parties. The physical
context within which the works are to be carried out and any constraints on the work to be done
should also be stated.

Generally, it is the words used that matter – not those that could have been or even should have
been used. The courts are inclined to take the words used at their face value, to assume that if
used as they were intended, that the same word has the same meaning throughout and that if
different words are used then different things are meant. They work on the basis that the words
of the contract were agreed between both Parties to the contract, and that being so it is not open
to either Party subsequently to complain that the responsibilities imposed are onerous.

It is convenient to think that the above applies only to the conditions of contract, but of course it
applies to all the documents forming part of the contract. In the case of the ECC this means the
documents stated as being part of the contract, as in the following:

g the form of contract/articles of agreement

g the core clauses and the main and secondary Option clauses of the ECC
g Contract Data part one and all documents referred to therein, principally the Scope and
the Site Information
g Contract Data part two and all documents referred to therein, including any Scope for
the Contractor’s design, the first programme submitted for acceptance and the pricing
document in the form of an activity schedule or bill of quantities.

Ironically, it is often the conditions of contract that prove to be the least fertile seedbed for
disputes, probably explained by their careful legal drafting and (at least in the case of standard
conditions) the Parties’ familiarity with their meaning, their responsibilities under them and the
recognised allocation of risk. The more common sources of dispute tend to be those documents
that have to be prepared each time to suit the specific requirements of the individual contracts.
With the ECC this means the Scope and the Site Information. It is worth considering the
definition given to these supporting documents by the ECC (clauses 11.2(16) and 11.2(18)).

The interpretation of documents applies to ALL the documents stated as being part of the
contract, not just the conditions of contract.

4.2.2.1 The Scope ‘Scope is information which

g specifies and describes the works or
g states any constraints on how the Contractor Provides the Works.’ (clause 11.2(16))

The Scope will therefore typically include the general specification, the preliminaries, the
materials and workmanship specification, the drawings, any Client’s requirements in respect
of parts of the works that the Contractor is to design, and any other document that describes
what the Contractor is to construct and that describes any constraints on how they are to go
about it.

Most disputes involving the Scope are therefore rooted in one of the following:

g the Scope is deficient in some respect, for example it is unclear as to who is responsible
for certain actions (e.g. obtaining consents) or unclear as to the detail or the quality
standards to be achieved

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Table 4.1 The importance of the Scope in the ECC

Clause Comments

11.2(6) A part of the works not in accordance with the Scope is a Defect. It follows that
the quality standards set out in the Scope provide the basis on which the
existence of a Defect is judged. Problems arise when the Scope is silent on
quality standards.
11.2(2) Completion is when the Contractor has done all the work which the Scope
states is to be done before the contractual Completion Date.
27.4 The Contractor is to act in accordance with the contract specific health and
safety requirements stated in the Scope.

21.1 The Contractor is to design such parts of the works as stated in the Scope.
25.1 The Contractor is to share the Working Areas with Others as stated in the Scope.
41.2 The Contractor and the Client provide materials, facilities and samples for tests
and inspections as stated in the Scope.

g there exists ambiguity or inconsistency in or between the documents that comprise the
Scope
g the Contractor contends that the Scope requires them to do something that is illegal or
impossible.

It is probably fair to say that in pursuit of the ‘flexibility’ objective, the ECC places greater
reliance on the Scope as a source of supplementary information than more traditional contracts
do on its equivalent. For example, details of testing are not included in the conditions of
contract, but must be drafted by the Client and included in the Scope. It therefore follows that
greater skill and care is required in the drafting of the Scope (in all its guises) if certain pro-
visions of the ECC are to be effective. Some examples of the importance that the ECC attaches
to the Scope are given in Table 4.1. For a full list, refer to Chapter 4 of Book Two.

The interaction between the conditions of contract and the Scope means that disputes can
occur when the Scope does not contain the information it should to give effect to the
conditions of contract.

The quality of the drafting of the Work Information is very important. Some common problems
include the following:

g A lack of precision as to what is required, a common example being quality standards

that are described subjectively in terms such as ‘to the satisfaction of the Engineer/
Architect’.
g An inconsistency in style between the various parts of the Scope as a result of different
people’s contribution. There must be an overall editor/coordinator of the contract
documents during their preparation if a ‘patchwork quilt’ effect is not to result.
g Ignorance of the fact that the Scope should be compatible with the conditions of contract
and consequently the use of different terms and expressions that conflict with the
responsibilities and risk allocation set out in the conditions of contract.
g A simple failure to appreciate how much information the Contractor’s estimator needs in
order to prepare a reliable tender. It must be realised that another party is committing
themselves to translate the documents into physical reality for a price.

It has been said that the successful outcome of a contract is largely dependent on the managerial
effort applied to the pre-planning and preparation of the contract documentation. Prevention of
disputes is, after all, more economical than having to resolve them later. Given this fact, it is still
incredible how poorly planned the pre-contract phase of most projects remains, with the

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 Disputes and dispute resolution

preparation of tender documentation still viewed by many Clients and Project Managers as a
simple activity of short duration squeezed in between the completion of design and the com-
mencement of construction.

The ECC places great emphasis on the Scope as a source of supplementary information,
far more so than traditional contracts.

Having considered disputes rooted in the Scope, let us now consider the other information
traditionally prepared by the Client and unique to each contract, namely the Site Information.

4.2.2.2 The Site The ECC definition of the Site Information is simply information that describes the Site and its
Information surroundings, the Site being that area within the boundaries of the site identified in the Contract
Data. Consequently, the Site Information would include details of such matters as

g any existing buildings/other structures at the Site

g any existing buried or above-ground services
g soil characteristics
g the levels of interfaces between different geological strata
g groundwater levels
g the presence of any bodies of water within or surrounding the Site and seasonal water
levels
g interpretative soil investigation reports.

It is easy to fall into the trap of thinking that Site Information relates to things (natural and
artificial) that are pre-existing at the Site before any work is commenced. On a multi-contract
project, details of the works constructed by the previous contractor become the Site Infor-
mation for the follow-on contractor. Consequently, on a project for a new below-ground trans-
portation system, the layout of the tunnels and the details of the tunnel linings, all constructed
by the preceding ‘civils’ contractor, become the Site Information for the succeeding contractor
engaged to install the mechanical and electrical system. For this reason, as well as to meet the
requirements of the Construction (Design and Management) Regulations 2015, it is important
to keep good records of the works actually being constructed by the different contractors on
multi-contract projects.

On the basis that the Site Information should represent a factual account of the Site and its
surroundings, it is surprising how many disputes arise from the encountering of physical
conditions that, to use a common expression, ‘could not reasonably have been foreseen by an
experienced contractor’. So why should this be?

Historically, clients have invested too little money at the front end of projects, which is where
any useful site investigation work is of most use, thereby ignoring the old maxim that ‘money
spent earlier buys more than money spent later’. In addition to the problem of not allocating
sufficient monies to site investigation is the related problem of collecting information that is
largely irrelevant to the construction of the works. A common problem is for the site investi-
gation to focus on the design of the permanent works with little or no thought as to what infor-
mation would be useful to the contractor in order to determine the most economic temporary
works solution and working methods.

