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Contents

Section 1 Contract Structure and Key Roles

Section 2 Programme 

 

Description:  The purpose of this unit is to enable you to produce suitable contract data for a traditional design and build contract and a collaborative contract, as well as an NEC compliant, resourced critical path programme for a construction project.

Author:  David Lowe, Value by Design Ltd


Section 1  Contract Structure and Key Roles




Aims and Objectives

At the end of this section you should be able to:
  • State the layout and content of the ECC Contract
  • Explain the roles and responsibilities of the key personnel within the NEC contract


The core clauses common to all NEC Contracts are:
  • Main / Payment Options
  • Dispute Process (W1 or 2)
  • Secondary Clauses
  • Y Clauses (Statutory Law)
  • Z Clauses (bespoke)
  • Contract Data Part 1 and 2
 
The Main / Payment Options to the ECC are broken down as follows:
        
A – Priced Contract with Activity Schedule     
B – Priced Contract with Bills of Quantity     
C – Target Cost Contract with Activity Schedule     
D – Target Cost Contract with Bills of Quantity     
E – Cost Reimbursable Contract     
F – Management Contract    


Key Documents 

ECC      Works Information          Site Information 

X12 Introduces Partnering Information, Clients Objectives and the Schedule of Core Group Members. Where X12 is used, X20 the KPI clause will not apply as X12 includes its own KPIs.  

Risk Register  


Key Roles   

The NEC is a bi-party contract with strong interaction between the defined roles.  

It should be noted that there is clear definition of the roles and activities required of each party, however minimal activity does not always denote minimal responsibility. The main roles outlined within the contract are as follows:  

The ECC’s Employer 

The Employer is defined as an organisation and not an individual. This is common practice and avoids issues when individuals move on within an organisation the liability is kept with the organisation as it is the organisation’s ultimate responsibility. The Employer’s responsibilities as defined in the contract are limited and are primarily involved with Compensation Events and Termination.     


The ECC’s Contractor   

Defined as an organisation and team responsible for the project. The Contractor’s responsibilities are outlined in Clause 2 of the contract.     


The ECC’s Supervisor   

Defined as an individual or a team responsible for the Contractor’s compliance with the Works Information. The Supervisor’s main responsibilities are outlined in Clause 4 and Clause 7 of the contract. This is the closest relationship to the traditional Clerk of Works role. It should be noted that there are some changes in duties between the two and the issuing of instructions from the Supervisor is limited; this is to ensure clarity of instruction and intentions and that the Project Manager is aware of all issues.     


The ECC’s Others  

The engagement and interaction with the ‘Others’ is an underused element of the contract. Its intentions are designed to significantly improve the traditional JCT third party engagement, which commonly leads to variations and extensions of time.   

The ‘Others’ are defined in Clause 11.2(10). It is the Contractor’s responsibility to work with them in order to deliver the works. Requirements and constraints should be detailed in Works Information and included in the Contractor’s programme.   

Consideration of ‘Others’ by the Employer and Project Manager when drafting Works Information can lead to significantly improved project delivery where multiple parties will be operating on the same site.     


The ECC’s Project Manager   

The NEC contract has no Contract Administrator, no Clerk of Works and no Architect. As such, the Project Manager is the focal point of the contract. It is the Project Manager’s duty to manage the contract on behalf of the Employer with the intention of achieving the Employer’s objectives with regard to budget, programme, quality/end product brief.   

The role of Project Manager is commonly assumed to be an individual. In reality, the role can be undertaken by a multi-disciplinary team. The Contract Data Part 1 should identify whether this role is undertaken by an individual or a team. Details of roles and responsibilities of each member of the team should be clearly outlined to avoid confusion on the contractor’s behalf. Even in the event of a team fulfilling the role of Project Manager, it is still recommended to have an overall leader who is aware of every aspect of his / her team’s activities. This allows the fulfilment of the NEC’s goal to have good leadership. Whoever is originally stipulated as being the ‘Project Manager’ may be altered accordingly at a later date by the Employer or Project Manager. When changes such as this are made the contractor should be made aware of the details of the change.   

The Project Manager’s duties also include changing the Works Information and using his/her expertise and construction judgement.   

