Escolar Documentos
Profissional Documentos
Cultura Documentos
“An agreement between two or more parties, that the law will enforce”
■ Simple
– Made by implication orally or in writing (sometimes called ‘parol’)
■ Speciality
– Contracts made by deed are called speciality contracts
■ Bilateral
– Arises where X makes promise(s) to Y and in return Y makes promise(s) to X
(‘a promise in return for a promise’)
■ Unilateral
– One party X makes a promise to Y in return for an action to be carried out by Y
(but which action Y does not promise X to carry out)
(‘a promise in return for an action’)
– Contracts of guarantee
■ Agreement
■ Intention to be bound
■ Capacity
■ Social/Domestic/Family Agreements
– Presumed by the law not to be legally binding
“The failure of one of our project managers to abide to the timetables for issuing
certificates under a JCT 98 Design and Build Contract resulted in the Contractor
successfully bringing an adjudication against the Employer for payment of his
valuation in full.
This payment significantly exceeded the amount subsequently certified. This error,
together with one or two other issues, has cost EC Harris £26,000 in reaching
settlement with the Client in order to prevent them from bringing an action against
us.
This, of course, comes straight off our bottom line. At current margins, we need to
earn over £500,000 of fees to replace £26,000 of profit.”
■ Type of client
■ Type of project
■ Use of asset
■ Risk allocation
■ Ability to change scope of works
■ Client Involvement
■ Design Management
■ Capacity for Variations
■ Complexity
■ Speed
■ Clarity of Remedies
■ Default
■ Delay
Methods:
■ Traditional (Build only – designers separately appointed by client)
■ Design and Build.
■ PFI/PPP (Includes DBO/DBOM and similar hybrids)
■ Management Contracting/Construction Management
■ Collaborative/Partnering.
■ JCT Excellence
Characteristics:
F – Management contract
■ Recognised worldwide
Silver
Risk transfer to Contractor
Certainty of outturn price
Yellow
Green
Low value
Red/ simple works
Pink
Characteristics:
■ Used for process plant installations, and associated building work.
■ Separate versions for use in UK and abroad.
■ Detailed requirements for testing and commissioning
■ NEC 3
■NEC3
Contractor has access to site – NOT possession
Employer takes over the work no later than 2 weeks after completion
No obligation on Employer to take over if it is stated in Contract Data
■JCT 05 SBC
■NEC3
■ Three Scenarios:
3. Recognition of the
If repudiated the Employer may be exposed
Existence of a binding
to the Contractor’s loss of profit
contract:-
| 43
Further Reading and Handout Material
| 44
What is NEC3…
■ 3rd Edition of the NEC Suite of Contracts
■ Mainly used in Transportation and Utilities sector
■ Endorsed by OGC for all public projects
(and growing)
■ Growing in all sectors such as E&M
■ Also growing in international application
| 45
46
Evolution:
3rd Edition of all NEC contracts including the ECC issued 2005
1. Flexibility
Certifying Payments
Risk Management
Project Manager
Management of Early
Waring Process
Review and
Acceptance
of Programmes
| 58
59
SUPERVISOR
“Checking” role similar to Clerk of Works
“To check that the works are constructed in accordance with the
contract” (ECC Guidance Notes)
Can issue Instructions to search for Defects
Responsible for issuing Defects Certificate
Can delegate some or all of his actions
60
ADJUDICATOR
Mandatory
Core Clauses
Main Option Main Option Main Option Main Option Main Option Main Option Must select
(A) (B) (C) (D) (E) (F) one main
option
All secondary
Secondary Secondary Secondary Secondary Secondary Secondary Secondary
options are
Option Option Option Option Option Option Option
optional
(X1) (X2) (X3) (X15) (X18) (Y(UK)2) (Z)
Incorporated
Contract Data Parts 1 & 2 in WPEP
| | 62
ECC and its modular form 63
Core Clauses
1 - General
2 - The Contractor’s main responsibilities
3 - Time
4 - Testing and Defects
5 - Payment
6 - Compensation events
7 - Title
8 - Risks and insurance
9 - Termination
r| | 63
ECC and its modular form 64
