The NEC Engineering and Construction Contract

Question 1

What s the definition of a contract?

Answer 1

An agreement between two or more parties having the capacity to make it, in the form demanded by law, to perform, on one side or both, acts which are not trifling, indeterminate, impossible or illegal.

Question 2

What does a contract form set out?

Answer 2

The terms and conditions of the contract

Question 3

What are JCT, ICE, NEC all?

Answer 3

They are standard forms of contract which have been developed in the construction industry.

Question 4

What does JCT stand for?

Answer 4

Joint Contracts Tribunal

Question 5

What does ICE stand for?

Answer 5

Institute of Civil Engineers

Question 6

What does NEC stand for?

Answer 6

New Engineering Contract

Question 7

What are the main objectives of a NEC contract?

Answer 7

• Flexibility
• Clarity and simplicity
• Stimulus to good management

Question 8

How is it more flexible?

Answer 8

• it is for building, civil engineering, electrical and mechanical work
• All procurement options are included such as traditional sequential, management and so on.
• Contractor design if required
• international application
• It offers alternative ways of doing things
• can also be used for design and build.

Question 9

How does it succeed in having clarity and simplicity?

Answer 9

• Ordinary language in the present tenserather than legal drafting
• No cross-referencing – each clause is complete on its own
• Easily translated into other languages
• Use of bullet points
• Actions of the parties in various situationsprecisely defined
• Use of expressions such as fair, reasonable, etc. minimised

Question 10

How is it a stimulus to good management?

Answer 10

• Procedures designed to improve the management of the project and stimulate cooperation
• intended to enable all parties to work collaboratively thereby reducing riskThe first clause in the contract is:
  “Cl. 10.1 ‘The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this contract and in a spirit of mutual trust and co-operation’”

The project manager is the equivelant of the architect and the engineer, and the Supervisior is someone he can delegate tasks to.

Question 11

What is a main difference between JCT and NEC?

Answer 11

JCT uses legalistic language that makes it difficult to read, and NEC uses much shorter and simpler statements in present tense to describe the same requirement.

Question 12

Court Interpretation

Answer 12

Courts restrict themselves to interpreting the terms of a contract in an objective way.
“the question to be answered always is ‘What is the meaning of what the parties have said?’ not ‘What did the parties mean to say?’”

Question 13

What is the layout of a NEC contract?

Answer 13

• Core Clauses
• Main Option Clauses
• Secondary Option Clauses
• Schedule of Cost Components
• Contract Data
• Works Information
• Site Information
• In every procurement option detail the main obligations

Question 14

What are the main option clauses of NEC?

Answer 14

There are 6 procurement options

A. Lump sum with activity schedule
B. Remeasurement with bill of quantities
C. Target cost with activity schedule
D. Target cost with bill of quantities
E. Cost reimbursable
F. Managemet contract

Question 15

What are the secondary option clauses in a NEC?

Answer 15

• performance bond
• parent company guarantee,
• sectional completion
• retention
• delay damages

Question 16

what are liquidated damages?

Answer 16

Liquidated damages or delay damages – if you don’t finish on time, you may have to pay for every day or week you run overtime. The price is based on the loss value of the facility, so if a shop it may be loss of profit. A genuine pre-estimate. Whatever the damages would actually be, the client is

Question 17

What are the schedule of components?

Answer 17

wages, bonuses, travelling, plant hire costs,plant depreciation costs etc; used to evaluate actual cost of changes to the works

Question 18

What does the Contract Data include?

Answer 18

Specifies:
the main and secondary options 
names of the contracting parties 
starting date 
completion date, etc.

Question 19

What is the Works Information?

Answer 19

Drawings and specification etc

Question 20

What is included in the site information?

Answer 20

Borehole reports, site access details etc.

Question 21

What concepts did ECC pioneer?

Answer 21

ECC pioneered a variety of concepts e.g.
- adjudication (now statutory in all construction contracts)
- early warning
- quotations for changed or extra work
- no nomination of sub-contractors
- a definitive method of assessing exceptionally adverse weather conditions
- regular re-programming
Some of these concepts have now been adopted by traditional standard forms.

Question 22

What is adjudication?

Answer 22

A quick method of dispute resolution wherebyan adjudicator gives an award within 28 days.of the dispute being referred to him.
The award is binding (i.e. the parties must comply with it) but not final (i.e. the partiescan open the dispute up in one of the more formal dispute resolution processes – arbitration or litigation.
This is now a statutory right available to the parties to constuction contracts.

Question 23

What is statutory adjudication?

Answer 23

this means that it has to be resolved within the time set. It is now a statutory right to adjudiction.

Question 24

What is the importance of early warnings? And how are they carried out?

Answer 24

The Contractor and Project Manager are required to notify each other if a situation is likely to arise which may cause delay or extra cost.
This is to prevent either party using unforeseensituations e.g. uncharted underground obstructions to their advantage.
The incentive for the Contractor is that he will only be paid as though he had given the early warning.
- You have to notify both contractor and project manager if there is something you think may occur which will incur costs. If you don’t give that early warning, you don’t get paid.

Question 25

What is the procedure for quotations for changed or extra work?

Answer 25

The Contractor can be asked to give a quotation for changed or extra work whichincludes the costs of any delays caused byit.
This is so that the Employer can make informed judgements as to whether thechange/extra work is an economic proposition.
The normal valuation process can also be used if quotations are unacceptable.
- Cost of ongoing delays which might be likely Client doesn’t always realise what the ongoing cost will be. You don’t have to accept a premium. It came in as a clause 13A quotation, other contracts took it on.

Question 26

What is the process for nomination of sub-contractors?

Answer 26

It doesn’t occur in NEC and is not in JCT now. If you are a client and you want a major sub-contractor, you need to manage it yourself along with the other contractor.
- Nomination is a process whereby the Employer chooses a sub-contractor himselfe.g. for a specialist process but requires themain contractor to enter into a contact withthat sub-contractor.
This process can lead to confused responsibilities and NEC considers that if the Employer wishes a particular subcontractor he should engage that
Sub-contractor directly.

Question 27

How is the Weather assessed by the contract?

Answer 27

• A definitive method of assessing exceptionally adverse weather conditions
• JCT contracts allow and extension of time forcompletion for ‘exceptionally adverse weather conditions’.
• NEC uses weather measurements combined with records to apply a 1 in 10 year statistical test.

NORMAL WEATHER IS A CONTRACTORS’ RISK. ADVERSE BAD WEATHER IS A SHARED RISK. IT IS A STATISTICAL METHOD TO FIGURING THS OUT.

Question 28

What is the procedure for re-programming?

Answer 28

NEC places high importance on programming.

To ensure that the contractor submits a programme for the works NEC allows the retention of 25% of the payments due to the contractor until the programme is submitted.This is a substantial incentive for a contractorto submit the programme.
Re-programming is required after changes to the Work

Question 29

What are the benefits of both NEC and JCT?

Answer 29

NEC contracts have been rising in popularity steadily. However JCT is still more popular. JCT allows you to do verbal instructions however NEC does not. However it is designed to make things clearer and simpler.

Question 30

What are the procedures and principles of the NEC?

Answer 30

The procedures and principles within the NEC encourage co-operation amongst contractparticipants. However, the NEC cannot fosterco-operation if the initial will to co-operate is not present the first place. For this reason, companies and individuals should beselected with appropriate attitudes.