Building Contracts - NEC Flashcards
What does NEC stand for?
New Engineering Contract
What does (NEC) ECC stand for?
Engineering and Construction Contract (ECC)
Can you tell me about the NEC contract?
- Suitable contract between the contractor and employer
- Suitable for any sector or industry
- There are six main options to choose from.
What are the key points to note under the NEC?
- No reference to a Qs in the contract
- PM assumes fully authority
- PM controls time and cost
- Programme is a contract document
- Requirement for parties to give EWNs
What different NEC contracts are available to you? What are the options?
- Option A: Priced with Activity Schedule
- Option B: Priced with BoQ
- Option C: Target cost with Activity Schedule
- Option D: Target with BoQ
- Option E: Cost Plus
- Option F: Management Contract
- Option G: Term Contract
What are the advantages of the NEC?
- Based on mutual trust and co-operation
- Focuses on pro-active risk management
- Contract is written in plain english.
What are the key differences between the NEC 2 & 3?
- Termination was introduced
- Option F was introduced
- Dispute resolution was clearly introduced in NEC 3 (Options W1 & W2)
- No mention of the Housing Rights and Grants Act
What are the key differences between the NEC 3 & 4?
- NEC 4 now gender neutral
- Employer has become ‘Client’ and Works Information’ becomes ‘Scope’
- Risk Register is now Early Warning Register
- There is now an alliance contract.
Can you give an overview of the NEC Option A please?
- Priced with activity schedule
- Activity schedule simplifies the administration
- Payments made against the completion of an activity
- It’s a lump sum contract
- Project defined at tender
- Suitable for traditional or D&B
Can you give an overview of the NEC Option B please?
- Priced with BoQ
- risk of carrying out the work to agreed prices borne by Contractor.
- Contractor is entitled to be paid a percentage of each BoQ line item within payment schedule.
Can you give an overview of the NEC Option C please?
- Target cost with activity schedule
- Financial risks are shared between client and contractor in agreed proportion.
- Motivates the contractor to deliver the project in the most cost effective way.
- Target cost agreed between the parties and made up of contractor’s estimate of ‘defined costs’ to over costs, overhead and profit.
- Target cost set by activity schedule
- Target moves with CE’s
- Contract uses pain/gain mechanism
Can you give an overview of the NEC Option D please?
- Target cost with BoQ
- Financial risks are shared between client and contractor in agreed proportion
- Similar to C but BoQ used.
Can you give an overview of the NEC Option E please?
- Cost reimbursable/Cost plus
- Employer largely takes the financial risk
- Contractor reimbursed for all costs
- Used where the nature of the works or scope cannot be defined.
Can you give an overview of the NEC Option F please?
- cost reimbursable management contract
-Designed/constructed by multiple sub-contractors appointed by a management contractor. - financial risk largely taken by the client
Which Contract is most risky for the client?
Option E - because the contractor is being reimbursed for cost plus fee
Which contract is the least financial risk to the client?
Option a because it’s a priced fixed contract.
What are the secondary options under the NEC?
- W1 & W2 – Dispute Resolution Clauses + new W3 (NEC 4)
- X Clauses
o X1 – Inflation
o X2 – Changes in the Law
o X3 – Multiple Currencies
o X4 – PGC
o X5 – Section completion
o X6 – Bonus for early completion
o X12 – Partnering
o X13 – Performance bond
o X16 – Retention - Options for dealing with legislation
o Y (UK) 2 – HGCRA 1996
o Y (UK) 3 – Rights of Third Parties Act.
What are Z Clauses?
they are used to amend the standard form of NEC contract.
What problems can arise when drafting Z clauses into a contract?
- Poorly drafted clauses can be problematic if they do not work in tandem with the core clauses; it may impact the core clauses.
What are the different types of programme on the NEC?
Total Float, Time risk allowance, Terminal float.
What is total float?
The time an activity can be delayed from it’s start date without delaying planned completion.
What is time risk allowance?
The duration allowed in each activity by the contractor to account for the risk in not completing that activity in the minimum period possible
What is terminal float?
the duration between planned completion and current contract completion date.
How can a completion date be changed?
Through Compensation Event or Acceleration
