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

Product Information

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] Hawkswell Kilvington, New NEC4 Contracts Announced, published 3 March 2017, accessed 31 October 2022 To conclude, the Activity Schedule can have significant and adverse commercial implications; such that it is essential to understand how the Activity Schedule is intended to operate and to ensure it is carefully prepared before entering into your Contract and signing on the dotted line! Under Options C, D and E the standard Schedule is used for assessing the Price for Work Done to Date, although the Shorter Schedule may be used for assessing compensation events if both the Project Manager and the Contractor agree. 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.

The NEC3 Engineering and Construction Contract is the core document from which the options A-F are extracted. It contains all core clauses and secondary option clauses, together with the schedules of cost components and forms for contract data. Early Contractor Involvement (ECI) 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. 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. These options offer a framework for tender and contract clauses that differ primarily in regard to the mechanisms by which the contractor is paid and how risk is allocated and motivated to control costs. If there is any error of measurement in the BoQ, then both parties will know how much extra is to be paid and received.

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Accordingly, the more activities included within the schedule, the better for the Contractor’s cash flow. Use under Option C Figure 1 represents everything a contractor needs to get paid under an NEC4 ECC. Clause 52.1 − a core clause and so in all the options – draws the line between defined cost and fee. Simply, if it is not in defined cost, the contractor will be deemed to have included for it in itstendered fee percentage. The fee is the fee percentage times defined cost. Under Option C, as we are only concerned with the total of the Prices, the errant activity will serve to increase the ‘target’ cost changing the Contractor’s share to his benefit. The use of the NEC3 family of contracts ensured that most problems were solved when they occurred, rather than ending up in the courts at the end of the process." - Sir John Armitt - Olympic delivery Authority

The contract is silent as to who prepares the list, but it is the Contractor that prices it, it is, after all, his tender. Very similar in detail and complexity of contractual requirements to the ECC contract above, but allows the Contractor to pass down terms to a Subcontractor imposing most of the clauses that they have within their headline contract. There is very little difference between the ECC and the ECS, other than the names of the Parties are changed (to Contractor and Subcontractor), and some of the timescales for contractual responses are altered to take into account the timescales required in the ECC contract. The Engineering and Construction Short Contract (ECSC)It is not necessary for the items in the programme to mimic exactly the items in the Activity Schedule; there may be more activities on the Activity Schedule than on the programme or vice versa.

The timely issuing of notifications is essential to the NEC’s collaborative way of working. Continuous communication between all parties will ensure disputes are kept to a minimum. Some share ranges can sometimes be disproportionately unfavorable to contractors. Care should be taken to ensure you are not being put at financial risk. Referring again to the Guidance Notes definition above, “the activity schedule is a list of activities prepared by the Contractor which he expects to carry out in Providing the Works”. 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. But it may not; it may contain an activity which is not in the Works Information or it may fail to include an activity which is in the Works Information. The consequences depends on whether the contract is Option A or Option C.It is important that the activities are clear and distinct so that the parties know when they are completed. The Contractor is only entitled to be paid for completed activities. From the Contractor’s perspective, therefore, it will want to ensure that the works are split into as many activities as possible. In contrast, an Employer may want to ensure that activities are described such that elements of work are only paid for when related elements of work are complete. This can be achieved either by ensuring that the relevant activity includes all related elements of work, or by grouping activities. Before moving on, clause 54.1 of the Contract assists us further in seeking a definition by telling us what the Activity Schedule is not: Subcontractors – a new category for NEC4 where Subcontractors costs can now be included as a lump sum, rather than having to break it down into the other categories listed