F – Management contract
31 March 2011 | 64
OPTION A 65
Remeasurement contract
BoQ produced by the employer, rates priced by contractor
Contractor paid for quantity of work completed each month
Risk of quantities / errors in BoQ borne by Employer
Financial risk of rates largely borne by the Contractor
Not suited to design and construct
Works should be well defined at tender
Risks are included in the BoQ and paid regardless of whether they occur
Contractor has an interest in minimising cost
OPTIONS C & D 67
Certificate 3
Base Certificate 2
Cost
Certificate 1
Management contract
■ Limited project definition required at tender stage
■ Earlier start on site
■ Employer carries risk of cost increases
■ Suitable for contracts with a high degree of specialist contractors
■ Contractor directly employees subcontractors
■ Contractor responsible for managing the subcontractors to time and quality
■ Works subcontractors paid on prime cost
■ Contractor tenders preliminaries and Fee
DISPUTE RESOLUTION OPTIONS 72
There are 2 Dispute Resolution option clauses which concern rules and
procedures for Adjudication and review by any subsequent tribunal
Employer must select 1 of these:
W1 Used unless the HGCR Act applies – e.g. For use outside of the UK
such as Abu Dhabi
E Sp
ee
Employer Risk / Reward
d
F to
Sit
e
D
C
B
A
Unknown
Employer Design
Time
Contractor Risk
£
Option E Option Option Option A Option A
C/D C/D
“The X factor” – Contract Tailoring
75
X1 Price adjustment for inflation
X2 Changes in the law
X3 Multiple currencies
X4 Parent company guarantee
X5 Sectional completion
X6 Bonus for early Completion
X7 Delay damages
X12 Partnering
X13 Performance bond
X14 Advanced payment to Contractor
X15 Limitation of Contractors liability for design to reasonable skill are care
X16 Retention
X17 Low performance damages
X18 Limitation of liability
X20 Key performance indicators
r| 31 March 2011 | 75
The Secondary Options – Contract Tailoring
76
Also, Z clauses…
Bespoke amendments
31 March 2011 | 76
THINGS TO LOOK OUT FOR…
15 November 2009
Take Care – Key Considerations within NEC
Time Bar
Accepted Programme
Key Dates
Early Warnings
Contract Documentation
Allocation of Risk
Reasonable Skill and Care and Rights of 3rd Parties
Earned Value Analysis
31 March 2011 | 78
TIME BAR & COMPENSATION
Potential Issue Opportunities for
Entitlement to additional time and money (Compensation Events) ECH
are subject to compliance with strict timescales Adopt the Prospective
Outlook approach
Impact on Employer Impact on Contractor
Should factor in additional Risk of incurring costs by Encourages good project
resource to PM team ignoring timescales management – actively
promote time bar!
Manage compensation Needs to have a clear plan
contemporaneously or before and organisational structure Encourage use of a web
the change is instructed to enable compensation based Contract Admin
tools
Greater control over risk and
the impact of change Introduce FCA on
reimbursable Contracts
Could be ambushed
Solution
Understand, comply and plan for with contractual timescales
Commit sufficient resources – Otherwise amend the contract to extend timescales
Prevention is better than Cure!
Need a clear, quick and accountable decision making process in client organisations
Dispatch Emergency Response Team to deal with increased intensity of Compensation Events
31 March 2011 | 79
TIME BAR & COMPENSATION
The compensation events are defined by the 19 listed events under clause
60.1 and these may be extended by inclusion of further matters in the
Contract Data Part One.
Clause 60.1 (14) refers to an Employer’s risk event occurs, and this
incorporates Section 8 on Risks and Insurances.
(There are no equivalent of “neutral events” found in JCT forms whereby the
employer bears the risk of time but the contractor bears the risk of costs.)
TIME BAR & COMPENSATION
The changes to the Completion Date and the contract Prices consequent
upon compensation events occurring are meant to be assessed
contemporaneously with the events arising and preferably before the
changes are instructed.
