21. Contract Admin Level 1

Question 1

What are the main suites of construction contracts?

Answer 1

JCT

NEC 4

ECC

ICE

FIDIC

Question 2

What does ‘JCT’ stand for?

Answer 2

Joint Contract Tribunal

Question 3

What does NEC stand for?

Answer 3

New Engineering Contract

Question 4

What does ECC stand for?

Answer 4

Engineering and Construction contract

Question 5

What does FIDIC stand for?

Answer 5

Federation internationale des ingenieurs civils

Question 6

What does ICE stand for?

Answer 6

Institution of Civil Engineers

Question 7

What is a bespoke contract?

Answer 7

Contract conditions that are drafted specifically for a particular project.

Question 8

What the advantages of standard forms over bespoke contracts?

Answer 8

• They are written by legal experts.
• Rights and obligations of each party are clearly set out to the required level of detail.
• The time and expense of preparing a fresh document for each occasion is avoided.

Question 9

What the disadvantages of standard forms over bespoke contracts?

Answer 9

They may not be appropriate to the needs of a particular project or client.
Using an inappropriate standard form for the project will cancel out any advantages.

Question 10

When would use a bespoke contract rather than a standard form?

Answer 10

When specialist advisors can undertake the amendments as this requires great skill and knowledge.

Question 11

When pricing an EOT what would you include for and what rates?

Answer 11

When pricing an EOT I would include costs for prolongation of site cabins, site utilities, welfare
facilities, management staff, inefficient use of labour & plant resources, subcontractor mobilisation costs, head office, finance charges & loss of profit

Question 12

Explain the relative advantages & disadvantages of the NEC and JCT?

Answer 12

Advantages of the JCT Suite of Contracts:-

o They are considered by many as the “industry standard,” therefore they offer familiarity.

o They cover most forms of procurement and building types through the various impressive ancillary documents to support the main forms.

o They are comprehensive in detail and considered by many to be fair and reasonable and not loaded in favour of either party.

Advantages of the NEC Contract

• They are applicable to a variety of procurement strategies,
• They offer clarity and simplicity by using:-

o Ordinary language (minimal legal jargon).

o They include flow charts to support their users.

• They act as a stimulus to good management through maintaining:-

o Up-to-date programmes which are required to be clear and precise.

o Provision of early warning procedures and risk registers.

o They Embody key features of project partnering.

o Assessment of Compensation events by applying a “rolling Final Account.”

Disadvantages of the JCT Suite of Contracts
**
- They are sometimes though to “compromise conditions,” in which they try to satisfy the interests of all parties.
- They can be considered as unnecessarily long and unnecessarily complex.**

Disadvantages of the NEC Contract

- They are often only considered to be used for civil engineering projects and partnerships.
- They have limited exposure to the market so they are therefore not fully tried and tested with supporting case law.**

Question 13

What are the key differences between NEC and JCT?

Answer 13

• The NEC is concise and written in plain English
• There are a number of optional clauses reducing the need to amend contracts compared to the JCT
• Provision of early warning procedure and risk register encourage a proactive approach to the management of the project whereas JCT is more reactive.
• There is no QS or Employers Agent mentioned in NEC only a Project Manager who takes on both roles
• The Programme is a contract document under NEC with 25% of money being deducted on interim payments if the contractor does not submit an accepted programme at contract stage

Question 14

What are the role of the parties in the NEC?

Answer 14

The Project Manager can be from the employer’s organisation or an external consultant.
The Project Manager represents the client and has full authority to make decisions, unless the employer has restricted his authority. The PM has the duty to be impartial and to apply the contract.
Designers prepare the work information and are not named in the NEC.
The supervisor is either from the employer’s organisation or an external consultant.
The supervisors role is to check that the works are carried out as described in the contract.
They have a similar role to the clerk of works with authority such as instructing searches or issuing
defect certificates

Question 15

What is the role of the quantity surveyor under the NEC?

Answer 15

The role of the QS is not mentioned in the contract.
* The QS can adopt a supporting role to contractor and PM to agree cost of compensation events
despite not being formally referenced.
* Options B and D involve quantities and measurement.
* Target costs under options C and D require an audit role in open book accounting in target contracts
which the QS may be responsible for.

Question 16

How is risk management dealt with in the NEC?

Answer 16

A risk register should be produced as soon as possible and regularly updated this is defined in clause
11.2(14)

It should include the description of the risk and the mitigation measure, not the value or the owner.
* Employer’s risks are listed in the compensation events (clause 60) and in the contract data (additional employer’s risks). Everything else is deemed to be a contractor’s risk.
* Caution: If ownership is stated in the risk register, it must match the contract conditions or it will create conflict. Compensation events can be added or deleted in Z clauses. Additional employer’s risks are listed in the contract data.
* In case of discrepancy between the risk register and terms of the contract, it will be read in the favour of the party who didn’t prepare the risk register, i.e. the contractor.
* If a sum is stated in the risk register neither party can claim for savings or compensation if the cost of the risk turns out to be less or more.
* Risks can only be transferred against a lump of money by modifying the contract conditions. The risk register is not contractual

Question 17

What is a compensation event?