To emphasise the importance of comprehensive and relevant Site Information to the avoidance
of disputes, consider the ‘physical conditions risk’ carried by the Contractor under the ECC.
Putting weather conditions to one side (since these are dealt with separately), if the Contractor
is to notify successfully for more money and/or time, they have to be able to persuade the
Project Manager that the physical conditions actually encountered within the Site are so differ-
ent that an experienced Contractor would have judged them to have such a small chance of
occurring that it would have been unreasonable for them to have allowed for these. Recognising
that this still leaves room for some interpretation, the ECC seeks to narrow the boundaries
surrounding this provision by stating that

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‘In judging the physical conditions for the purpose of assessing a compensation event, the
Contractor is assumed to have taken into account

g the Site Information,

g publicly available information referred to in the Site Information,
g information obtainable from a visual inspection of the Site and
g other information, which an experienced contractor could reasonably be expected to
have or to obtain.’ (clause 60.2)

Ignoring the obvious and the catch-all (third and fourth bullet points, respectively), it should be
clear that the test of what should have been foreseeable by the experienced Contractor still relies
heavily on information in or referred to in the Site Information, and the advice remains for
Clients to buy the most comprehensive and relevant site investigation appropriate to the circum-
stances. However, to state a sum of money that should be spent on site investigation as a
percentage of the value of the overall work can be misleading. It is far better to approach the
subject from the risk analysis perspective.

Consider a new motorway contract where the designers are seeking to achieve a new
vertical alignment that ensures a cut–fill balance; that is, using the excavated material
derived from the cuttings as fill in the new embankment with a minimum of material to be
disposed of off Site. It is clearly important to the Client’s budget and programme for the
contract to have a high level of confidence that sufficient quantities of acceptable material
are present in the proposed cuttings. The consequence of this not being the case is the high
cost of the disposal of quantities of unacceptable materials off Site (landfill tax included)
and the additional cost of ‘importing’ acceptable fill materials to the Site. Given the ‘risk
exposure’ in this instance, it might well prove desirable to invest in a thorough site
investigation, and if necessary alter the vertical alignment to achieve the earthworks
balance objective. Comprehensive site investigation is invariably a sound investment, since
if it narrows the definition of the likely conditions to be encountered, it should accordingly
reduce the amount of risk monies included in the Contractor’s tender for what could
otherwise be perceived as widely varying conditions.

So, what are the common sources of dispute associated with the Site Information?

g Where the Site Information does not accurately represent the actual physical conditions
encountered. As noted, very often this is a result of an inadequate/irrelevant site
investigation, but now and again it is just the result of something unexpected. This is
more common with below-ground civil engineering works, where no matter how
thorough the site investigation, until the works are actually executed the true nature of
the conditions will never be known for certain. It was this feature of civil engineering
works that has traditionally led to contracts for such work being accompanied by a bill
of quantities containing provisional quantities of the work, all subject to admeasurement.
g Inconsistency or ambiguity in or between the documents that form part of the Site
Information.

It should be noted that most disputes surrounding the Site Information are not black-and-white
cases. It is for this reason that the ECC Guidance Notes introduce the concept of ‘boundary
limits’. These should be introduced to the contract through the use of secondary Option Z
additional conditions.

Good, early and comprehensive site investigation for the permanent and temporary works
is essential.

4.2.2.3 The Contract Data The final document mentioned earlier that is unique in its content to each project is the Contract
Data, which forms part of the conditions of contract. It comes in two parts, part one prepared
by the Client and sent out with the invitation to tender letter and accompanying tender

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documentation, and part two prepared by the Contractor and submitted with the tender sub-
mission. Its purpose is to provide key information as required by the conditions of contract and
that is specific to a particular contract. It is absolutely key to the effective operation of the ECC
that the terms in italics contained in the conditions of contract are given their meaning by the
related entry in the Contract Data. For example, the following are addressed in the Contract Data:

g the main Option and secondary Options applicable to the particular contract
g the names of the Client, Contractor, Project Manager, Supervisor and Adjudicator
g where to find the documents comprising the Scope and the Site Information
g the starting date, access dates and completion date(s)
g the method of measurement (if an ECC main Option using a bill of quantities applies)
g the amount of delay damages (Option X7) payable by the Contractor if the works are late
and the amount of low-performance damages (Option X17) payable if the works do not
meet stated performance levels
g the names of the Contractor’s key people
g any Scope in respect of designs for which the Contractor is responsible
g the identity of the activity schedule or bill of quantities as appropriate, together with the
tendered total of the Prices
g the identity of the first programme to be submitted.

The ECC provides a pro forma Contract Data, and consequently the likelihood of getting it
wrong should be small, most errors arising from a misunderstanding of the information to
be inserted. Getting it wrong is serious, however, since unlike the Scope, which can be changed
by an instruction given by the Project Manager, once the contract has been let, the Contract
Data can only be changed by agreement between the Client and the Contractor.

One common mistake made by drafters of the documents comprising the ECC is to mix up infor-
mation between the Site Information and the Scope, for example giving information describing
the Site and its surroundings in documents identified by the Contract Data as being the Scope
(and vice versa). This is something that must be avoided (see Chapter 4 of Book Two).

The Client might have commissioned the most comprehensive and relevant site
investigations possible, but if they then include the findings in a document referred to as the
Scope, they will not be able to rely on it as Site Information when seeking to counter a
compensation event notification from the Contractor contending changed physical
conditions.

It is essential to ensure that the data in Contract Data part one and Contract Data part two are
complete. It is not uncommon to find that some data are not inserted by the Contractor at the
time of tender, for example components of cost for the Short Schedule of Cost Components.

Ensure that the Contract Data has been fully completed at the tender and tender
assessment stages. The Scope and Site Information should be kept separate. Failure to do
so might have implications on how a compensation event is assessed.

4.2.3 The cost and time The second source of dispute identified is differences of opinion over the financial and/or time
effects of disputes effects of events that arise once the contract has been let. In this instance, since the hurdle as to
whether entitlement exists contractually for any particular case has been overcome, it remains
only to establish its financial and time effects.

Traditionally, price-based contracts have sought to assess the financial effects of variations and
other events at the client’s risk as follows:

g If the nature of the work affected by the ‘event’ and the conditions under which it is
required to be undertaken are unchanged from those pertaining when the contractor
prepared their tender, then such rates would be used to value the effects of the variation
or change.

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g If one or other of the nature or the conditions is dissimilar, then the contract rates and
prices are used as the basis for assessing the value of the variation or change.
g If neither the nature of the work nor the conditions are similar, then the client’s
representative would be responsible for ascertaining a fair evaluation, but in doing so
would seek to ensure that as far as possible the valuation was still related to the
contractor’s original contract rates and prices.
g As a last resort in circumstances where none of the above were feasible, the variation or
change would be valued on a cost-plus or ‘day work’ basis.

This process resulted in many disputes over the applicability of the contract rates, usually con-
tained in a bill of quantities, a document based on the misapprehension that all of a contractor’s
costs are proportional to the quantities of the various elements of the work.

A contractor losing money or seeking to earn inflated profits could always be relied upon to
come up with all sorts of plausible reasons why the contract rates were not applicable to the
varied work. The client’s representative often found it difficult to counter such arguments, given
the veil that the bill of quantities throws across the contractor’s true costs and the manner in
which they are incurred.