Grounds for compensation events are listed in clause 60.1. There are 19
standard compensation events heads with an additional 7 dependent upon which
main and secondary options are chosen. Examples of compensation events: -
(1) Project Manager gives and instruction to change the Works Information
(2) Employer does not provide access to and use of a part of the Site
(5) The Employer or Others do not work within the times shown on the
accepted programme, or in accordance with the Works Information
(19) Prevention, as event occurs which neither party could foresee, can prevent
and stops the Contractor completing the works in time or at all
TIME BAR & COMPENSATION
Notification 8 weeks
Quotation 3 weeks
Implementation
TIME BAR & COMPENSATION
Notification
Validity
60.1(1) exceptions
Quotation
Acceptance / Assessment
63.1 method of assessing
63.3 method of change to Completion Date (EoT)
62.2 method of assessing disruption
62.3 Project Manager accepts, rejects (with reasons) and
resubmit
62.3 Project Manager not going ahead
62.3 Project Manager will assess
62.6 Default acceptance of quotation if no response from the Project
Manger within the correct timescales (2 weeks + 2 weeks)
Implementation
65.1 Compensation event implementation
65.2 Finality (unless assumptions to be revised) (beware caveats)
Time Outline Master
ACCEPTED PROGRAMME Programme
Solution
Hold workshop at pre-contract stage to confirm expectation
Take a robust but pragmatic approach on compliance with 31.2 dependant on the size of the
project
Request Critical Path and Logic Linked programmes in the Works Information
31 March 2011 | 87
TIME 88
The Contractor does not start work on Site until the first
access date (or access dates if detailed in Contract Data
Part 1)
31 The programme
planned Completion
the starting date (Contract Data) The Completion Date – is the –
completion date (Contract Data) –
unless otherwise changed in
access date(s) (Contract Data) accordance with this contract
* * * * * *
date of Completion
TIME 92
35 Take over
The Employer need not take over the works before the
Completion Date if it is stated in the Contract Data
36 Acceleration
TIME 94
Solution
Key Dates are effectively used where there is an particular interface with another contractor
Don’t use key dates to hand over an area of a building, in such circumstances the option for
Sectional Completion should be selected
31 March 2011 | 95
EARLY WARNINGS
Potential Issue Opportunities for
Contractor or Project Manager can give an Early Warning as ECH
soon as they are aware of potential price increase or delay
Pragmatically resolve
Can instruct the other to attend a risk reduction meeting to find issues and prevent
solutions problems (capture
measureable to
Impact on Employer Impact on Contractor demonstrate performance)
Contractual mechanism Can agree changes
provided to enable the pragmatically with PM Use risk register to
effective management of risk manage actions
Solution
Early Warnings brings benefits - prevention better than cure
Deal with matters while there is still time to positively influence the course of events before
blame
31 March 2011 | 96
GENERAL 97
16 Early Warning
Contractor or Project Manager gives an early warning as soon as
either becomes aware of a matter that may (can be Contractor
or Employer risk)
Either the Contractor or the Project Manager may instruct the other
to attend a risk reduction meeting At a risk reduction meeting
those who attend co-operate in
Solution
Structure contract correctly
Consultants must review the NEC (ECC) to identify each clause that refers to Works Information
31 March 2011 | 99
10
0
Works Information is the most important part of any ECC contract, it will contain
drawings and specifications but also a substantial amount of further information
The ECC achieves flexibility through reliance on the Works Information to contain
project specific information such as;
31 March 2011 | 10
1
CONTRACT DOCUMENTATION – FOCUS ON WORKS INFORMATION
• Consultants should review the NEC (ECC) Contract to identify each clause that
refers to each section of the Contract.
31 March 2011 | 10
2
10
3
CONTRACT DATA
CONTRACT DATA 104
Defects Date
etc
Fee percentages
Tender price
etc
10
7
Solution
Review the contractual allocation of risk and perhaps negotiate a reallocation, amending the
standard contract through Z Clauses
Risk transfer in a standard contract is allocated between the parties at Compensation Event
clause 60.1 and Employer’s Risk clause 80.1
31 March 2011 | 10
9
REASONABLE SKILL & CARE / 3rd PARTY RIGHTS
Potential Issue Opportunities for
ECH
A standard Contract infers Fitness for Purpose is the Duty of
Care for design and assumes the Rights of 3rd Parties Act Apply expertise with the
applies. Contract to protect the
Contractor
Simple application of
Impact on Employer Impact on Contractor knowledge and training to
Any 3rd party to the Contract Contractor could the project team at the
could have right against the inadvertently sign up to a outset will prevent such
contract higher standard of care for issues from arising
which he cannot insure
against
Solution
Use Option X15 to lower the Duty of care from Fitness for Purpose to the more typical
Reasonable skill and care
Use Option Y(UK) 3 to limit 3rd parties from making claims under the Contract
31 March 2011 | 11
0
EARNED VALUE ANALYSIS
Potential Issue Opportunities for
Programme requirements at Clause 31.2 enable the Employer to ECH
define the management information and reporting requirements.
