Clause 10.2: the parties and the service manager act in a spirit of mutual trust and cooperation. [17] This contract is for anyone providing a service, rather than undertaking any physical construction works. Designers are the most obvious party to fit into this category. Whilst they are producing a design for an employer or contractor, they would sign up and follow the clauses within the PSC. Most of the clauses within this contract are the same or similar to those in the main ECC contract, so that all contractors, designers and subcontractors have broadly the same obligations and processes to follow as each other. The PSC can be used in a wide variety of situations with relatively little change required. [20] Defined cost is as stated for options A and B in the short(er) schedule of cost components (SSCC) while in options C, D and E it is as stated in the schedule of cost components (SCC).

An activity schedule is a list of activities prepared by the Contractor which he expects to carry out in Providing the Works. When it has been priced by the Contractor, the lump sum for each activity is the Price to be paid by the Employer for that activity. The total of the Prices is the Contractor’s price for providing the whole of the works, including for all matters which are at the Contractor’s risk. NEC3 contracts are a diverse range of definitive end-to-end project management contracts that empower users to deliver projects on time, on budget and to the highest standards.compensation events – events which will give rise to time and money and procedures for dealing with these; It can include a range of different services to be provided before, during and after engineering and construction works are completed. Option C - target contract with activity schedule - a cost plus contract subject to a pain/gain share mechanism by reference to an agreed target cost (built up from an activity schedule). It should be noted that unlike Option B, this is not a re-measure contract. So, any error in measurement which won’t amend the price and could cause a financial loss. Should Contractor price the Bill of Quantities or the Scope?: The Contractor only has the opportunity to price the items in the Bill of Quantities. Clause 20.1 obligates the Contractor to provide the works in accordance with the Scope. The Bill of Quantities is not Scope, so any ambiguities between an item in the Scope but not allowed for within the Bill of Quantities will need to be identified as an ambiguity in accordance with clause 17.1. This will require an instruction by the Project Manager to resolve the ambiguity, and assuming what is stated in the Scope is what is required, will need to correct the mistake within the Bill of Quantities (60.6). This should then also be confirmed as a compensation event under clause 60.7. The Contractor will be entitled to assess the cost and time implications that have resulted due to the error in the Bill of Quantities.

NEC3 is now used for many major construction and engineering projects in the UK and overseas. It is endorsed by the Institute of Civil Engineers, the Olympic Delivery Authority and the Office of Government Commerce which recommends NEC3 for use on all public sector construction projects. Underlying principles of NEC3GMH Planning Ltd., NEC4 Term Service Contract – review of changes from NEC3, and NEC4 Engineering and Construction Subcontract – review of changes from NEC3, both accessed 28 November 2022 Office of Government Commerce, Public sector Z clauses for use with NEC3 contracts, n.d., archived 8 October 2010, accessed 10 January 2023 If parties want to use a separate variations pricing schedule they should consider whether the valuation clause and the schedule itself should provide for greater flexibility. This could allow adjustments to be made depending on the quantities varied as well as allowing for differential pricing for additions and omissions. Under each option assessment of the financial impact of a compensation event is made by reference to the impact on Direct Cost and the resulting Fee. Changes to the Prices are assessed as the impact of the compensation event on the actual Defined Cost for work that has been done, the forecast Defined Cost of work not yet done and the resulting Fee.

Taking the former situation first, under Option A as the Price for Work Done to Date includes only those completed activities (and if an activity on the Activity Schedule is not in the Works Information then it can never be completed), the Contractor has no entitlement to be paid for that errant activity. This, the penultimate post in my series on variations, discusses valuation. In particular, the differences in approach construction contracts take to valuing variations and the implications of this, both during the project and in the assessment of tenders. Should a Contractor point out any errors in the Bill of Quantities at tender stage? The overwhelming answer has to be “yes”. The Contractor may feel there could somehow be a commercial advantage to say nothing if they spot such an ambiguity, given it will be treated as a compensation event that they can potentially earn profit upon. It is, however, rarely easy to agree the value of compensation events, and it could also be putting significant pressure on a Client’s budget that they had not allowed for. It would therefore be better to avoid this scenario wherever possible, and pointing this out at tender stage could avoid arguments and give a Contractor good credibility during the tender process which may even help them win the tender.

Sectors and what we do

Option F - management contract - the Contractor is paid the cost that it pays its subcontractors plus a fee.

The NEC3 provides for a family or suite of contracts that facilitates the implementation of sound project management principles and practices as well as defining legal relationships. Mostly used upon appointment of a contractor to carry out; infrastructure, highways, buildings & process plants. Can be used regardless of the level of design responsibility. Providing a prescriptive process for assessing change (compensation events) for which there is a strict series of processes to follow and within certain timescales. These result in a contractual conclusion, with the event being “implemented” and not liable for subsequent change or challenge from either party.Barnes, R., NEC Professional Services Contract (PSC): the Consultants' Perspective, Paper presented to the Society of Construction Law in London on 8th March 2011, published August 2011, accessed 6 September 2021 In NEC4 ECC priced options A and B, defined cost is as stated in the short schedule of cost components (SSCC), and in cost-reimbursable options C, D and E, it is as listed in the schedule of cost components (SCC). This is simplified compared with the NEC3 ECC, in which there is the shorter schedule of cost components (also abbreviated here to SSCC) in options A and B and the SCC in options C, D and E. But options C, D and E can also use the SSCC instead of SCC for assessing compensation events, and only by agreement. Defined cost versus fee