If agreeing the financial effects of change was a challenge, then agreement of the time effects was
nigh on impossible given the traditional scant regard paid to monitoring progress against an
original and meaningful programme and it being in the contractor’s interest to address the
delaying effects for which the client was responsible later rather than sooner, once delays caused
by their own inefficiencies were less prominent in the memory of the client’s representative.

It is perhaps sad that until very recently far more space on construction industry bookshop
shelves and far more seminar time were devoted to the subject of ‘claimsmanship’ than to
improving the performance of the construction industry for the benefit of its customers.
Although it looks like this trend has altered, disputes over both money and time still comprise
a large proportion of the total of all disputes at the site level.

4.3. How the ECC When designing the ECC the drafters intended it to be flexible and clear and to promote good
seeks to reduce management. One example of this is the avoidance in the contract of such phrases as ‘in the
the incidence of opinion of the Engineer’. Instead, the duties of the Project Manager are clearly set out, and the
disputes criteria on which their decisions are to be based are stated specifically, not left to a general
concept of acceptability.

In many instances, the ECC will serve to reduce the incidence of disputes by virtue of its two
founding principles, both of which have a major impact upon the objectives of stimulating good
management. These principles are

g foresight applied collaboratively mitigates problems and shrinks risk

g clear division of function and responsibility helps accountability and motivates people to
play their part.

Some practical examples of how these principles serve to reduce the incidence of disputes
follow.

4.3.1 Early warning The early warning provision of the ECC places an obligation on both the Project Manager and
the Contractor to give to the other a notification of any matter that could increase the price that
the Client pays, delay Completion or impact on the finished quality of the works or delay
meeting a Key Date. The Contractor and the Project Manager may also give an early warning
of any other matter that could increase the Contractor’s total cost. Early warning of a matter for
which a compensation event has previously been notified is not required. This is intended to be
a practical device to stimulate early joint consideration of unforeseen problems.

Joint consideration of the problem should lead to joint agreement as to the best solution, and
consequently the necessary action to avoid the problem or reduce its impact. In addition to
shrinking the risk to the price, the programme and the quality of the works, the early warning

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provisions, by involving the Project Manager in the decision-making, reduce the possibility of
them deciding at a later date with the wisdom of hindsight that the Contractor did not deal with
the problem in the most cost- and/or time-effective manner.

4.3.2 Valuing changes Many disputes arise over the assessment of the financial and time effects of variations and other
changes at the Client’s risk under the contract. These disputes invariably centre on the applica-
bility of the contract rates to the changed situation and the ineffective use of a programme to
monitor progress and plan the future work.

Under the ECC, the traditional basis of valuing variations using tendered bill of quantities rates
is discarded in favour of valuation according to the full effect of the variation on timing and
methods of work, and the use of resources (although rates can be used by agreement in the
assessment of compensation events). Such a means of valuation relies on the Contractor main-
taining a comprehensive, realistic and up-to-date plan for the remaining work that they are
obliged to do by the ECC and for which serious sanctions apply in the event that they fail
to do so. The side-benefit of these requirements is to eliminate disputes over the applicability
of tendered rates for pricing variations and to reduce the likelihood of disputes over the time
effect of those same variations.

4.3.3 Clear division The ECC recognises that if risk is placed on a Party to the contract, that Party is motivated to
of function and minimise its effect and use risk allocation to encourage good management in the Parties most
responsibility likely to be able to respond.

For example, the contractor is traditionally assumed to have inspected the site and carried out
their own site investigation. This does not motivate the client to do sufficient site investigation
to establish the effect of ground conditions on construction cost. The ECC does not state that
the Client should do more site investigations, as this would have little impact. Instead it is stated
that the Contractor is to assume that the ground conditions will be as they are described to them
in the tender documents (the Site Information).

Consequently, if only minimal site investigation has been done, the Contractor could base their
price on an erroneous view of the sub-surface conditions. As this will increase the Client’s risk of
later programme delays and extra cost, the Client is more strongly motivated to investigate
sufficiently. The side-benefit of course is that if the Client is motivated to do a comprehensive
site investigation, the likelihood of disputes arising over changed conditions and their effect on
the works must be reduced.

Staying with site investigations and physical conditions, it was stated earlier that disputes rooted
in different interpretations placed on the Site Information are rarely black-and-white affairs.
This is due, in part, to the difficulty in defining precisely the boundary between the physical
condition risk carried by the Contractor and that by the Client. This difficulty is exacerbated
by the use in construction contracts of such terms as ‘those physical conditions which could not
reasonably have been foreseen by an experienced Contractor’ to describe the risk carried by the
Client. A simple example of the problem will illustrate the difficulty.

The Site Information includes three borehole logs, which indicate that in three separate
locations the depth of the existing topsoil at the Site was 100, 200 and 350 mm, respectively.
Is the Contractor deemed to have included in the price for excavating existing topsoil across
the Site up to 350 mm thick, an average of 217 mm thick across the Site or some other
permutation of the numbers depending on the precise location of the boreholes?

The ECC Guidance Notes have recognised the potential for such issues to give rise to
disputes, and so they suggest the inclusion in the contract of ‘boundary limits’ between the
risks carried by the Client and the Contractor; that is, to state what tenderers should allow
for in their tenders.

In our topsoil example this could be done by stating in the Scope that the Contractor shall
be deemed to have allowed in the tendered total of the Prices for excavating a prescribed

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volume of topsoil with a thickness in the range of 100–350 mm. Additionally, a small
tolerance, say +5%, could be stated to apply to the prescribed volume to avoid
compensation events for insignificant changes in quantity. Tenderers will then be able to
tender on a common basis knowing that they must allow in their pricing for the occurrence
of physical conditions within the stated boundary limits. The same principles can of course
be applied to such physical conditions as soil characteristics, the level of the rock–soil
interface, groundwater levels, permeability limits and overbreak in rock excavation.

4.3.4 Reducing disputes This section examines how the ECC attempts to head off potential disputes centring on
in the Scope and Site deficient/inadequate Works and Site Information, looking individually at cases where
Information
g the Scope is unclear as to what is to be done
g there exists ambiguity or inconsistency in or between the documents comprising the Scope
g the Contractor contends that the Scope requires them to do something that is illegal or
impossible
g there exist inconsistencies within the Site Information (including the information referred
to in it).

4.3.4.1 Scope This situation is where the Scope does not provide a full description of what is to be done by the
descriptions Contractor or does not describe adequately the constraints under which the work is to be done.

For example, in a contract where the Client is responsible for all design, the Scope might be silent
on the subject of what tests are necessary to verify the quality of a particular component or the
construction tolerances applicable. In such instances, it falls to the Project Manager to remedy
this deficiency as part of their duty to ensure that the completed works meet the Client’s objectives
in terms of quality. Clause 14.3 of the ECC gives the Project Manager the power to instruct a
change to the Scope, and, in the example referred to, the Project Manager would instruct the
Contractor as to what tests were necessary, or the construction tolerance that was applicable. Such
an instruction, being a change to the Scope, is of course a compensation event (clause 60.1(1)), and
the Contractor would therefore be entitled to an assessment of time and money, which, if nothing
else, emphasises the importance of getting the Scope right in the first instance.

Get the Scope right!

Deficiencies in the Scope may lead to compensation events.