Clause 31.2 is key in
providing the level of detail
needed for reviewing
Impact on Employer Impact on Contractor Contractor quotes for
Enables the PM to manage The Contractor must break Compensation or Early
Contractors more effectively down his activities into the Warning.
level of resources required for
Difficult to achieve on Option the delivery of each activity Use clause 31.2 to enable
A: Lump Sum Contracts EVA with Cost, Time and
Resource in a single model
Solution
Ensure enough information is provided under 31.2 to assess and challenge contractor
quotations for Compensation Event Claim or Early Warnings.
Assimilate and report data through EVA to challenge the accuracy of the data provided by the
contractor during the delivery of the project.
| 31 March 2011 | 11
1
EC Harris NEC 3rd Edition
43 Correcting Defects
The Contractor corrects Defects whether or not the Supervisor
notifies him of them
The Contractor corrects notified Defects before the end of the
defect correction period. This period begins at Completion for
Defects notified before Completion and when the Defect is notified
for other Defects
Supervisor issues the Defects Certificate
TESTING AND DEFECTS 115
TESTING AND DEFECTS 116
44 Accepting Defect
The Contractor or Project Manager may propose that the WI
be changed to accept a Defect
The Prices are reduced and / or an earlier Completion Date
agreed
45 Uncorrected Defects
If the Contactor is given access to correct a notified Defect,
but does not correct it within its defects correction period the
Project Manager assesses the cost of having the Defect
corrected by others and the Contractor pays this amount
If the Contractor is not given access to correct a notified
Defect the Project Manager assesses the cost to the
Contractor of correcting the Defect and the Contractor pays
this amount
11
7
Option A
11.2 (27) The Price for Work Done to Date is the total of the Prices for
Option B
11.2 (28) The Price for Work Done to Date is the total of
Option C, D & E
11.2 (29) The Price for Work Done to Date is the total Defined Cost which
the Project Manager forecasts will have been paid by the
Contractor before the next assessment date plus the Fee
PAYMENT
Payment timescales
1st assessment 2nd assessment 3rd assessment
starting date date date date
Up to 31 days
assessment interval, if monthly
cash positive
normally monthly
1 People
2 Equipment
3 Plant and Materials
4 Charges
5 Manufacture and fabrication
6 Design
7 Insurance
PAYMENT
51 Payment
52 Defined Cost
All the Contractors cost not included in Defined Cost are deemed to
be in the Fee
SUGGESTED AMENDMENTS…
15 November 2009
Suggested Z clauses (Amendments to the Contract)
■ Prevention
New grounds for a compensation event called “prevention”, effectively
a Force Majeure provision, - entitles the Contractor to claim additional
time and money.
Common to delete or amend it to be a time only Compensation Event in
line with other standard forms.
■ Provisional Sums
Can be added as a Z clause to revert back to a more traditional
approach here (alternatively specify in Works Information)
31 March 2011 | 13
1
Suggested Z clauses (Amendments to the Contract)
■ Extension To Time Bar Timescales In The Contract
If suitable resources are unavailable, suitable amendments should be made
to the contractual timescales for compensation.
■ Issue – Cash Positive
The standard ECC under the cost reimbursable options (C, D and E) is cash
positive in terms of interim payments to the Contractor. We recommend that
the Employer reviews the payment process to determine if they are happy to
pay on a cash positive basis. If not we would recommend that the standard
payment clause is amended to a cash neutral situation.
■ Issue – Assessing The Amount Due
Project Manager assesses the amount due at each assessment date. There
is no requirement for the Contractor to submit an application. We suggest
the Employer reviews this issue and if required amends the contract to make
the submission of an application a condition precedent for payment.
