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NEC 3 : Introduction

NEC 3 : Introduction. www.QuiggGolden.com. Introduction. The rudiments of NEC New (No, really quite mature) Engineering (No, anything really) Contract (No, a contracting system). www.QuiggGolden.com. A Brief History of NEC. NEC Amendments April 2013. http://www.neccontract.com /.

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NEC 3 : Introduction

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  1. NEC 3: Introduction www.QuiggGolden.com

  2. Introduction • The rudiments of NEC • New (No, really quite mature) • Engineering (No, anything really) • Contract (No, a contracting system) www.QuiggGolden.com

  3. A Brief History of NEC

  4. NEC Amendments April 2013 http://www.neccontract.com/

  5. Why the NEC? • Constructing the Team - Sir Michael Latham 1994 • Rethinking Construction – Sir John Egan 1998 • Achieving Excellence – OGC 2003 • HM Treasury www.QuiggGolden.com

  6. Basic Characteristics of NEC • Contractor lead • Mutual trust and co-operation (edition 2 onwards) • Good management encouraged (not just rights and obligations) • Procedure driven • Programme given HUGE prominence • Recognising risk and dealing with it as you go rather than allocating blame afterwards • Clear and distinct roles for those involved • Minimises subjective phrases such as fair, reasonable, opinion www.QuiggGolden.com

  7. Basic Characteristics of NEC • Modular approach • Interlocking contracts e.g. Subcontract, PSC, Adjudicator • Logical contracts (can be described in flow charts) • Written in simple English (and in the present tense) • Certainty of actions and outcome • Flexible approach allows use in multi discipline projects and a wide range of projects • Can be used internationally www.QuiggGolden.com

  8. Using the NEC • Works well where used properly • Allows great flexibility in public and private sectors • Easy to apportion design responsibility • Use the main options to decide big issues such as pricing options • Tailor with secondary options www.QuiggGolden.com

  9. The Present Family of NEC Contracts • NEC3 April 2013 Edition complete family of contracts (39 documents including guidance notes and flow charts)

  10. A typical project using NEC Contracts Client Project ManagerPSC or PSSC Adjudicator AC Contractor ECC or ECSC Consultant SupervisorPSC or PSSC ConsultantPSC or PSSC Subcontractor ECS or ECSS Suppliers SC or SSC Suppliers ECS or ECSS www.QuiggGolden.com

  11. NEC 3:Main and Secondary Options and Alternatives www.QuiggGolden.com

  12. Introduction • Strategy for choosing the correct contract • 6 Main Options • Secondary Option Clauses (X, Y & W) www.QuiggGolden.com

  13. Contract Strategy • ECC main option is based on completeness of the Works Information • Example Scenarios • Employer has fully designed the required works & requires a lump sum price • Employer requires Contractor to design and construct the work on a fixed sum basis • Employer requires Contractor to design and construct the work on a fixed sum basis • Employer requires immediate and urgent works that are not designed www.QuiggGolden.com

  14. Main Option Concepts • Activity Schedule • Bill of Quantities • Cost Reimbursement • Target Cost www.QuiggGolden.com

  15. Balance of risk www.QuiggGolden.com

  16. Main Options – A (1) • Option A – Priced contract with activity schedule • Fixed Price Lump Sum contract • Activity Schedule • Price Comparison • Change Management • The Programme • Control and Change www.QuiggGolden.com

  17. Main Options – A (2) • Risk and Reward with Contractor • Ideally suited to contractor’s design but can be used for Employers design • Divided design responsibility providing the Employer’s design element is complete at time of tender • Offers best prospects for price certainty www.QuiggGolden.com

  18. Main Options – B • Option B – Priced contract with bill of quantities • Re-measurement contract • Bill of Quantities • Price Comparison • Changing the BoQ • Change Management • Not suited to Contractor’s design because of reliance on bills of quantities • Risk split Quantity/Price • Lacks price certainty