4.3.4.2 Conflicts within The second situation is where separate parts of the Scope might in themselves be clear as to
the Scope what is to be done but, unfortunately, conflict with one another – for example the same rein-
forcement bars called up as two different diameters in the reinforcement schedules and on the
reinforced concrete detail drawings. The ECC does not use a hierarchical arrangement of the
contract documents, giving precedence to those higher up the hierarchy to resolve such ambi-
guities. Instead, where such ambiguities and inconsistencies exist in or between the documents
comprising the Scope, the ECC places the responsibility on the Project Manager to give an
instruction resolving the ambiguity or inconsistency, for example by advising the Contractor
what the Client/designer actually requires (clause 17.1). If the resolution of the ambiguity or
inconsistency requires an instruction that changes the Scope, the contra proferentum rule
applies, which interprets any ambiguous or inconsistent statements in a contract against the
party responsible for their preparation.

To put this into a practical context, using the reinforcement example above, if the
reinforcement schedule showed 32 mm bars and the reinforcement detail drawing for the
same bars indicated a diameter of 40 mm, then if the Project Manager confirms the latter as
being required, the effect of the ensuing compensation event would be assessed as if the
Prices and the Completion Date and the Key Dates were for the interpretation most
favourable to the Contractor; that is, they would be deemed to have allowed in their
original tender price for the smaller bars.

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The ECC has no hierarchy of documents.

The contra proferentum rule applies against the Client if the Scope contains conflicting
information, since ambiguities and inconsistencies in wording are construed against the
drafter.

4.3.4.3 The Scope The third situation is where the Contractor notifies the Project Manager that they consider the
requires an illegal Scope requires them to do something that is illegal (e.g. to flout the building regulations) or
action impossible (e.g. to construct a bored tunnel causing absolutely no settlement). If, having
reviewed the situation, the Project Manager agrees, they give an instruction changing the
Scope appropriately (clause 17.2). This, of course, would be a compensation event (clause
60.1(1)).

4.3.4.4 Inconsistencies Finally, where the Site Information contains inconsistencies within itself or between it and other
within the Site information referred to in it: for example, one part of the Site Information shows the Site to be
Information clear of all buried services while another part shows a high-pressure gas main crossing the Site.
Again, the contra proferentum rule applies, clause 60.3 stating that ‘the Contractor is assumed to
have taken into account the physical conditions more favourable to doing the work’; that is, in
this case to have assumed the Site to be clear of all buried services.

The contra proferentum rule applies to the Site Information.

4.3.5 Conclusion All of the above are examples of ‘self-help’ remedies contained within the ECC, facilitating the
removal of the uncertainty as to what is to be done in particular circumstances and in doing so
reducing the potential for disputes.

Before concluding this section, it is worth countering the concerns from many quarters that by
using the ECC there is a risk that claims on contractual matters will increase because the
contract is relatively untried, the language is unfamiliar and the contract has never been tested
in the courts. The ECC had more legal checking before publication than any of the traditional
standard forms preceding it. It was drafted to eliminate known problems associated with
traditional contracts that have come before the courts. All the well-known court cases that
hinged upon the wording of a traditional contract have been taken into account in drafting the
ECC so that the same matter could not come up again when the ECC was used. In addition, the
fact that it has not been tested in court is extremely positive – it means the contract has not been
so troublesome that a court has had to resolve conflicts.

We will now consider in the final section of this chapter the situation where, despite all the
efforts of both parties, and the self-help remedies contained within the ECC, a dispute actually
arises.

4.4. Dispute The ECC caters for dispute resolution in three ways, as shown in Figure 4.1.
resolution under
the ECC The NEC had catered for adjudication as a dispute resolution procedure prior to legislation
4.4.1 General promulgated in the UK mandating the use of adjudication in construction contracts (as
defined). This procedure is still available in the ECC, and is described in Option W1.

The HGCR Act mandated adjudication for construction contracts let after 1 May 1998, and the
procedure for this type of adjudication is described in Option W2.

A third option for dispute resolution is the use of a Dispute Avoidance Board in place of
adjudication, and this procedure is described in Option W3.

All three Options for resolving and avoiding disputes have as their last tier of resolution the tri-
bunal, which is usually either arbitration or the courts, and the Client states their choice in
Contract Data part one. Table 4.2 describes the three Options in broad detail.

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Figure 4.1 Levels of dispute resolution in Options W1, W2 and W3

First level of Second level of Third level of

dispute resolution dispute resolution dispute resolution

Senior
Option W1 Adjudicator tribunal
Representatives

Senior
Option W2 Adjudicator tribunal
Representatives

Dispute Avoidance
Option W3 tribunal
Board

Table 4.2 Options in the ECC for dispute resolution

Option W1 Option W2 Option W3

When is it used? Used when the HGCR Act Used when the HGCR Act Used when the HGCR Act
does not apply applies does not apply
What preparations are The Adjudicator is appointed The Adjudicator is appointed The Dispute Avoidance Board
made? by the Parties under the NEC4 by the Parties under the is appointed by the Parties
Dispute Resolution Service NEC4 Dispute Resolution under the NEC4 Dispute
Contract at the starting date Service Contract at the Resolution Service Contract at
starting date the starting date
What actions are taken by The Dispute Avoidance Board
the dispute resolver during visits the Site at stated
the period of the contract? intervals, inspects the progress
of the works and becomes
aware of any potential
differences
To whom is a dispute A dispute is referred to the If the Parties agree, a A difference is referred to the
referred? Senior Representatives dispute is referred to the Dispute Avoidance Board
Senior Representatives
What procedures are in Each Party and the Senior Each Party and the Senior Each Party and the Dispute
place? Representatives follow the Representatives follow the Avoidance Board follow the
procedure described and procedure described and procedure described and
comply with the timescales comply with the timescales comply with the timescales
required required required
When can a dispute be If the dispute is not resolved A dispute can be referred to If the dispute is not resolved
referred to the next level of by the Senior Representatives, the Adjudicator by either by the Senior Representatives,
dispute resolution? it is referred to and decided Party at any time, it is referred to and decided
by the Adjudicator irrespective of whether the by the Adjudicator. Only
dispute has been referred to issues not agreed by the
the Senior Representatives Senior Representatives are
referred to the Adjudicator
What disputes can be Only issues not agreed by the A dispute can be referred to A Party may not refer a
referred to the next level of Senior Representatives are the Adjudicator by either dispute to the tribunal unless
dispute resolution? referred to the Adjudicator Party at any time a difference has first been
referred to the Dispute
Avoidance Board
What procedures are in The Parties and the The Parties and the
place? Adjudicator follow the Adjudicator follow the
procedure described and procedure described and
comply with the timescales comply with the timescales
When does a dispute go to A Party who is dissatisfied A Party who is dissatisfied A Party who is dissatisfied
the next level of dispute with the Adjudicator’s with the Adjudicator’s with the Dispute Avoidance
resolution? decision may refer that matter decision may refer that Board’s recommendation may
to the tribunal matter to the tribunal refer that matter to the
tribunal

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The ECC caters for adjudication on contracts that do not fall within the definition of a
construction contract or are outside the UK.

Secondary Option Y(UK)2 should be chosen for contracts that fall within the definition of
a construction contract.

4.4.2 Option W1 first tier The first dispute resolution tier in Option W1 is to refer a dispute to the Senior Representatives.
– Senior Representatives Both the Client and the Contractor have the opportunity to name the people whom they wish to
represent their interests in the case of a dispute.