31 March 2011 | 13
2
Suggested Z clauses (Amendments to the Contract)
■ Issue – Disallowed Cost
The standard ECC under the cost reimbursable options (C, D and E) has a
defined term Disallowed Cost. These are costs which are not recoverable
by the Contractor.
We recommend that the Employer reviews these to ensure they are happy
with what they cover. Particular attention is drawn the issue of Defects
correction.
Under the standard ECC the majority of Defects identified and corrected
before Completion will be paid for by the Employer. Employers need to
understand this and make sure they are happy to allow this. This does bring
some benefit to the Employer in that it encourages all Defects to be
corrected prior to Completion.
31 March 2011 | 13
3
Focus on the Professional Services Contract 134
The PSC has been drafted with the same objectives as the NEC and has
adopted clauses from the NEC Engineering and Construction Contract
(ECC) where they were considered to be appropriate for the appointment of
a professional organisation or person
The terms are very similar to the Works Contract with some exceptions as
follows…
PROFESSIONAL SERVICES CONTRACT
The following Main Option Clauses are used with the PSC
Option A: Price Contract with Activity Schedule
Option C: Target Contract with Activity Schedule
Option E: Time Based Contract
BAA PROFESSIONAL SERVICES TERMS (PSC)
Under the PST the cost for services is valued on a Time Charge basis
rather than actual cost (Defined Cost)
PROFESSIONAL SERVICES CONTRACT
Key Differences between the PSC and the WC
The following Secondary Option Clauses are used with the PSC
■ Distinctive nature
■ Providing a service over a period of time (“service period”)
■ Examples in construction
■ Other examples
Range of use
■ TSC ■ ECC
– provides a service – provides works
– service period (not – Completion Date (can be
extended) extended)
– Service Manager – Project Manager &
Supervisor
– 6 main Options
– 3 main Options
– 18 secondary Options
– 13 secondary Options
– No “call-off” option
– X19 –Task Order
TSC and ECC compared
■ TSC ■ ECC
– Contractor’s plan – Programme
– Defects corrected asap – Defects corrected in dcp
– Defined Cost in core – Defined Cost in main
Options
– Affected Property
– Site and Working Areas
– Allows for Employer’s
equipment – Equipment always
Contractor’s
– 14 CE’s + 9 in secondary
Options – 19 CE’s + 5 in secondary
Options
– no unforeseen physical
conditions CE – unforeseen physical
conditions CE
– no weather CE
– weather CE
TSC and PSC Compared
■ TSC ■ PSC
– mainly physical work – mainly non-physical work
– maintenance-type work – project work
– normally on Employer’s – premises or asset
office and site
Main Option clauses
Main Option clauses are as follows
■ A Priced contract with price list
■ C Target contract with price list
■ E Cost reimbursable contract
Secondary Option clauses
■ X1 - Price adjustment for inflation
■ X2 - Changes in the law
■ X3 - Multiple currencies
■ X4 - Parent company guarantee
■ X12 – Partnering
■ X13 - Performance bond
■ X17 - Low service damages
Secondary Option clauses
■ X18 – Limitation of liability
■ X19 – Task Order
■ X20 – Key Performance Indicators
■ Y(UK)2 – The Housing Grants, Construction and Regeneration Act
1996
■ Y(UK)3 – The Contracts (Rights of Third Parties) Act 1999
■ Z - Additional conditions of contract
Questions : Discussion Forum 14
8
JCT 2005
PART 5: EFFECT OF JCT 05 (Part 1)
Conditions
What are the Key Changes (Are the changes of substance or of form?)
7. Automatic Determination on Contractor’s Liquidation or Bankruptcy (Now provides the other party
the choice to determine)
Minor Works and Intermediate Form of Contract Now allows for CDP elements!!