Answer 17

Events which, if they do not arise from the fault of the Contractor’s, entitle the Contractor to be
compensated for effect on the Prices, Key Dates and Completion Date.
*There are 19Nr compensation events listed in clause 60.1

Question 18

What are Early Warning Notices under an NEC contract and what are their purpose?

Answer 18

These are notices given by either Party of any matter which could potentially have an impact on cost, completion date, key dates or performance in use

Their purpose is to give the parties sufficient time to consider the options available to prevent or
mitigate the issue and collaboratively find the best solution to meet the employer’s interests

Question 19

How are early warnings dealt with?

Answer 19

The PM and contractor have duties to give each other early warnings for inclusion in the risk register as soon as they become aware of an events that may:

• Increase the total of the prices
• Delay completion
• Delay meeting a key date
• PM is to record all the early warnings in the risk register
• Any party can call for a risk reduction meeting to review the early warning notices and collaboratively find the best solutions to meet the employer’s interests.
• As early warnings are resolved, they are removed from the risk register.

Question 20

What input have you given into EWN’s on the projects you have worked on?

Answer 20

Notified EWs as soon as I become aware of them

Attend risk reduction meetings

Question 21

How are ambiguities and inconsistencies dealt with under the NEC?

Answer 21

Under clause 17 they are awarded in favour of the party who did not provide the works information

The PM issues an instruction to vary the works information which is a compensation event

Question 22

How does the NEC deal with time and programme?

Answer 22

The employer sets the access dates for areas of the works if applicable within the starting date, the key milestones and completion date

The contract duration is not stated, the contractor must complete the works on or before the stated date

If the contractor fails to meet the completion date, delay damages apply if Option X7 was selected

The PM must issue the notice of completion within a week of completion

Programme is a contractual documents

Clause 31.2 details requirements of the programme

The programme has to be regularly updated

Question 23

How is completion defined under the NEC?

Answer 23

All the works have been completed as described in the works information

The contractor has done all the works required for the employer to use the works and for others to do their work

All defects have been rectified

Question 24

What is the difference between acceleration (clause 36) and early completion bonus (clause X6)?

Answer 24

Acceleration is where the completion date and key dates are advanced for an agreed price

An early completion bonus is where the contractor receives a bonus proportional to the number of days they completed the works in advance with the original completion date unchanged

Question 25

What are the payment mechanisms under the NEC?

Answer 25

Option A - Priced contract with activity schedule

Option B - priced contract with bill of quantities

Option C - target cost contract with activity schedule

Option D - Target cost contract with BOQ

Option E - Cost reimbursable contract

Option F - Management Contract

Question 26

What are the difficulties of assessing interim valuations with an activity schedule? (Option A)

Answer 26

The activity schedule does not describe the works to be done, this is included in the works information

The contractor re-sequences the works to meet the completion date, he needs to revise the activity schedule so that the works and methods of working included in each activity are compatible with the programme

Question 27

Under which conditions can the activity schedule be adjusted?

Answer 27

There are only 3:

Compensation events

Changes in planned method of working

Acceptance of a quotation for acceleration

Question 28

How does the NEC permit payment by milestones / stages?

Answer 28

The contractor must group in his tender documents his activities by groups of activities which will form the milestones

At each assessment date the PM assess the level of completion of each group. Payment is only certified when all activities of the group have been fully completed with no scope for partial payments

Question 29

Name some of the compensation events

Answer 29

There are 19 of them in clause 60.1:-
o Changing the works information.
o Access to the site.
o PM instructs to stop work.
o PM or supervisor do not respond to a communication within the timescale stated in the
contract.
o Object of value or historical interest.
o PM withholds an acceptance without valid reason.
o Instruction to search.
o Adverse weather (as measured in the contract data).
o Employer’s risks listed in clause 80.1 and contract data.
o PM changes assumptions previously made on compensation events
o Employer’s breach of contract

Question 30

How are compensation events dealt with?

Answer 30

1. PM notifies the CE at the time of giving the instruction OR the contractor notifies the PM of the CE but he must do so within 8 weeks of becoming aware otherwise they are not allowed compensation event
2. PM has one week to decide whether it is a valid CE
3. If the PM fails to do so, the contractor notifies the PM that a decision needs to be made. If the PM still doesn’t respond within 2 weeks if this notification, the CE is deemed to be accepted and the contractor can submit a quotation
4. The contractor has 3 weeks to provide a quotation
5. Within 2 weeks the project manager can either request a revised quotation or accepr it or inform the contractor the proposed changes are not being made
6. If the PM failed to respond within the timescales, the contractor notifies him. If the PM fails to respond within further 2 weeks the quotation is accepted
7. Timescales can be extended

Question 31

How is a contract under hand different from a deed?

Answer 31

A deed is signed by a witness and traditionally authenticated by a seal

Question 32

What is your understanding of latent defects and what contractual issues are associated with them? What should the architect do if they are discovered?

Answer 32

Latent defects are defects that won’t be identified straight away but they will become more visible some time after building completion and may take many years to become identifiable