Contract Data part one

If Option W1 or W2 is used

The Senior Representatives of the Client are

Name (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contract Data part two

If Option W1 or W2 is used

The Senior Representatives of the Contractor are

Name (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Three matters may be notified by either Party, and one further matter can only be notified by
the Client.

g The Contractor may refer these matters to the Senior Representatives:

(a) an action or inaction of the Project Manager or the Supervisor
(b) an assessment of Defined Cost that is treated as correct
(c) any other matter.
g The Client may refer these matters to the Senior Representatives:
(a) an action or inaction of the Project Manager or the Supervisor
(b) an assessment of Defined Cost that is treated as correct
(c) any other matter
(d ) a programme, compensation event or quotation for a compensation event which is
treated as having been accepted.

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Managing the Contract

The Senior Representatives work together as one body to

g review each Party’s statement of case (clause W1.1(2) does not actually provide that the
Parties submit their statement of case to the Senior Representatives, only to each other,
but the statements must also go to the Senior Representatives if they are to review the
dispute)
g attend as many meetings and use any procedure they consider necessary to try to resolve
the disputes within the time allowed (no more than 3 weeks)
g produce a list of the issues agreed and the issues not agreed.

The ECC provides that if the dispute is not resolved by the Senior Representatives, it is referred
to and decided by the Adjudicator. There is no choice involved. However, this is softened
slightly by clause W1.3(1), which provides that a Party who disputes any issue not agreed by
the Senior Representatives issues a notice of adjudication and refers the dispute to the Adjudi-
cator (note that the clause does not state who refers the dispute to the Adjudicator, but it is likely
to be the disputing Party).

4.4.2.1 Who should be People who can view things fairly dispassionately should be selected, such as a managing
selected as a Senior director. Also, consider having a lawyer on the team to assess legal risks, someone who can see
Representative beyond the immediate budget (because in the end it’s all about money), and someone who can
see where their team has failed to deliver and can address the issues that arise without casting
blame.

4.4.2.2 Who should Although the Adjudicator is appointed at the starting date of the construction contract, the
be selected as an Adjudicator only becomes involved when a dispute arises.
Adjudicator
Their fees are shared between the Parties regardless of their decision and regardless of which
Party refers the dispute.

The Adjudicator’s decision is final and binding unless revised by the tribunal.

A dispute cannot be referred to the tribunal unless it has first been referred to adjudication.

Construction projects are complex, and disputes can arise on technical or commercial issues. On
the technical side, a dispute may involve specialist work such as geotechnical engineering, or
specialist engineering systems that need to meet prescriptive performance tests.

Therefore, even the most experienced professional acting as an Adjudicator is unlikely to be an

expert or knowledgeable on everything.

Some people suggest having a number of adjudicators named to cover engineering and commer-
cial aspects. However, this should be unnecessary since the named Adjudicator should have the
relevant experience/competence to draw upon the technical assistance of others.

The Adjudicator’s name should be inserted in Contract Data part one.

The Adjudicator only becomes involved when a dispute arises.

Appointed jointly by the Client and the Contractor on the NEC4 Dispute Resolution
Service Contract.

Adjudication fees are shared equally irrespective of their decision.

4.4.3 Option W2 first tier The first dispute resolution tier in Option W2 is to refer a dispute to the Senior Representatives –
– Senior Representatives but only if both Parties agree to do this. Both the Client and the Contractor have the opportu-
nity to name the people whom they wish to represent their interests in the case of a dispute.

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 Disputes and dispute resolution

Contract Data part one

If Option W1 or W2 is used

The Senior Representatives of the Client are

Name (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contract Data part two

If Option W1 or W2 is used

The Senior Representatives of the Contractor are

Name (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address for communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

There is no restriction on the types of matters that can be referred to the Senior Representatives,
and there is no absolute obligation or requirement to refer disputes to the Senior Representatives
prior to adjudication, as legislation provides that disputes can be referred to the Adjudicator at
any time.

The Senior Representatives work together as one body to

g review each Party’s statement of case (clause W2.1(2) does not actually provide that the
Parties submit their statement of case to the Senior Representatives, only to each other,
but the statements must also go to the Senior Representatives if they are to review the
dispute)
g attend as many meetings and use any procedure they consider necessary to try to resolve
the disputes within the time allowed (no more than 3 weeks)
g produce a list of the issues agreed and the issues not agreed.

The ECC provides that if the dispute is not resolved by the Senior Representatives, it is referred
to and decided by the Adjudicator. There is no choice involved.

See Section 4.4.2.1 above regarding the selection of Senior Representatives.

4.4.4 Option W2 second The NEC is an international contract, and, as such, a national requirement for the HGCR Act
tier – adjudication after as amended, which is a UK-specific requirement, should not be contained within the core
the HGCR Act clauses of the contract. Therefore, Option W1 or W3 is to be used except in the UK, when the
HGCR Act as amended applies. (Note: not all construction projects in the UK fall under the
HGCR Act – see sections 104–107 of the act.)

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Managing the Contract

Option W1 or W3 can be chosen for non-UK contracts and those contracts in the UK that fall
outside of the definition of a construction contract for the purposes of the HGCR Act as
amended.

Option W2 is to be used in the UK when the HGCR Act as amended applies, and must be used
with secondary Option Y(UK)2, which ensures compliance with the requirements of section 110
(‘Dates for payment’), section 111 (‘Requirement to pay notified sum’), section 112 (‘Right to
suspend performance for non-payment’) and section 116 (‘Reckoning of periods of time’).

The Client is required to identify the Adjudicator in Contract Data part one.

Contract Data part one

If Option W1 or W2 is used

The Adjudicator is
Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address for communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Adjudicator nominating body is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As with adjudication under Option W1, the Adjudicator is appointed jointly by the Client and
the Contractor under the NEC Dispute Resolution Service Contract at the starting date.

Unlike Option W1, there is no restriction on the types of dispute that can be referred to adju-
dication; but the procedure follows similar lines to Option W1. The procedure below is drafted
in the case of the Contractor referring a dispute:

1 The Senior Representatives do OR

1 A Party refers a dispute to the
not resolve a dispute. Adjudicator whether or not the dispute
has been referred to the Senior
Representatives.
2 The Contractor gives a notice of adjudication to the other Party and sends a copy of the
notice of adjudication to the Adjudicator.
3 Within 3 days of the receipt of the notice of adjudication, the Adjudicator tells the Client
and the Contractor if they can decide the dispute.
4 Within 7 days of a Party giving a notice of adjudication, it refers the dispute to the
Adjudicator, and provides information to the Adjudicator and the other Party. Further
information must be provided within 14 days of referral.

Within 28 days of the referral, the Adjudicator notifies their decision together with their
reasons.

All periods may be extended subject to certain procedures.

See Section 4.4.2.2 above regarding the selection of an Adjudicator.

4.4.5 Option W3 first tier The first tier of dispute resolution in Option W3 is a Dispute Avoidance Board to whom differ-
– the Dispute Avoidance ences are referred. The members for the Dispute Avoidance Board are chosen by the Client and
Board the Contractor using Contract Data parts one and two, and the Dispute Avoidance Board is
appointed by the Client and the Contractor under the NEC Dispute Resolution Service
Contract at the starting date.

