Contract Practice - FINAL Flashcards

Question

Completion & Defects Date/ Defects Certificate under NEC?

Answer 1

‘Completion’ in the ECC is a defined term, Clause 11.1. Completion is when the Contractor has – • Done all the works which the works information states he is to do by the Completion date • Has corrected notified Defects which would have prevented the Employer from using the works and Others from doing their work • If the work Contractor is to do by completion date is not stated in works information, Completion is when contractor has done all the work needed for Employer to use the work or Others to do their work

Answer 2

Actual Defined Cost • Work already done prior to the date the project manager instructed, or should have instructed, the contractor to submit a quotation. • The contractor needs sufficient resources to maintain full and accurate cost records, which includes its own cost and/or subcontractor's cost. • It may require amending traditional application payment cycles while implementing an open book arrangement, so that at any point in time the contractor is able to identify the actual cost expended by subcontractors on works already carried out. Forecasted Defined Cost • Second is forecasting the defined cost of work not yet done. • The assessment of these costs requires detailed knowledge of the progress of the individual work or trade packages and a realistic estimated final account for each subcontractor. • As there is a limited period (the default being 3 weeks) for the contractor to submit its CE quotation, the Contractor has to have a means of forecasting the cost of the change inherent in the CE. Adjustment of Fee • The third matter is an adjustment of the fee which, as it is a percentage addition to the defined cost, is simply dependent on ensuring that the defined cost is correctly assessed Minus disallowed cost which is a cost that – • Is not justified by the Contractors accounts and record, • Should not have been paid to a Subcontractor or supplier in accordance with his contract • Was incurred only because the Contractor did not follow an acceptance or procurement procedure stated in the Works Information or did not give an early warning which contract required him to give And the cost of – • Correcting Defects after Completion • Correction Defects caused by the Contractor not complying with a constraint on how he is to Provide the Works stated in the Works Information • Plant and Material not used to Provide the Works (after allowing for reasonable wastage) unless resulting from a change to the Works Information • Resources not used to Provide the Works (after allowing for reasonable availability and utilisation) or not taken away from the Working Areas when the Project Manager requested and • Preparation for and conduct of an adjudication or proceedings of the tribunal

Answer 3

Option C Tender information incomplete, higher risks, financial risk shared. Pain/Gain Incentivisation mechanism. Option E - Cost Reimbursable - Scope of works unknown & TC unable to be developed. Early start required. Majority of risk sits with Employer. Contractor paid actual cost plus fee. No incentive to drive down cost.

Answer 4

PMA when: 1) Contractor has not submitted a quote 2) PM decides that CE has not been assessed properly by the contractor 3) If no programme submitted with quotation 4) If programme has not been accepted by PM due to contractor fault. PM lists assumptions. Can only be reopened if PM has made an error. If assumption was incorrect then it is a new Compensation Event.

Answer 5

On Site - The materials should be for the works, adequately protected, delivered to programme and in a reasonable quantity Off Site - Proof that ownership will transfer to the employer on payment (vesting certificate) • Insurance until materials arrive at site • Materials are clearly labelled as for the site and set apart from other materials • A materials off site bond has been provided if required

Answer 6

"Used only for option C, D & E. Identifies the cost heads under which actual costs incurred under the works should be allocated in order to calculate the defined cost. 1) People - Directly employed by contractor or not directly employed but paid for time such as labour only subcontractors. 2) Equipment 3) Plant and materials 4) Charges - water, gas, electricity in working areas 5) Manufacture and fabrication 6) Design 7) Insurance - deduct from cost the insurance policies and other costs paid to contractors by insurers."

Answer 7

Covered under section 8 - Risks and Insurance • Contractor provides insurance stated in insurance table and any additional stated in Contract Data unless Employer stated to provide • In joint names and covers Contractor’s risk events from starting date until defect cert or termination cert issued • Before start date and on each policy renewal, Contractor submits insurance certificates to PM • Any amount not received from insurer borne by risk owner (Contractor or Employer) • Employer can insure a Contractor’s risk, cost borne by the Contractor and vice versa • PM submits insurance policies and Certificates to be provided by Employer to Contractor for Acceptance.

Answer 8

HGCRA – Projects longer than 45 days must contain provision for interim payments Core Clause 50.2, the amount due to the contractor is the total of: • price for work done to date; plus • other amounts to be paid to the contractor (such as compensationn events); less • any amounts to be paid or retained from the Contractor. Project manager is obliged to certify payment within 1 week of each assessment date. • The assessment date is normally agreed between the parties. • If not agreed the assessment date is calculated by reference to the assessment interval following the starting date. • Payments are made within 3 weeks of the assessment date. • If a payment is later corrected, interest is paid.

Answer 9

NEC Contract - • Main Document (Core Clauses/Main Option/DR/Secondary Option) • Schedule of Cost Components (BQ/AS) • Works Information (Contractors Responsibilities, Programme) • Site Information (Services) • Contract Schedules (Agreement Form) • Drawing Register • Contract Data Part 1 (Supplied by Employer - Client Details, Access dates, Weather measurements for CE, Insurance values if provided by employer, Z Clauses) • Contract Data Part 2 (Supplied by Contractor - details of key personnel, data for SOCC, Fee %)

Answer 10

Yes, if there is no defined cost incurred or changes to any dates in the programme.

Answer 11

Wouldn’t review programme myself but planner or PM would. If there is extension of programme would likely be reviewing increase in prelim cost.

Answer 12

Last date of the defects period under NEC. Defects period 26 to 52 weeks after completion date. Defects date last day PM can notify defects.

Answer 13

If occurs after the end of the defects period. Employer will have to go through courts. Limitations are 6 years for contracts signed under hand and 12 for signed under deed. Can reduce risk through collateral warranties, guarantees and latent defects insurance.

Answer 14

Because all cost risk would have sat with client. Option C would’ve provided incentive for Contractor to reduce costs and balanced cost risk between contractor and client through pain/gain mechanism

Answer 15

Wasn’t fully designed enough, too many unknowns. Also Client doesn’t use option A as they believe they are too adversarial, only option C and E

Answer 16

Essentially yes, Contractor has another 3 weeks to prepare another quote, PM has another 2 weeks once submitted to respond.

Answer 17

Amended using z clauses (additional conditions of contract) EG removing CE’s (Physical conditions of site (12), Confidentiality clauses, specifying payment terms. Could change the risk balance of the contract, In case of NEC can change meaning of the contract EG adversarial instead of collaborative, bespoke clauses may not have been tested in court so cannot ensure outcome if there is litigation (unfair contract terms act)

Answer 18

* Standard Building Contract * Minor works * Design and Build * Construction Management

Answer 19

o Where the rights of one contractual party are transferred to a third party EG assignment of the rights under a collateral warranthy to a different tenant/purchaser o Assigned using z clauses in NEC3, I’m aware NEC4 contains an assignment core clause o It is standard to allow assignment of rights twice without consent o The assignment should be notified in writing to the other party