The Project Manager should be on site regularly and be aware of progress, including any changes to price, defects and Compensation Events.   

Attempting to manage too many NEC projects as a Project Manager can lead to a reduction of the effectiveness of the role. The Project Manager’s role is designed to be highly involved in the project; ‘on-the-fence’ Project Management can lead to later problems and adversely affect cost and control of the project.   

The Project Manager should proactively control the works whilst monitoring progress, approving programmes and seeking quotations for acceleration. It is the Project Manager who issues instructions; reviews and accept design and method statements; accept subcontractors; assesses Compensation Events; maintains the Risk Register; and assesses amounts due for payment.   

The contract is set up to incentivise Project Managers to respond on time – a failure to respond can result in a response being deemed accepted. NEC is different in its approach to incentivisation of parties in as much as it aims to provide a carrot and stick to both sides, the focus being on the most effective delivery of the Employer’s requirements, ie the Works Information rather than aiming to provide benefit to either party over the other. This can be seen elsewhere with the contra proferentem principles of error and ambiguity management.   

The areas that the Project Manager is NOT involved in are: Supervisor’s duties, making payments and the act of termination.   

Even in areas that are not under the direct control of the Project Manager, the individual or team responsible should still maintain an indirect awareness of the issues as this will be required to effectively manage the Compensation Event and programme control processes.   

Design is issued on behalf of the Employer by the Project Manager, rather than issued by a designer designated in the contract. This has occasionally caused contention as the primary aim of this is to ensure impartiality of the Project Manager it is considered that the Project Manager control information issued to the contractor to ensure all are aware of instructions. This matches the NEC’s intention that the Project Manager and the contractor are active and aware of all design considerations and implications and able to proactively manage changes and compensation events.     


Project Manager Duties   

The NEC differs from traditional contracts by ensuring that the programme is a contractual document owned by the contractor rather than the Project Manager or Employer. The Project Manager’s duties are effectively in providing the start and finish dates required and any other interim key dates. The contractor’s duty is to provide an achievable programme for delivery of these which is subsequently approved by the Project Manager. The key priority of the Project Manager is to approve the programme within two weeks of issue; this ensures an accurate and reflective programme.   

The approval of subcontractors should not be seen as an opportunity for the Project Manager to hold sway over who is selected, but as an opportunity to ensure the likelihood of the project achieving success through the selection of an able and appropriate supply chain. This approval process can be bypassed if the supply chain is employed under an NEC contract or the Project Manager has agreed not to use the approval process. In all cases common sense and a pragmatic approach is required by the Project Manager.   

The NEC does not have a valuation process per se; the Project Manager has a duty to assess costs. This varies between the different forms of contract. In reality, the ability of a Project Manager to assess a contractor’s open-book costs without input from the contractor is questionable, therefore the contract allows for the contractor to offer up their assessment of costs and for the Project Manager to use this as a guide.   

On an Option A form of contract, the Project Manager uses an assessment of the programme to determine the completed activities and, as such, the costs of work done to date.   

A key duty of the Project Manager in this area is to ensure the review and control of costs through the disallowed cost process.   

As with all commercial issues the Project Manager must be authorised by the Employer to fulfil the financial management role. The nature of the NEC, particularly in open book contracts, is such that the interim assessments reflect a forecast final account. The Project Manager has a limited period of time to review interim assessments and should therefore become comfortable with the requirements of Defined Costs and disallowed, creating an appropriately robust audit regime.   

The parties should not underestimate the importance of the Early Warning process; its use should be considered as a precursor for avoiding Compensation Events, rather than a starting point for their instigation. Project Managers and contractors should consider a regular review of forthcoming activities as part of a proactive risk management approach, which incorporates Early Warning and programme control.   

As with programme control, Project Managers should be timely with their review of Compensation Events to avoid changing or worsening of situations or a reduction of the options available. The use of ‘assumptions’ by the Project Manager to allow the interim assessment of Compensation Events, which is an effective way to maintain the flow of a contract whilst information is gathered that will ultimately form the basis of the final Compensation Event.      



