A Series of Live Televised Debates on the NEC Form of Contract…Episodes 16 to 30

A Series of Live Televised Debates on the NEC Form of Contract…Episodes 16 to 30

Obligations under the NEC – 16. Why do Options C D and E allow the PM to disallow costs?

Disallowed cost is a subject that makes almost everyone, no matter which side of the contract they sit on, slightly hot under the collar. Why is it really needed under some forms of contract? Is there an alternative better approach? What happens when disallowed cost is applied incorrectly?

Obligations under the NEC – 17. How do I recover my subcontractors overheads?

The NEC allows recovery of “Defined Cost” plus fee with each contract having a slightly different approach to the calculation of Defined Cost. How do you make sure that those definitions tie up with the supply chain so that no one is recovering extra percentage uplifts and therefore extra profit but equally no one is exposing themselves to risk of the unknown in pricing someone else’s fee.

Obligations under the NEC – 18. Does the payment mechanism under NEC work efficiently?

Most contracts assume the contractor will lead the payment application cycle with the certifier reviewing the application. Why is the NEC different in this regard in having the process led by the PM? Does that actually happen in practice and is the distinction important in any event?

Obligations under the NEC – 19. How much detail should the Programme include?

For long and complex projects the programme can itself be complicated.  How much information should anyone reasonably expect to see on a programme and does the distance away from “time now” matter? If activities of work are further in the future is it acceptable to provide less detail?

Obligations under the NEC – 20. Is an NEC programme just a bar chart?

The programme is central to most processes under the NEC but what exactly is the programme? If it is not just a bar chart what exactly is it or what could it include?

Obligations under the NEC – 21. Is there an implied acceptance of programmes?

Given how central the programme is to the NEC it must be important that everyone works to the same, up to date version of it. What happens then if a contractor submits a programme and hears nothing back? Is it accepted or not and does it make any difference?

Obligations under the NEC – 22. Float and time risk allowance are the same aren’t they?

Both time risk allowance and float are provided within the requirements for the content of an NEC programme. What are the practical and programming differences between the two? How do you make sure you show them and use them effectively?

Obligations under the NEC – 23. Is the programme I submitted with a CE a revised programme under 32.2?

The contract requires that any compensation event that is said to have an impact on planned Completion must be supported by the alterations needed to the Accepted Programme (clause 62.2). Does that mean a new programme has to be submitted and if it does is that then the new Accepted Programme?

Obligations under the NEC – 24. Are the programmes requirements of NEC too complicated?

Clause 31.2 contains a long list of what must be included within a compliant programme, as a minimum; and 32.1 adds to that for each update. Is this overly burdensome, particularly if the project is a relatively simple one?

Obligations under the NEC – 25. Which compensation events are most common and which are wrongly claimed incorrectly most often?

The compensation event mechanism is intended to be a sole remedy under the contract. Therefore, the list of what can be a compensation event has to be all encompassing. Despite that breadth, are there trends for which ones are most common and are there particular events which rarely seemed to be claimed properly?

Obligations under the NEC – 26. How do the time bars in 61.3 operate? Do they sit well with 10.1 (mutual trust and cooperation)?

Clause 61.3 provides that, for certain compensation events, if the contractor does not notify them within 8 weeks of becoming aware of them, it will lose the right to a change in the total of the prices and a revision to the completion date. This does not sound much like mutual trust and cooperation does it? Is it appropriate to have time bars in this contract and do they work?

Obligations under the NEC – 27. Compensation events tie together the consequences of certain events.  Does that really work?

The theory behind compensation events in the NEC is to take an event and deal with all of its consequences. Does that produce a better result or just a more complicated process? Is it really any different to other contacts in any event?

Obligations under the NEC – 28. Does clause 63.1 apply to assessing time as well as money and what are the consequences?

Clause 63.1 provides a dividing line between using the cost incurred and using a forecast of cost plus risk for future operations. Given that the compensation event process deals with all aspects of an event in one go does the dividing line established in 63.1 apply equally to delay caused by the event or is there some other mechanism that has to be used? If some other mechanism applies, does that threaten the all-encompassing approach of compensation events?

Obligations under the NEC – 29. Do the 63.7 assumptions work in practice?

Clause 63.7 allows the Project Manager to give some working assumptions to the contractor where there is not enough detail available for a proper quotation for a compensation event. Are assumptions often given and if they are, do they help the contractor or just cover the Project Manager?

Obligations under the NEC – 30. What happens when the Project Manager doesn’t reply properly either to a notification or a quotation?

There are a number of stages that a compensation event needs to pass through before it becomes implemented under the contract. Is it possible for the Project Manager to de-rail the process by refusing to engage in it? If there is a lack of engagement what happens ideally and practically?