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 Disputes and dispute resolution

Contract Data part one

If Option W3 is used

The Client’s nomination for the Dispute Avoidance Board is

Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Dispute Avoidance Board visit the Site at intervals not longer than . . . . . . . . . months

The Dispute Avoidance Board nominating body is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contract Data part two

If Option W3 is used

The Contractor’s nomination for the Dispute Avoidance Board is

Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address for electronic communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unlike the Senior Representatives and the Adjudicator, the Dispute Avoidance Board is more
involved actively in the ongoing progress of the works and takes a more proactive role with
regards to disputes, As such, the Client and the Contractor should consider carefully whom they
would like to make decisions for them and what their qualifications and experience should be.
The Dispute Avoidance Board may not include people whom the Client would put forward as
an Adjudicator.

The Dispute Avoidance Board

g visits the Site regularly after the start of the contract unless the Client and the
Contractor agree that a visit is not necessary, and they make extra visits when the Parties
ask them to (note that the wording in the ECC refers to one visit only, so the Dispute
Avoidance Board must visit at the intervals stated and the Parties’ decision that the
Dispute Avoidance Board can forego a visit does not mean that no further visits need
take place)
g inspects the progress of the works during visits and uses the time to become aware of any
potential differences – a very proactive approach and one designed to be objective
g adheres to the site visit agenda proposed by the Parties
g prepares a note of its visit
g assists the Parties in resolving differences before they become disputes
g provides a recommendation for resolving differences unless the Parties have resolved the
difference by the end of the Site visit
g can take the initiative in reviewing potential disputes, including asking the Parties to
provide further information.

The members of the Dispute Avoidance Board, their employees and agents are not liable to the
Parties for any action or failure unless the action or failure was in bad faith (clause W3.1(7)).

The overall Dispute Avoidance Board procedure is described in Table 4.3.

Before a dispute is referred to the tribunal, it must be referred to the Dispute Avoidance Board
as a difference. A Party who is dissatisfied with the Dispute Avoidance Board’s recommen-
dation may refer a dispute to the tribunal.

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Managing the Contract

Table 4.3 The Dispute Avoidance Board procedure

Clause Comment

W3.2(1) A difference arising under or in connection with the contract is referred to the
Dispute Avoidance Board

W3.2(2) Between 2 and 4 weeks after notification of the difference to the other Party
and the Project Manager, differences are notified and referred to the Dispute
Avoidance Board
The Dispute Avoidance Board assists the Parties in resolving differences before
they become disputes

W3.2(3) The Parties make available to the Dispute Avoidance Board

g copies of the contract
g progress reports
g any other material they consider relevant to any difference that they wish
the Dispute Avoidance Board to consider in advance of the visit to Site

W3.2(4) The Dispute Avoidance Board

g visits the Site and inspect the works
g reviews all potential disputes and helps the Parties to settle them without
the need for the dispute to be formally referred
g prepares a note of its visit
g provides a recommendation for resolving the difference – unless the Parties
have resolved the difference by the end of the Site visit

W3.2(5) The Dispute Avoidance Board can take the initiative in reviewing potential
disputes, including asking the Parties to provide further information

4.4.5.1 Selection of the Care should be taken in the selection of those people who are to sit on the Dispute Resolution
Dispute Resolution Board Board. Does the person selected have the required competencies and skills to resolve disputes as
they arise?

4.4.6 The tribunal – last The tribunal is the second formal level of dispute resolution in the ECC. The tribunal is chosen
tier for Options W1, W2 by the Client (by an appropriate insertion in Contract Data part one), and would normally be
and W3 either arbitration or the courts.

Contract Data part one

If the tribunal is arbitration

The arbitration procedure is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The place where arbitrations is to be held is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The person or organisation who will choose an arbitrator if the Parties cannot agree a
choice or if the arbitration procedure does not state who selects an arbitrator is . . . . . . . . .
..............................................................................................

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 Disputes and dispute resolution

4.5. Dispute There are generally two schools of thought about adjudication:
resolution – general
comments and g the adjudication is in the contract to be used
observations g adjudication is a failure (because the dispute has not been resolved prior to the
adjudication process).

In relation to the first point, many ‘enlightened’ Clients see adjudication as a failure, and intro-
duce through Option Z (additional conditions) clauses and procedures that deal with dispute
resolution in a contract. This usually revolves around the idea of a dispute being resolved at the
lowest level possible and there being an ‘escalation’ process for the more difficult issues. Only
after the parties have exhausted this in a structured timescale is adjudication used.

This type of arrangement is often found in partnering and frame-working arrangements.

Figure 4.2 shows an example of the ‘steps’ in the escalation of a dispute.

4.5.1 ‘Star chambers’ A ‘star chamber’ is simply an interim dispute resolution process according to which, if the
and the like Parties fail to agree at the lowest level, then the dispute will ultimately be resolved by the star
chamber. The star chamber comprises the managing directors or other senior executives of the
two Parties. Some commentators consider that such a chamber also needs an independent
representation whenever it is unable to agree a decision.

If the issue gets as far as the star chamber, each party will be given an opportunity to resolve the
issue at the lowest level, usually to a prescribed timescale.

After having been given time to resolve the issue at the lowest level, each party will be given a set
period, say 2 weeks, in which to compile the facts as they see them. Each side then also presents
this information in a 15–20-minute presentation. The star chamber members then deliberate on
the issue and give their decision.

The process relieves the lower levels of management from making decisions on disputed items,
and gets them resolved so that they can concentrate on their role in the project (adding value),
rather than being distracted from their role.

The authors’ own experience is that having to present your argument/reasoning on why some-
thing is or is not a compensation event is daunting, especially if your audience is your
company’s managing director or client.

It is interesting to note that such a procedure does encourage resolution at the lowest level.
People tend not to want to appear unable to resolve issues perceived as being confrontational.

Options W1 and W2 include for a dispute being referred to Senior Representatives, chosen by
both Parties at the tender stage, before the dispute is formally referred to adjudication, and the

Figure 4.2 Dispute escalation

(Tribunal/arbitration/courts) Tribunal

Adjudication

Managing
director
Escalation
Head office
steps
management
Site management
Timescale

Site level

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Managing the Contract

procedures described are similar to a star chamber arrangement. Note, however, that in Option
W2 the reference to the Senior Representatives prior to adjudication cannot be enforced due to
the HGCR Act allowing for adjudication at any time, but the facility to attempt a resolution
prior to a formal reference nevertheless indicates a willingness to do so.

4.5.2 Good information It is essential to keep good records and information in a structured way, as required by the
and records – how the ECC.
dispute resolver will
judge the information The Adjudicator and the other dispute resolution boards such as the Senior Representatives and
the Dispute Avoidance Board will review the actions/inaction of the Parties based upon the
information and records existing at the time that the issue/dispute arose.

The added benefit of good information and records is that if/when a dispute arises, you will not
be involved in hours or days of documentation retrieval. This is especially true where IT has
been harnessed to control the administration of change.

4.5.3 The Adjudicator The Client will insert in section 1, ‘General’, in Contract Data part one the name of the
Adjudicator. Before naming the Adjudicator, the Client should check that the Adjudicator has
no conflicts of interest with the Parties and that they have the relevant experience, qualifications
and competency.

Some Clients have a list of Adjudicators from which to choose (note that having an Adjudicator
on a retainer basis defeats the purpose of an independent arbiter of disputes), others simply
leave it open for the Adjudicator to be selected by the president of the ICE or other professional
body. Most of the professional bodies keep a register of approved adjudicators.

