Contract Practice Flashcards
What does a NEC4 contract look like?
Main Options (A-F)
Core Clauses (1-9)
Dispute Clause (W1 - W3)
Secondary Option Clauses X Clauses (X1 - X29)
Legislation Clauses (YUK1 - YUK2)
Additional Clauses (Z Clauses)
Contract Data Part 1
Contract Data Part 2
What does the ECC stand for? What are the alternative forms of contract?
ECC stands for engineering and construction cost.
NEC4 Engineering and Construction Contract (ECC): Used for major construction projects.
NEC4 Engineering and Construction Short Contract (ECSC): Suitable for smaller, less complex projects.
NEC4 Engineering and Construction Subcontract (ECS): For subcontracting work under the ECC.
NEC4 Engineering and Construction Short Subcontract (ECSS): A simpler form of subcontract.
NEC4 Design, Build and Operate Contract (DBO): Covers the design, construction, and operation of a facility.
NEC4 Alliance Contract (ALC): Promotes collaborative working among all parties involved in a project.
NEC4 Framework Contract (FC): Establishes a framework for multiple projects.
NEC4 Professional Service Contract (PSC): For professional services such as consultancy.
NEC4 Professional Service Short Contract (PSSC): A simpler version of the PSC.
NEC4 Supply Contract (SC): Used for the procurement and supply of high-value goods.
NEC4 Supply Short Contract (SSC): For the supply of lower-value goods.
NEC4 Dispute Resolution Service Contract (DRSC): Provides mechanisms for resolving disputes.
How did you deal with activities that weren’t 100% complete on contractor’s application for payment.
I would explain my decision to the contractor QS that in line with the contractual terms, I could not recommend to certify for any items that weren’t 100% complete.
How did you assess the impact to the programme?
For simple CE’s, i.e. the Kings coronation (1 day) i was able to do myself.
For complex CE’s involving heavy changes to the programme, i consulted the project planner to gain an estimate from them.
How did you assess a compensation event on the Option A contract?
- Assessing the quotation according to defined cost, which under an Option A, is calculated by using the short schedule of cost components which states the things that will be included in the CE (people, plant, equipment) and the rates and percentages included in the contract data part 2.
What was included in the early warning register?
Description of the Risk: A clear and concise description of the potential risk or issue that has been identified.
Date of Notification: The date when the early warning was notified.
Actions to be Taken: Specific actions that need to be taken to avoid or reduce the risk.
Responsible Party: The person or team responsible for taking the necessary actions.
Status: The current status of the risk, such as open, in progress, or closed.
Review Date: The date when the risk will be reviewed again to assess progress and effectiveness of the actions taken.
What happens when you reach sectional completion on a NEC4 contract?
Once sectional completion has been achieved, the client takes over that section of the work.
The client assumes the liability for loss or damage to that section of the works. Delay damages or bonus for early completion can be calculated if assigned to the relevant section.
The defects date remains unchanged as this is only known once the completion of the WHOLE of the works is achieved. This is the same for retention, half of it is only released upon completion of the WHOLE of the works.
What are the different warranties/bonds available to a client?
Performance bond - A surety that protects the client from financial loss if the contractor doesn’t fulfill the terms of the contract. Usually a contractor will take out with the insurer as a financial guarantee to the client that they will be reimbursed.
Retention bond - This is a surety bond to protect the client in case the contractor doesn’t complete the project or correct defects. It is used in lieu of the client withholding actual funds from the contractor.
Advanced Payment Bond - This a surety bond to protect the client when making a payment up front. Should the supplier/contractor not deliver, the bond guarantees the return of the advance.
Collateral Warranties - These warranties provide rights to a client or third party that would not otherwise have direct contractual rights. They ensure that subcontractors and suppliers fulfill their obligations.
Off Site Materials / Vesting Agreement - These bonds provide a financial guarantee for materials stored off-site. If the contractor defaults, the client can claim against the bond to recover the value of the material.
What are the roles and responsibilities of a CA under a JCT contract?
- Issuing instructions.
- Certifying Payments.
- Quality Control - approving quality of materials and workmanship.
- Managing instructions.
- Ensuring contractor compliance with the contract - can take action if non-compliance.
What is novation and when might it be used?
Novation is the act of replacing one party in a contract with another, transferring the obligations, rights and risks without cancelling the contract. An example of when it could be used is in a D&B project, in which the client has initially engaged a designer for an early design stage, but then novates the designer over to the contractor to finish off the design as they assume responsibility for design and construction.
