NEC4: Engineering and Construction Contract Option C: Target Contract with Activity Schedule

Product Information

The repair and indemnity provisions at clauses 82 and 82 have been replaced with a new recovery of costs clause 82. The waiver of subrogation has now been extended to cover both parties, following on from the SSE v Hochtief decision where it was held that insurers had the right to pursue a joint insured. Core Clause 9: termination So the warning note under Option C is that while cost management is important to interim valuations and cash flow during the project the proper and accurate management of value, in terms of identifying, pricing and agreeing change is also vital to a successful project outcome. 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. NEC's history started in 1986 when Martin Barnes was commissioned to start drafting a contract to stimulate good project management. The first edition of NEC was launched in 1993. NEC2 arrived two years later, in 1995. NEC2 was used to build the High Speed 1 railway, between London and the Channel Tunnel. [ citation needed]

This arrangement forces both parties to work more collaboratively as the financial success is shared by both client and contractor. Similarly, the financial failure of a project is shared. This collaborative working can reduce disputes and accelerate innovation. This core clause also contains new clauses dealing with assignment and disclosure/confidentiality. These are welcome additions, but as the clauses are fairly short clients may wish to replace them with their own bespoke 'z' clauses, as is currently the case. Core Clause 3: time Design – cost of people involved in design that are outside of the working area at their rate stated in contract data (with an extra allowance for travel expenses when they need to travel to the Working Area). Client termination for any reason now has its own secondary option clause, at X11. Clause 91.8 creates an additional right for client to terminate due to corruption. Option W: resolving and avoiding disputes The supply of equipment, supplies and services included in the charge for overhead cost within the Working Areas in this contract; andClause 16 introduces a brand new value engineering provision. This allows the contractor to propose changes that reduce the cost of the works in exchange for a proportion of savings as specified in the contract.

Thomas Telford Ltd., NEC3: April 2013 Edition complete family of contracts, accessed 6 September 2021 Clearly the tenderer has two separate percentages to provide in its NEC4 PSC option C or E tender: the overhead percentage that is only applied to the defined cost of ‘people items’; and the fee percentage applied to all defined cost (see Figure 1 (b)). Once tendered, these percentages would not be subject to audit. For some actual costs it might not be obvious whether they should be covered by the overhead percentage or the fee percentage. Activity Schedule – A list of activities (prepared by the contractor), which they expect to carry out while providing the works. Each activity is linked to a price (prepared by the contractor) to be paid by the client. A common example is the addition of a new category based on whether costs are ‘not properly incurred’ or ‘are due to a failure by the Contractor to comply with the terms of this contract’. While on their face they may seem unobjectionable, in practice they can be used to disallow costs beyond existing categories and on a wide basis.Option D: target contract with bill of quantities – similar to Option C, with the ‘Target’ price relating to the Bill of Quantities (unless later changed, e.g., ref. compensation events), and the Price for the Work Done to Date relating to Defined Cost. As above, the pain/gain share is assessed by the Project Manager.

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. The NEC4 Professional Service Contract (PSC) is the main professional service contract in the NEC4 suite of collaborative, flexible and clearly written contracts for built environment procurement. It is for appointing any provider of professional services, including project managers, service managers, supervisors, designers and other consultants associated with an NEC4 contract. Another example is the treatment of defects. Under NEC standard forms, the cost of correcting defects before completion is generally only disallowed when it is caused by failure to comply with a constraint. Some clients have used amendments to expand the scope of disallowing costs incurred in relation to defects. This ignores the fact that the costs of correcting defects will affect the contractor’s share, so there is already an incentive in place to reduce such costs and it is effectively a shared risk under ECC target-cost options.

NEC4 Y Clauses - February 2023

Theagreedcumulativecostisthendeductedfromtheamountpreviouslypaidunderthecontract. Thisamountisthenpaidtothecontractor. Clause 52.4, the ‘open book’ clause, allows the service manager to access the records required to be kept. This may present a problem for the consultant, especially if the service manager (new to NEC4 PSC and carrying out a role similar to the project manager in ECC) is an employee of a competitor. The consultant is very likely at least to want to put a confidentiality agreement in place (this is not provided for in NEC4 PSC). The details of defined cost are set out in the SCC. Defined cost in the SCC This option contains a priced contract which is linked to a Bill of Quantities (BoQ). The BoQ will contain project-specific measurements which are derived from the drawings and specifications. Each measurement will then be linked to a rate.