Differences in Key Clauses – Variations vs
Compensation Events
JCT 05
NEC 3
NEC 3
JCT 05 SBC
• With Quantities
• Without Quantities
• With Approximate Quantities
• Common Characteristics:
• Characteristics:
JCT Excellence
• Characteristics:
flexibility in use
JCT SBC 05
The Contract Documents are defined as:
“The Contract Drawings, the Contract Bills, the Agreement and
these Conditions, together with (where applicable) the
Employer’s Requirements, the Contractor’s Proposals and the
CDP Analysis”
Cl 1.3 “The Agreement and these Conditions are to be read as
a whole but nothing contained in the Contract Bills or the CDP
Documents shall override or modify the Agreement or these
Conditions”
PART 5 : DISCREPANCIES (Cont’d)
JCT DB 05
The Contract Documents are defined as:
“The Agreement and these Conditions, together with the
Employer’s Requirements, the Contractor’s Proposals and the
Contract Sum Analysis”
Cl 1.2 states “The Agreement and these conditions are to be
read as a whole but nothing contained in the Employer’s
Requirements, the Contractor’s Proposals or the Contract Sum
Analysis shall override or modify the Agreement or the
Conditions
PART 5 : DISCREPANCIES (Cont’d)
JCT DB 05
Discrepancies are dealt with as follows:
Cl 2.13 states if the Contractor finds any inadequacy in the
Employer’s Requirements or discrepancy in the Contractor’s
Proposals he shall notify the Employer
Cl 2.14 states where the discrepancy is within the Contractor’s
Proposal, he shall inform the Employer in writing of his proposed
amendment and the Employer shall decide between discrepant
items or otherwise accept Contractor’s proposed amendment
Cl 2.14.2 states where the discrepancy is within the Employer’s
Requirements, the Contractor’s Proposals shall prevail
PART 6 : LETTERS OF INTENT
Letters on Intent are usually used where the issuer wishes to have
some work commenced by the Contractor before a formal contract
has been agreed and signed up to by the parties
PART 6 : LETTERS OF INTENT
Usually the case that such letters do not give rise to any legal
rights or obligations
• With Quantities
• Without Quantities
• With Approximate Quantities
• Common Characteristics:
• Characteristics:
JCT Excellence
• Characteristics:
flexibility in use
JCT 05
NEC 3
JCT 05
NEC 3
JCT 05
NEC 3
Client Involvement
Design Management
Complexity
Speed
Clarity of Remedies
Default
Delay
Quality Failure
FIDIC – an Introduction
June 2010
“Fédération Internationale des Ingénieurs Conseils”
■ Red - Construction
■ Orange - Design & Build/Turnkey
■ Yellow - Design & Build
■ Silver - EPC Turnkey
■ Gold - DBO Contract
■ Green - Minor Works - ‘mini-Red Book’
■ White - Professional Services Contract
■ Blue - Dredging and Reclamation
■ Pink - MDB Harmonised Red Book
Choice of Form
Silver
Risk transfer to Contractor
Certainty of outturn price
Yellow
Green
Low value
Red/ simple works
Pink
■ Contract Agreement
■ General Conditions
■ Particular Conditions
■ Appendix to Tender
■ DAB Agreement
■ Example Proformas
■ Guidance Notes
Principal Parties:
■ Employer
■ Engineer
■ Contractor
Other Parties
■ Designers
Employer
Project Board
PM/Contract
Administrator
(‘Engineer’)
PM/CA
M&E Design E C Harris LLP Fit Out
Contractors
(Idom)
Architect Contractor
Sarma &Norde Dispute Adjudication
(SIA Re & Re)
Board
KEY
Subcontractors Principal document
Structural Eng
BKB Function
Payment
Employer
■ Providing Information
■ Issuing Instructions
■ Approving Quality of the Works
■ Certifying Payments to be made by the Employer
■ Making Determinations where required
The Contractor
■ Carries out and completes the Works in accordance with the Contract and
Instructions of the Engineer.
Supervisor
7.4: Testing
“Whenever these Conditions provide that the Engineer shall proceed in accordance
with this Sub-Clause 3.5 to agree or determine any matter, the Engineer shall consult
with each Party in an endeavour to reach agreement. If agreement is not achieved,
the Engineer shall make a fair determination in accordance with the Contract, taking
due regard of all relevant circumstances.
The Engineer shall give notice to both Parties of each agreement or determination,
with supporting particulars. Each Party shall give effect to each agreement or
determination unless and until revised under Clause 20 [Claims, Disputes and
Arbitration].”
Determinations only apply to Sub-Clauses:
Four levels:
1. Informal
2. Engineers Determination
■ Negotiation
■ Mini –Trial
■ Conciliation