WK6PM - NEC Payment Questions

Question 1

Q1. Who is responsible for assessing the amount due under NEC4? What is the implication if this has not been carried out correctly?

Answer 1

Project manager asses amount due.

Question 2

Q2. How is the PWDD valued under Option A?

Answer 2

A – Activity schedule with a priced contract – like a drawing and spec
Using activity schedule – you only pay once the whole thing is complete. Minor defects are no issue, major ones are.
B – Priced contract with BOQ – similar to JCT with full BOQ – can be remeasured
C – Target cost and activity schedule
D - Target cost BOQ
PWDD - Total price for completed activities - A completed activity is one without Defects which will delay / be covered up
Priced Contract with Activity Schedule – Each activity must be clearly defined

Question 3

Q3. How does the MC receive payment for preliminaries under NEC4 option A? How does the MC receive payment for materials on site under NEC4 option A?

Answer 3

Fixed, time related, cost related items.

Question 4

Q4. Under NEC 4 option D is the MC allowed to get paid for defective work that has been carried out?

Answer 4

Option D – Target contract with BOQ

Yes you can be paid for defective work in C or D as its target cost s

Question 5

Q5. What is unusual about how the PWDD is valued under options C - E? How is this usually managed?

Answer 5

The total Defined cost which the service manager forecasts will have been paid by the contractor before the next assessment date plus fee.
Usually – Price for each lump sum item in the price list which the contractor has completed and where a quantity is stated, an amount is calculated by multiplying the quantity which the contractor has completed.

Question 6

Q6. What are the requirements for provisional sums under NEC 4?

Answer 6

If still undecided at time of tender, then must later be entered as a compensation event and the cost of the work is held in the budget for the scheme rather than in the contract.

Question 7

Q7. Is there an option under NEC4 for fluctuations?

Answer 7

NEC has a Secondary Option X1 that must be selected when the contract documents are assembled.

Question 8

Q8. What is the shorter schedule of cost components used for under NEC4?

Answer 8

Used as consideration in pricing compensation events.
To cost the resources used within the service areas, so these resources if also used within the extended service areas would be included as cost rather than within the fee percentage when assessing compensation events.

Question 9

Q9. How would you advise the Emp on what the implications are of submitting a late payment to a contractor under NEC4?

Answer 9

Must be made either one week after the paying party receives the invoice or three weeks after the assessment date unless otherwise stated in the contract. Interest rates are stated in part 1 of the contract.
Payment due x interest rate x number of days late = Ans / 365.

Question 10

Q10. Under NEC4 how would you advise the PM on what costs can be disallowed under Option C-E?

Answer 10

Disallowed Cost is cost which the Service manager decides is;
• Not justified by contractor’s accounts and records
• Should not have been paid to a subcontractor or supplier in accordance with the contract
• Was incurred only because the contractor did not;
o Follow an acceptance or procurement procedure accepted in the scope
o Give an early warning which the contract required it to give
o Give notice to the SM of the preparation and conduct of an adjudication or proceedings of a tribunal between the C and SC or supplier.

Question 11

Q11. What is the main difference between how the final account is valued under JCT SBC 2016 with quantities and NEC4 Option B?

Answer 11

JCT - Payments are generally calculated by QS based upon assessment of work done plus materials, following an application made by the Contractor.

Option B – Priced contract with BOQ - payment is based on a remeasure + proportions of lump sums

Question 12

Q13. What are the optional X clauses in relation to payments that can be used?

Answer 12

Option X1 - price adjustment for inflation
 X3 - multiple currencies (A&B)
 X14 - advanced payment
 X16 - retention

Question 13

Q12. Explain what would happen if the PM did not meet the final assessment date?

Answer 13

Must be done no later then – 4 weeks after defects certificate or 13 weeks after PM issues termination certificate.
Contractor may issue the client an assessment of the final amount due and how its been calculated in which the client can accept.

Question 14

Q14. Explain how JCT and NEC4 differ in relation to negative interim valuations and why?

Answer 14

NEC – allowed to have negative interim valuations

JCT – Not allowed. Issue a negative later certificate claim back on final account.