It is essential to name the Adjudicator in the contract prior to contract execution. If the Parties are
already in dispute, it may become unlikely that they will agree the name of the Adjudicator for
contracts where ‘to be agreed’ has been inserted against the Adjudicator in the Contract Data.

4.5.3.1 When should the Although the Adjudicator is appointed at the starting date of the construction contract, the
Adjudicator become Adjudicator only becomes involved when a dispute arises.
involved?
Their fees are shared between the Parties regardless of their decision and regardless of which
Party refers the dispute.

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Managing the Contract
ISBN 978-0-7277-6186-6

ICE Publishing: All rights reserved

http://dx.doi.org/10.1680/mc.61866.079

Index

acceleration, 34–35 Clients

acceptance (programme), 24, 44, 52–54 access for, 49
of Defect, 54 part of works, order and timing of, 25
non-acceptance (and withholding acceptance), 45 programme, 35
reasons, 32–33 representatives
resubmission following, 33 access for, 59
timing, 33–34 roles relating to quality, 45–46
submission for, 19–20 roles/responsibilities/actions
first programme, 30–31 fulfilling or not fulfilling, 26
with tender, 7, 19 quality and, 46
timing of, 33–34 supplying/providing things to Contractor, 24–25, 46–47
Accepted Programme, 19–21 Senior Representatives of Contractors and, 70, 71, 72–73,
compatibility of activity schedule and, 25 74, 75, 77, 78
Contractor failing to maintain, 37 take over of works, 34
definition, 19–20 compensation events, 21, 22, 25, 26, 27, 28, 33, 35, 37, 42,
as moving target, 36 44, 47, 50, 51, 60, 64, 65, 66, 68, 71
purpose, 20–21 revised programme with, 31–32
access things which are not, 26, 35, 54, 78
for Client and their representatives, 49 Completion, 17, 34
to part of Site if later than access date, 23–24 assessment of payment at, 14
access date, 16, 22 defects notified and corrected after, 53
access to part of Site if later than, 23–24 defects notified and corrected before, 53
activity schedules, 25, 27, 38, 65 planned, 17, 22–23, 28, 36
compatibility of Accepted Programme and, 25 sectional, 17, 28
revised programme activities not matching, 36–37 take over and, 34
actual progress, 22, 30, 32, 35 Completion Date, 20, 21, 22, 24, 28, 29, 30, 31, 32, 34, 35,
additional testing, 50–51 36, 42, 54, 55, 62, 68
Adjudicator (and adjudication), 8, 11, 69, 70, 71, 72, 73–74, completion date, 17, 19, 24
75, 77, 78 compliance issues (and non-compliance), 41, 44, 45, 52, 57
arbitration, 76 programme and Scope, 33
assessment dates, 4, 5, 6, 8, 9, 10–11, 12, 13, 36 concessions, 54
conditions of contract, 4, 5, 9, 10, 11, 27, 32, 48
bill of quantities, 4, 25, 61, 66, 67 dispute relating to, 61, 62, 64, 65
buried services, 63, 69 construction method statements, 27, 43–44
contract(s)
cash flow, programme affecting, 36 conditions of see conditions of contract
certification dispute risk arising in administration of, 60
Completion, 54–55 documents see documents
defects, 54–55 maintenance, 53
Defects Certificate, 5, 6, 14, 55, 57 procedures set out in, 29–30
incentivisation through, 56 termination see termination
payments, 8, 9, 11 see also Engineering and Construction Contract
changes and variations Contract Data
price-based contracts and assessment of financial effects disputes and, 61, 63, 64–65, 69, 71, 72, 73, 74, 75, 76,
of, 65–66 77, 78
time effects of, assessment, 29 part one, 5, 7, 8, 11, 16, 17, 19, 20, 22, 23, 24, 31, 53,
valuing, 67 57, 61, 64, 65, 69, 71, 72, 73, 74, 75, 76, 78

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Contract Data (continued ) cost and time effects, 65–66

part two, 7, 8, 19, 30, 42, 43, 61, 65, 71, 73, 75 incidence reduction, 66–69
payment and, 7, 8, 11, 12, 13 resolution, 69–78
programme and, 7 first level/tier, 70, 71–73, 74–75
quality control and, 42, 43, 46, 53, 57 general comments and observations, 77–78
time issues, 16, 17, 19, 20, 22, 23, 24, 26, 30, 34, 36 second level/tier, 70, 73–74
Contract Date, 7, 8, 16, 19, 20 third (last) level/tier, 70, 76–77
Contractors steps in escalation, 77
Client providing/supplying things to, 24–25, 46–47 Dispute Avoidance Board, 69, 70, 74–76, 78
design, 42–43 documents (contract)
failing to maintain Accepted Programme, 37 ambiguities and inconsistencies (discrepancies), 41–42,
obligations, 40–45 46, 62, 64, 68
other see Others dispute relating to interpretation of, 61
payment to see payment hierarchy and non-hierarchy, 42, 68, 69
plans see plans drafting, importance of quality, 62
programme, 35 duties see roles and responsibilities
Provide the Works, 16, 30, 34, 40, 41, 44, 45, 46, 47, 48,
52, 61 early warning, 42, 66–67
Senior Representatives of Clients and, 70, 71, 72–73, 74, employees see personnel
75, 77, 78 employment of Contractor, termination see termination
subcontracting see Subcontractors enforcement, 49, 55–57
termination of employment see termination Engineering and Construction Contract (basic references
costs and references in book titles and subtitles)
cost-reimbursable contract, 19, 20, 41 disputes in
Disallowed, 35, 53 reduction, 66–69, 69
disputes affecting, 65–66 resolution, 69–77
general and background aspects, 1–2
damages HGCR act in, 11
delay, 4, 20, 22, 65 section 5 and its differences from Option Y(UK)2,
low-performance, 52, 56, 65 11–13
dates, 21, 26–27 see also contract
assessment dates, 4, 5, 6, 8, 9, 10–11, 12, 13, 36 entitlement, 28
Contract Date, 7, 8, 16, 19, 20
importance, 26–27 facilities, Client providing, 46–47
Key Dates, 17, 19, 21, 22, 23, 25, 42, 54, 66, 68 financial effects of variations and other events, 65–66
payment float, 28, 36
final date for payment, 11, 12, 13 terminal, 22, 28, 36
payment due date, 11 forensic analysis and evidence, 16, 26, 30
Price for Work Done to Date, 4, 6, 7, 8, 9, 30 free float, 28
starting date, 5, 14, 16, 22, 24, 36, 45, 70, 72, 74, 78
see also time issues and timescales health and safety, 29, 44
Defects (defective work), 5, 14, 45, 46, 50–51, 52–54, 55, HGCR Act (Housing Grants, Construction and
56, 57 Regeneration Act 1996), 11, 13, 69, 70, 73–74, 78
certification see certification hierarchy and non-hierarchy in documents, 42, 68, 69
correction, 7, 52–53 Housing Grants, Construction and Regeneration Act 1996
defect correction period, 5, 14, 46, 53, 55, 56 (HGCR Act), 11, 13, 69, 70, 73–74, 78
by others, 56
definition, 50–51 illegal actions in Scope, 69
latent, 55 incentivisation through certification, 56
liability period, 53–54 information and records
notifying and investigating, 50–51 good, 73, 78
Defects Certificate, 5, 6, 14, 55, 57 in programme, 21–30
defects date, 5, 51, 53, 55, 56 Site see Site
payment procedure after, 14 inspections, 49–50
delay damages, 4, 20, 22, 65 intention to pay less, 13
design, Contractor’s, 42–43 interest (payment), 8, 9
Disallowed Cost, 35, 53 invoices, 9–10
dispute(s), 59–78
causes, 60–65 Joint Contracts Tribunal (JCT), 17, 28, 55

