Presentation on theme: "NEC - Engineering and Construction Contract (ECC)"— Presentation transcript:
1NEC - Engineering and Construction Contract (ECC)
2BackgroundThe ‘traditional’ contract is fully specified and administered by the Engineer or ArchitectProportion of ‘traditional’ contracts fallingThe Latham Report (Constructing the Team, 1994) and the Egan Report (Rethinking Construction, 1998) both reported widespread Client dissatisfaction with construction contracts which were seen as:Too many forms, too adversarialContracts which were very inflexibleDisputes - too many, too long to settleLegal compliance seen as being more important than effective contract management
3Contract ProcurementThe UK Government has embraced the Private Finance Initiative (PFI)Framework and Partnering agreements have become widespread with larger clientsThe was therefore a radical need to rethink traditional construction contractsThis resulted in the introduction of the New Engineering Contract (NEC), which later became the Engineering and Construction Contract (EEC)
4Engineering and Construction Contract The objectives for the design of the NEC / ECC were to make improvements under 3 main headingsFlexibilityTerminologyClarity and simplicityStimulus to good
5Objectives of ECC -1 Flexibility , the ECC is intended to be used for engineering and construction work containing any or all of the traditional disciplines such as civil, electrical, mechanical and building work.to be used whether the Contractor has some design responsibility, full design responsibility or no design responsibility.to provide all the normal current options for types of contract such as competitive tender (where the Contractor is committed to his offered prices), target contracts, cost reimbursable contracts and management contracts.to be used in the United Kingdom and in other countries.
6Objectives of ECC -1 Terminology In order to achieve uniformity across these sectors, some changes of terminology have been necessary.One example is that the word `Equipment' is used for what, in the building and civil engineering sectors, has in the past been called `Constructional Plant'.The traditional civil engineering and building term `temporary works' is covered by `Equipment' as defined in ECC Clause 11.2(11) and therefore is not used.
7Objectives of ECC - 2 Clarity and simplicity The ECC is written in ordinary language. The actions by the parties which follow from use of the ECC are defined precisely so that there should be few disputes about who is to do what and how.The ECC is based upon flow charts of the procedures to be followed by the parties named in the contract.Almost all circumstances which may give rise to additional payment to the Contractor are identified as compensation events, which must include reviews of both the cost and time implications.
8Objectives of ECC - 3 Stimulus to good The ECC is founded upon the propositionthat co-operative management of the interactions between the parties can shrink the risks inherent in construction workclear division of function and responsibility helps accountability and motivates people to play their partmuch reduced risk to the Employer of cost and time overruns and of poor performance of the completed projects.much increased likelihood of achieving a profit for the Contractor, subcontractors and suppliers.
9Objectives of ECC - 3 continued Stimulus to goodThe ECC is founded upon the propositionpeople will be motivated to play their part in collaborative management if it is in their commercial and professional interest to do so. Reliance need not be placed upon exhortation either within the contract or outside it.the Project Manager, acting on behalf of the Employer and in communication with him, should be presented with options for dealing with the problem from which he can choose, directed by the interests of the Employer.The Contractor should be unaffected by the choice made.
10Other changes Standard form of subcontract, very similar to ECC Subcontractors cannot be nominatedMust use direct contract with EmployerThe financial control document in the ECC can be either a traditional bill of quantities or an activity schedule.The activity schedule is a list of items with lump sum prices. The total price for the work to be done is divided between each of the items.Neither document is used in the ECC for any purpose other than assessing payments due to the Contractor.
11ECC Documents the core clauses the main option clauses, the secondary option clauses,the Schedules of Cost Components andthe Contract Data formatsPlusworks informationsite informationAccepted programme
13ECC Core Clauses General Contractors responsibility Time Quality PaymentCompensation eventsPropertyRisks & insuranceDisputes and terminations
14ECC Main Option Clauses Conventional contract with activity scheduleConventional contract with Bill of QuantitiesTarget contract with activity scheduleTarget contract with Bill of QuantitiesCost reimbursable contractManagement contract
15ECC Secondary Option Clauses InflationRetentionDelay damagesEarly completion bonusLow performance damagesSectional completionAdvance paymentsAdvance payment bondPerformance bondParent company guaranteeContractors’ liability for his design limited to reasonable skill and careVAT and taxMultiple currencies
16A partnering contract, between two Parties only, is achieved by using a standard NEC contract. This Option X12, which puts the NEC Partnering Option into a contract, is used for partnering between more than two parties working on the same project or programme of projects
17ECC Cost and Contract forms The Schedule of Cost Components is a complete identification of components of cost which is not varied from one contract to anotherThe Contract Data are selected and completed for each contract. These data identify such things as the completion dates, the contract specific documents (e.g. specifications and drawings), interest rates and price adjustment indices to be used.
18ECC Roles & DutiesThe ECC sets out the responsibilities and roles of the following parties:the Employer,the Project Manager,the Supervisor,the Contractor,the Subcontractor andthe AdjudicatorSeparate functions of Employer's designer and Contractor's designer are assumed but not mentioned in the contract.The role played by the Engineer, Architect or Supervising Officer in other standard forms is divided between the Project Manager, the Supervisor, the Employer's designer and the Adjudicator.
19Project ManagerAppointed by Employer to manage contract to achieve Employer’s objectivesAppointed at feasibility stage, may advise onprocurement of design, estimates of time and cost, alternative options, construction procurementHe should have Employer’s full authority.Can change/vary work and instruct contractorIn compensation events can chose best option for Employer but must act reasonably or face Adjudication
20DesignersIf design & construct is separated then Designers appointed directly by EmployerDevelop design to a point where tenders can be invitedIf Design & ConstructEmployers Designer provides a performance specificationContractors Designer contracted to ContractorProject Manager manages whole design process
21Supervisor Appointed by Employer for particular contract The role is to check that works are constructed in accordance with contractSimilar to role of Resident Engineer or Architect, but on simple contracts may be a Clerk of WorksDisputes between Supervisor and Contractor referred to Adjudicator
22AdjudicatorAppointed jointly by Employer and Contractor, who share his feeUsually registeredEmployer can insert his choice in contract data and seek contractor approval, or ask contractor to supply list of namesResponsible for deciding any disagreements in the contractIf either party does not accept his decision, may proceed to arbitration or court
23ConclusionThe ECC is intended to provide a framework for all parties to work collaboratively and achieve their own objectivesAim is to satisfy ClientShould lead to much reduced risk of cost and time overrunsIncreased likelihood of achieving profit for contractors & suppliers