If a client wanted to complete a project earlier and acceleration was discussed, what options might you review with the contractor?
If a client wanted to complete a project earlier and acceleration was discussed, i would review the feasibility of accelerating the works as well as the cost.
I would advise the client that acceleration is usually achieved by increasing the workforce, extending working hours or increasing equipment. These all cost money and I would advise the client on the cost of these before negotiating with the contractor an agreed cost so that the PM/CA can issue a compensation event/variation.
When would you propose a JCT intermediate contract over a JCT minor works contract?
I would propose a JCT intermediate over a minor works contract when the project was of sufficient complexity or value that it was unsuited to a minor works contract, i.e. not suitable where the project is complex enough to require bills of quantities, detailed control procedures, or provisions to govern work carried out by named specialists.
Why did you advise NEC? Why Option A?
NEC contracts are more collaborative, flexible and proactive. It is also open book from Options C onwards so more transparent.
I chose Option A due to the fact:
- It provides a simplified payment provision, works are paid once 100% complete.
- Option A provides greater cost certainty, as Option B is re-measurable and can result in price changes.
- Option A is targeted at simpler projects such as fit outs as all activities are easily identifiable within the scope.
What was the value of the delay damages included in the Brent Cross Project?
£20,000 per week.
What other secondary clauses did you advise the client to include for the Brent Cross project?
X13 - Performance Bond
X15 - Contractor’s Design
X16 - Retention
What is completion under a NEC contract?
A CE has been raised 12 weeks after completion, what would you do?
If a CE was raised 12 weeks after the issue, the PM would not accept it. If it was raised 12 weeks after completion, but within the normal timescales, i would assess it as usual.
If a client was unsure as to whether to use the JCT or NEC form of contract, what advice would you give them?
If the client wanted a contract suite that used plain English, presented a high degree of customisation, placed emphasis on collaboration and pro-activity, a rolling final account due to the strict change control process - I would recommend NEC.
If they wanted clear, pre-determined allocations of risk, a more familiar and widely used contract suite, less potential resource costs (PM/Commercial) - I would recommend JCT contracts.
You advised the client to insert the X7 clause for Delay Damages. If your client wanted to levy liquidated damages, what would you advise must be in place?
NEC - just the completion date and rate of delay damages need to be specified within the contract data.
JCT - CA would need to issue a non-completion certificate before LD’s could be taken.
You advised the client to insert the X5 clause for sectional completion into the contract. What would you advise the client is the consequence of sectional completion for a project?
- The client becomes liable for works, i.e. should take over insurances (public insurance, building insurance).
- If delay damages or early bonus for completion, these can be calculated.
- Retention / Defects date would remain unchanged.
You state that within your documents that you have assessed quotes received for compensation events. Do you review these quotes in isolation or do you seek information from other sources or parties?
- Would speak to other relevant parties, i.e. PM/planner for project impact.
- Would review it in line with contract data, i.e. fees and percentages.
- Would review in line with SSC / SSCC.
- Would also look to review against benchmarked figures where relevant to ensure prices were a fair estimate of current market prices.
If the contractor has provided notification of a compensation event 12 weeks after becoming aware of the event - what advice would you give to the client?
8 weeks is the time bar for raising CE’s, so no costs would be due.
What can be provided in lieu of retention being taken from interim payments?
Retention bond.
What are the disadvantages of a retention bond?
Can require legal action to prove default, thus costing client legal fee’s.
What is the Construction Act?
Housing Grant, Construction, Regeneration Act 1996.
Made interim payments and adjudication statutory rights.
On the university project, you advised Option A over B, did you consider any of the other pricing options?
Not on this particular project, as the projects risk profile was low and the scope was very clear so it always lended itself to an Option A or an Option B.
The reason for Option A over B was simply due to the risk transfer of the quantities to the contractor as Option B is a re-measurable contract.
Why did you advise sectional completion over partial possession?
Sectional completion offers a more structured approach to taking over parts of the work early as it is pre-agreed, doesn’t require contractor consent and a rate of liquidated damages can be agreed for failing to hit these dates that are separate to the whole of the works.
Are you aware of what defined terms are under NEC?
Defined terms are specific contractual terms that have precise meanings within the context of the contract. They are capitalised and can be found in clause 11.2 of the contract.
What is a key date under NEC?
A Key Date under NEC4 is a specific contractual milestone by which the contractor must meet a defined condition.
How do Key Dates differ from Sectional Completion?
What provisions are there within a contract to protect a contractor?