  19. Main Options – C (1) • Option C – Target contract with activity schedule • Target contract based on lump sum • Allows Employer flexibility in developing his own design • Target Cost • Administrative Burden • Cash flow certainty • Cost Transparency www.QuiggGolden.com

  20. Main Options – C (2) • Risk split - Contractor: • Fixed margin • Pain/gain • Risk split – Employer: • Payment burden • Pain/gain • Fixes some degree of certainty on price www.QuiggGolden.com

  21. Main Options – D • Option D – Target contract with bill of quantities • Target contract bill of quantities based • Similar price risk as Option B www.QuiggGolden.com

  22. Main Options – E • Option E – Cost reimbursable contract • Maximum flexibility in allocation of design responsibility • Contractor has little incentive by way of any target to minimise costs • Not suitable if the employer is looking for price certainty www.QuiggGolden.com

  23. Main Options – F • Option F – Management contract • Not suitable for allocation of the whole of the design responsibility to the Contractor unless placed as a ‘design & manage’ contract • Suitable for contracts with a high reliance on specialist subcontractors who undertake their own design • Can be arranged on the basis of lump sum contract www.QuiggGolden.com

  24. Secondary Option Clauses • You must elect to include them; No automatic incorporation • X Clauses (15 in total in Main Contract) • X4 – Parent Company Guarantee • X5 – Sectional Completion • X7 – Delay Damages • X16 – Retention • Y Clauses • Y(UK)1 – Project Bank Account • Y(UK)2 – The Housing Grants Construction and Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act 2009 • Y(UK)3 – The Contracts (Rights of Third Parties) Act 1996 www.QuiggGolden.com

  25. Secondary Options www.QuiggGolden.com

  26. Key Options • W2and Y(UK)2 • X5– Sectional completion • X7 – Delay Damages • X16 – Retention • X13 – Performance Bond www.QuiggGolden.com

  27. Options using NEC3 ECC W1 or W2 Priced Contract either A with AS or B with BoQ X3 multiple currencies if required X1 price adjustment X16 retention as required X2 changes in the Law X4 parent company guarantee X5 sectional Completion X6 bonus for early Completion X7 delay damages X12 Partnering X13 performance bond X14 advanced payment to the Contractor X17 low performance damages X18 limitation of liability X20 Key Performance Indicators Y(UK)1, Y(UK)2, Y(UK)3 Z as required Target Contract either C with AS or D with BoQ X16 retention as required Cost Reimbursable E Management F Main Option Dispute Option Secondary Options

  28. Engineering Construction Short Contract (ECSC) • For work that does not require all the procedures in the ECC • Single Contract Data • Price list for PWDD and: • Quantity changes • But notCE’s • No express provisions for contractor design • Flexible programme requirements • No Main or Secondary Option but: • can have “additional clauses” • includes delay damages and retention

  29. PSC& PSSC • Used to appoint professionals (by Employer or Contractor) • Designers • Project Manager • Supervisor • Same Objectives as NEC Main Contracts • Same clause structure as the NEC ECC • No SCC or SSCC www.QuiggGolden.com

  30. Professional Services Contract (PSC) • Main Option Clauses: • A – Priced Contract with Activity Schedule • C – Target Contract • E – Time Based Contract • G – Term Contract • Options B, D & F are not used www.QuiggGolden.com

  31. When to use? ‘a simpler approach to simpler commissions’ • Choice between the PSSC & PSC should be base purely on the level of complexity and level of risk • Non-UK heavy engineering • Another member of NEC family • Project Manger • Supervisor • Service Manager • Consultant on a ‘as and when needed’ basis

  32. PSSC –v– PSC PSSC does not include: • Main Option Clauses • Secondary Option Clauses • Sectional Completion PSSC does include Pro-forma’s for: • Consultant’s Offer • Client’sAcceptance • Price List www.QuiggGolden.com

  33. www.QuiggGolden.com

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