Contract Practice & Admin

Question 1

What are the payment provisions under the NEC4?

Answer 1

• Application for payment submitted by assessment date
• 7 days for PM to certify payment by the due date
• 14 days from due date until final date for payment
• Client must issue payless notice 7 days before final date for payment if applicable.

Question 2

What is the compensation event procedure under the NEC4?

Answer 2

Before a compensation event occurs and early warning should be given in order for the Project Manager and the Contractor to mitigate or reduce the impact.

A CE is an event which can affect the cost to the Client of the work being carried out, the time when the works will be completed, or both. PM replies in 1 week to notification, 2 weeks to quote. Contractor has 3 weeks to provide a quote. Contractor must notify within 8 weeks of becoming aware of a CE.

If a contractor notifies the CE the PM responds within one week.

Question 3

How do you assess a compensation event?

Answer 3

The impact of defined cost incurred in line with the schedule of cost components (or short schedule) plus the contractors fee. Actual defined cost used up to dividing date, forecast defined cost used for any works after the dividing date.

Question 4

What are the timescales for a proposed instruction?

Answer 4

State the date the proposed instruction may be given by, contractor has 3 weeks to provide a quotation, project manager replies by the date that the proposed instruction may be given.

No response within the time allowed means that the quotation is not accepted.

Question 5

What headings form the NEC4 schedule of cost components?

Answer 5

• People
• Equipment
• Plant and Materials
• Subcontractors
• Charges
• Manufacture and Fabrication
• Design
• Insurance

Question 6

How do you calculate delay damages?

Answer 6

Genuine predetermined estimate of the financial impact to the client if the contractor does not meet completion date of a section or the whole works.

Question 7

What happens if nothing is included in the contract data for delay damages?

Answer 7

Unliquidated damages could be pursued, this owuld require the client to accurately demonstrate the damages incurred as a result of delay.

Question 8

What happens if the contract data states £0 for delay damages?

Answer 8

Then no damages can be pursued under the contract.

Question 9

How does retention work?

Answer 9

Retention is a method of witholding a percentage from the PWDD in interim assessments so that the client has coverage if the contractor does not rectify defects on the project. Retention is released in half at completion of the works and the rest at the defects date.

Question 10

What is an alternative to retention?

Answer 10

Retention bond can be taken out for the same percentage value. This will still give the client comfort of being able to cover the costs of rectifying defects but will also aid contractor cashflow in the construction period.

Question 11

What are the changes between NEC3 and NEC4?

Answer 11

• Terminology (employer now client, risk reg now EWN reg, works info now scope)
• Two new contracts - Design Build Operate and Alliance
• New Option W3 - Dispute Avoidance Board (when construction act does not apply)
• Dispute Negotiation - Option for senior reps meetings
• Programme - now deemed accepted if no response given after Pm is notified of failure to respond

Question 12

What conditions must be met for a contract to be formed?

Answer 12

• Offer
• Acceptance
• Consideration
• Legality
• Intent
• Capacity

Question 13

What contract documentation would to see in an NEC cotract?

Answer 13

• Form of agreement
• Conditions of contract (Core clauses, main option, dispute resolution, secondary options, schedule of cost components)
• Contract Data (Part 1 and 2)
• Pricing Document (Activity Schedule or BoQ)
• Clients Scope
• Scope for Contractors Design (if applicable)
• Site Information

Question 14

What happens upon completion?

Answer 14

Project Manager certifies completion within 7 days of it being achieved.

• This ends commences the period for correcting defects identified in the contract data between completion and the defects date.
• Also ends all liabilities for the contractor for the working areas, ends all bonds, means delay damages are not applicable anymore.
• Half retention held is released.

Question 15

What are the risks of early takeover?

Answer 15

Not a contractual obligation - the contractor has to agree to it. No risk mitigation such as delay damages can be applied to it. Not a set date.

Question 16

What is the difference between a contract under hand and one under deed?

Answer 16

Under Hand - Signed by authorised representatives of the parties. Liability period of 6 years.
Under Deed - Expressed as a deed, delivered as a deed. Signed by two directors or a director and secretary. Liability period of 12 years.

Question 17

What was the purpose of the Housing Grants Construction and Regeneration Act 1996 ?

Answer 17

Intended to ensure that payments are made promptly through supply chain and disputes resolved swiftly. Provisions of the act include:

• The right to be paid in interim, periodic or stage payments.
• The right to be informed of the amount due, or any amounts to be withheld.
• The right to suspend performance for non-payment.
• The right to adjudication.
• Disallowing pay when paid clauses.

Question 18

What changes to the construction act did the construction act 2009 bring in?

Answer 18

Introduced various solutions to gaps in the HGRA. Including the following:

• Contracts no longer required to be evidenced in writing for it to apply and for adjudication to apply.
• ‘Slip Rule’ (5 days) introduced for adjudicator to correct a decision to remove a clerical or typographical error.
• The contract can now not state who pays adjudication costs, adjudicator allocates cost or parties agree after adjudication notice.
• Extends to verbal contracts
• Pay less notice
• Cannot ‘pay when certified’