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

Product Information

As with all NEC4 contracts, the parties to a PSC are required to act in a ‘spirit of mutual trust and co-operation’ and give early warnings of anything that could affect time, cost or usefulness of the service so it can be mitigated without delay.

The option C contract allows the financial risks to be shared between the parties (employer and the Contractor) which motivates the contractor to deliver the works in the most cost efficient way.

Amendments to disallowed costs

Brook M. (2004). Estimating and Tendering for Construction Work Butterworth-Heinemann ISBN 978-0-7506-5864-5 The significance of the disallowed costs provisions has been recognised in NEC4, where the NEC3 words ‘which the Project Manager decides’ have been deleted from the first line of 11.2(26). This suggests that there was a need to highlight that disallowed cost should be decided on an objective basis and are not a matter for the project manager to decide. Conclusions For example, let’s say a contractor won a bid for some work under NEC Option B. Within the tender would be a priced contract with a BoQ. Within the BoQ, there is an item for installing a new fence around the boundary of a garden.

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.If you need assistance with live or upcoming NEC projects, Ramskill Martin’s Team of Consultants have an experienced team which can help. Core Clause 2, which sets out the contractor's main responsibilities, has not had many changes. However, there are some interesting changes at clause 26, which give the client more control over subcontracting. Firstly, subcontractors will no longer be appointed until they are accepted by the client and, if required, the subcontract documents are also accepted. NEC3 did not require approval of subcontract forms if NEC contracts were used. NEC4 adds that NEC contracts "must not [be] amended other than in accordance with the additional conditions of contract". This means the client can set limits on acceptable amendments. Very similar in detail and complexity of contractual requirements to the ECC contract above, but allows the contractor to sub-let the project to a subcontractor imposing most of the clauses that she/he has within her/his headline contract. There is very little difference between the ECC and the ECS, other than the names of the parties are changed (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 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.

The Contractor’s main responsibilities– detailed NEC’s requirements in respect of the provision of the Works, Contractor’s design, design of Equipment, people (key persons), working with the Client and Others, Subcontracting and other responsibilities. The NEC disallowed costs provisions have been drafted carefully as part of the overall allocation of risk and to achieve a commercial balance which motivates both parties and aligns their interests. If not used correctly or if amended, that commercial balance is disrupted and the incentives for better performance under ECC Options C, D and E contracts will be less effective.The NEC4 Engineering and Construction Contract (ECC) is the main works contract in the NEC4 suite of collaborative, flexible and clearly written contracts for built environment procurement. This option is a cost reimbursable option. Unlike Option E, this option is tailored towards the management contractor procurement route. Bill of Quantities (BoQ) – A document that lists specific measured items of work identified by the drawings and specifications. Each item will be allocated a price.

NEC is famed for its use of short, plain English, and the new contracts incorporate changes in terminology. They are now gender neutral with some considered changes in emphasis. For example, the 'employer' is now the 'client', and 'works information' is now the 'scope'. This creates consistency across the suite.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. 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 The alliancing contract was published for consultation on 28 June, with final release anticipated in January 2018. It is NEC based on option E but multi-party contract performance based, so driven by client needs. It is a 'pure' alliance contract under which all parties to the alliance carry all risks except wilful default, and there is no dispute resolution mechanism. The idea is that, if there is a dispute, the alliance effectively comes to an end. That sharing of risks under ECC Option C is based on the assumption that both parties are incentivised to work together for the benefit of the project and assist each other to increase any gains and avoid overspend. Disallowed costs sit outside this mechanism and are borne in full by the contractor, so the extent of disallowed costs will have a substantial impact on the underlying commercial bargain. Amendments to disallowed costs 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.