Publications  

  • Thomas Telford Ltd (2005), NEC3 Engineering and Construction Contract (ECC), London: Thomas Telford Ltd
  • Broome, Jon (1999), The NEC Engineering and Construction Contract: A User's Guide (NEC2 Only), London: Thomas Telford Ltd
  • Trebes, Barry; Mitchell, Bronwyn (2005), NEC Managing Reality Book 5 Managing Procedure, London: Thomas Telford Ltd



Self-Assessment Task

  • List and explain the roles and responsibilities of the key personnel within the NEC contract




Section 2  Programme 




Aims and Objectives

At the end of this section you should be able to:
  • Explain the key roles and responsibilities of parties in relation to the Programme
  • State the required content of a Programme
  • State the ways and when a Programme can be changed


The level and extent of the NEC programme far exceeds traditional expectations of a contract programme. This has been perceived by some as an issue and by others as a significant step forward. Once initial concerns have been overcome regarding the extent of information the level of management required by the NEC programme, users find the subsequent management of the programme is highly beneficial to both parties. Users should come to terms with the regular and systematic updating of the programme, which will in turn lead to the early identification of potential Compensation Events and progress gains and slippages, both of which are essential to the effective management of the Works. 

The programme is a tool for managing the remaining activities. It is pre-emptive in that it encourages the exploration of the ‘what-if’ scenarios. It is a vital document for the administration of the project allowing all parties to be able to assess the impact of Compensation Events. It is a base document for the Contract.  


Programme Responsibility 

The programme belongs to the Contractor and not the Employer or the Project Manager. The importance of the programme is highlighted in the fact that 25% of monies due is retained until the first programme is issued. The Project Manager’s role is to accept it from the Contractor. 

The programme is regularly updated with actual progress. The accepted programme is the latest programme agreed by the Project Manager.  Programme Content Each item of the programme must have information (a method statement or Plan of Works) indicating how the Contractor intends to undertake the work. The programme also includes details of resources intended to be used. The programme creates a benchmark. 

The programme should include:
  • Date Information
  • Order and timing of operations
  • Method Statements for each operation
  • The provision for:
    • Float(s)
    • Time risk
    • Health and Safety information
    • Procedures within the contract, including in the Works Information  
Planning terms referred to within the programme are as below and are outlined in detail in the supporting documentation 
  • Float
  • Time Risk Allowance
  • Logic Links
  • Critical Path

Changes to the Programme 

Assessing change – Compensation Events are used to assess the delay to the completion date as set out on the accepted programme. 

Actual progress – The programme can be updated to reflect actual progress, but changes to date must bring Early Warning / Compensation Events with them. 

Updating the programme – The Contractor updates the programme either by a schedule as set out in the contract, whenever changes need to be incorporated, or where Compensation Events include changes in prices or completion dates. 

Accepting the programme – The Project Manager has two weeks to accept the programme, but can reject it on the grounds that plans are not practicable, it doesn't show the contractually required information, it doesn't represent the Contractor’s plans, or it does not comply with the Works Information. The Project Manager should not try and second guess the use of float and time-risk allowances, but should focus on the accuracy of the programme; questions regarding whether to accept a programme should be focused on ‘why shouldn't I’ rather than ‘why should I’. Addressing these issues; the Project Manager should focus on whether the programme will work and not whether the Project Manager themselves would have programmed it differently. It is important to remove this element of subjectivity and remember that it is ultimately the contractor’s programme, which is an attempt to deliver the works to the intended completion date.  

     



Publications

  • Thomas Telford Ltd (2005), NEC3 Engineering and Construction Contract (ECC), London: Thomas Telford Ltd
  • Broome, Jon (1999), The NEC Engineering and Construction Contract: A User's Guide (NEC2 Only), London: Thomas Telford Ltd
  • Trebes, Barry; Mitchell, Bronwyn (2005), NEC Managing Reality Book 3 Managing the Contract, London: Thomas Telford Ltd
  • Trebes, Barry; Mitchell, Bronwyn (2005), NEC Managing Reality Book 4 Managing Change, London: Thomas Telford Ltd
  • Trebes, Barry; Mitchell, Bronwyn (2005), NEC Managing Reality Book 5 Managing Procedure, London: Thomas Telford Ltd



Self-Assessment Task

  • Outline the required content of a programme and explain the ways that a programme can be changed





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