NEC3 Engineering and Construction Contract Option A: Price contract with activity schedule

Product Information

The two approaches to valuing variations, as outlined above, create their own challenges. There are two important aspects of the distinction, the assessment of tenders and the valuation of omissions. GMH 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

One former NEC3 clause which dealt with the "spirit" of the contract was divided into two clauses, to show that both aspects should be complied with: 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. Taking the latter situation, Under Option A the only method by which the Prices can be changed (save for acceleration) is by way of a compensation event. None of the listed compensation events permit the addition of an item to the Activity Schedule simply because it has been missed. The price for it is assumed to be included in other activities. This was added to the family in April 2013 and was co-developed with the Association for Project Management. It is for simpler less complex assignments than the PSC, such as the appointment of small team for managing an ECC contract on the Employer's behalf. E.g. the Project Manager and Supervisor. It is frequently used as a subcontract to the PSC for design work. The application will contain a breakdown of the contractors’ cumulative “defined cost” plus fee minus any “disallowed cost”. This combined is known as the “Price for Work Done to Date” (PWDD).The assessment is first made at completion based on a forecast of the two figures. The ECC provides for a final assessment once the final figures are known.

Clause 60.7 liability with errors in the Bill of Quantities: This clause confirms that a compensation event resulting from a correction of an inconsistency between the Bill of Quantities and another document (e.g. Scope), the Contractor is assumed to have taken the Bill of Quantities as correct. This means that any items that the Client requires that have not been listed with the Bill of Quantities will be treated as a compensation event, even if that item was included within the drawings/details of the Scope. The Activity Schedule is the activity schedule unless later changed in accordance with this contract.

Real costs and rates

The Contractor provides information which shows how each activity on the Activity Schedule relates to the operations on each programme which he submits for acceptance. permitting the Contractor to include a reference to another document, the contents of which would, on execution of the contract, be the activity schedule. It goes without saying that as the Activity Schedule is a list of activities which the Contractor expects to carry out in Providing the Works, that it should corralate with the works included in the Works Information. Some share ranges can sometimes be disproportionately unfavorable to contractors. Care should be taken to ensure you are not being put at financial risk.

If an element of the works is incapable of being accurately specified at the outset then it should be described in as much detail as possible in the technical documentation (i.e. the Works Information) together with appropriate assumptions and priced accordingly. Beneficial for developers who are just entering the market as responsibility for procuring and managing the works is with the management contractor. This is an abbreviated version of the ECC contract and most suitable when the contract is considered "low risk" (not necessarily low value) on a project with little change expected. This contract is still between the employer and contractor but does not use all of the processes of the ECC making it simpler and easier to manage and administer. Although this contract is often referred to as “Cost Plus,” contractors should not get complacent and think Option E means a blank chequebook for works. The terms within the contract should set out clearly what is and isn’t to be reimbursed to the contractor. Under the ECC there is no separate concept of a contract sum. The ECC uses the term Prices, which has a different meaning in each of the options:The Activity Schedule should contain the activities relating to such work with the lump sum prices against each. 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. main options: these relate to contract structure and pricing. One option, from A to F, must be selected:

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). Brook M. (2004). Estimating and Tendering for Construction Work Butterworth-Heinemann ISBN 978-0-7506-5864-5Evans, S. C., NEC3 compensation events: a practical guide, published April 2013, accessed 13 June 2023 Each of Options A, B, C and D rely on a pricing document. Either an activity schedule or a bill of quantities. Excessive use of Z clauses has been criticised as "onerous" and "poorly drafted"; NEC guidance states that "additional conditions should be used only when absolutely necessary to accommodate special needs". [25] Guidance notes and further information [ edit ]