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 Index

Key Dates, 17, 19, 21, 22, 23, 25, 42, 54, 66, 68 representation, 11
key people, 43, 46, 65 people see personnel
performance
latent Defects, 55 damages for low performance, 52, 56, 65
law and illegal actions in Scope, 69 suspending, 13, 74
liability periods for payment, 11–13
Client’s liability event, 47 periods for reply, 30, 31, 33
Defects liability period, 54–55 personnel (persons/people/employees), 43
low-performance damages, 52, 56, 65 key, 43, 46, 65
removal, 56
main Options, 27, 31, 52, 65 replacement, 43
choice, 4, 7 see also Others
maintenance contracts, 53 physical conditions, 63–64, 64, 67, 68, 69
master plan, 35 plans and planning (Contractor’s)
Materials see Plant and Materials impracticable plans, 32
method statements, 27, 43–44 planned Completion, 17, 22–23, 28, 36
monthly assessment intervals, 5 programme not representing the plans realistically, 32–33
moving target, Accepted Programme as, 36 Plant and Materials, 24–25, 26, 46, 47, 49, 50
Client providing/supplying, 24–25, 26, 46–47
NEC see New Engineering Contracts price (and pricing)
New Engineering Contracts (NECs – family), 2 for achieving acceleration, 35
adjudication, 69 reduced, Defects and, 54
non-compliance see compliance issues resource statements and, 27–28
notified sum, 11, 13 price-based contracts and assessment of financial effects of
variations and other events, 65–66
obligations see roles and responsibilities Price for Work Done to Date, 4, 6, 7, 8, 9, 30
operations, 21, 22, 25, 27, 28 programme, 7–8, 15–37
Options Client’s, 35
main see main Options Contractor’s, 35
secondary see secondary Options dates see dates
W1 (in dispute resolution), 69, 70, 74, 78 defining, 17–19
first tier, 71–72 first, 7, 8, 19, 20, 22, 30–31, 32
last tier, 76–77 included information, 21–30
W2 (in dispute resolution), 69, 70, 71, 72–74, 78 revised, 22, 36–37, 53
first tier, 72–73 activities not matching activity schedule, 36–37
second tier, 73–74 frequency, 31–32
third (last) tier, 76–77 submission and acceptance see acceptance; Accepted
W3 (in dispute resolution), 69, 70, 71, 72 Programme
first tier, 74–76 terminology, 16
last tier, 76–77 progress of works see works
Z (additional conditions), 9, 11, 53, 64, 77 Project Manager, quality and role of, 46
Others Provide the Works, 16, 30, 34, 40, 41, 44, 45, 46, 47, 48,
defects corrected by, 56 52, 61
definition, 47
quality, 39–57
payment to Contractor, 3–14 Client’s representatives’ roles relating to, 45–46
application for, 4, 6, 9 control, 52–53
assessment of amount due, 4, 6–9, 57 drafting, importance, 62
at Completion, 14 management systems, 44–45, 48, 49, 51, 52
details, 9 procedures, 51–52
after termination, 14 standards, 40, 41, 43, 51, 52, 61, 62
certification, 8, 9, 11
at Completion, 14 records see information and records
deduction, 4, 14 rejection of works, 52
intention to pay less, 13 resources (in programme), 20–21
invoices, 9–10 Client providing, 46–47
periods for, 11–13 statement, 20, 21, 27–28
procedure, 4–11 responsibilities see roles and responsibilities
after defects date, 14 retention, 7, 14, 31, 53, 55, 56, 57

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risk (and risk assessment/analysis/allowances), 22, 24, 44 resources (in programme), 20, 21, 27–28
of Client not providing, 47 Subcontractors, 46, 47–49
dispute risks, 60–65 removal, 46
time risks, 22, 28 sums, notified, 11, 13
roles and responsibilities (incl. duties and obligations) supervision (and supervisors), 43, 45
clear division of function and responsibility, 67–68 defects and, 14
Client see Client quality and, 43, 45, 46, 49, 50, 51, 52, 55, 57
Client’s representatives with respect to quality, 45–46
Contractor with respect to quality, 40–45 take over, 34
disputes and, 61, 66 technical specification, 49–50
tender, programme submitted with, 7, 19
sanctions, 42 terminal float, 22, 28, 36
Key Dates not met, 17 termination of contract (Contractor’s employment), 57
late invoice, 10 assessment of payment after, 14
schedule of project dates, 5, 10 terminology describing the programme, 16
Scope, 2, 61–63, 68–69 testing, 49–50
conflicts within, 68–69 additional, 50–51
definition, 61 time issues and timescales, 15–37
design and, 42, 43 disputes, 65–66
disputes in, 60, 61–63, 65, 67 payments
reducing, 68–69 in EEC section 5 vs Option Y(UK)2, 11–12
illegal actions, 69 payment and time periods for assessment, 8–9
payment and, 4, 7, 9, 11, 14 time risk allowances, 22, 28
programme not complying with, 33 see also dates
quality and, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, traditional contracts
52, 54, 55, 56 disputes, 62, 63, 65–66, 67, 69
time control and, 16, 17, 21, 22, 24, 25, 27, 29, 30, 32, programme, 17, 19
33, 34, 36 quality in, 40, 43, 48, 49, 54
of works, reduced or increased, 26 subcontractors, 48, 49
other information in, 22, 30 tribunal, 8, 69, 70, 72, 75, 76
secondary Options
X5, 17 value added tax (VAT), 6, 7, 10
Y(UK)2, 10, 11–13, 71, 74 valuing changes, 67
sectional Completion, 17, 28 variations and changes see changes and variations
Senior Representatives (of Clients and Contractors), 70, 71, VAT (value added tax), 6, 7, 10
72–73, 74, 75, 77, 78 visits to site by Dispute Avoidance Board, 70, 75
services
buried, 63, 69 withholding
Client providing, 46–47 acceptance see acceptance
setting out of works, 44 payment, 13
site (and Site) wording and disputes, 61
access to part of Site if later than access date, 23–24 work
Dispute Avoidance Board visits to, 70, 75 defective see Defects
Site Information (and site records), 63–64, 69 Price for Work Done to Date, 4, 6, 7, 8, 9, 30
disputes relating to, 63–64, 65, 67, 68, 69 works
good, importance, 37, 63, 64 order and timing of Client’s part of, 25
inconsistencies, 69 progress
standards (and standardization) actual, 22, 30, 32, 35
quality, 40, 41, 43, 51, 52, 61, 62 Dispute Avoidance Board inspections of, 75
technical specifications, 50 rejection, 52
star chamber, 77–78 Scope of, reduced or increased, 26
starting date, 5, 14, 16, 22, 24, 36, 45, 70, 72, 74, 78 setting out, 44
statements take over, 34
method, 27, 43–44 see also Provide the Works

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