This book details some of the most important and interesting questions raised about the NEC4 family of contracts and provides clear, comprehensive answers to those questions.
Written by an NEC expert with over 20 years experience using, advising and training others, the book has several distinctive features:
It covers the whole NEC4 family
It is written by a very experienced NEC author who explains sometimes complex issues in a simple and accessible style
The questions and answers range from beginner level up to a masterclass level
The questions are real life questions asked by actual NEC practitioners on real projects.
The book includes questions and answers relating to tendering, early warnings, programme issues, quality management, payment provisions, compensation events, liabilities, insurances, adjudication, termination and much more. It is essential reading for anyone working with the NEC4 family of contracts, whether professionals or students in construction, architecture, project management and engineering.
Contents
Chapter 0
Introduction to the NEC4 Contracts
Use of NEC4 Contracts
What are the general differences between the NEC3 and NEC4 contracts?
We are compiling tender documents for a project we have valued at
approximately £500,000, and are wondering whether we should consider using
the NEC4 Engineering and Construction Contract or the NEC4 Engineering and
Construction Short Contract? What is the difference between the two, and is
there any project for which the NEC4 contracts would not be applicable?
We wish to engage a Contractor to carry out electrical testing within
existing council housing stock over a period of three years. The work is
fairly straightforward, can we use the NEC4 Term Service Short Contract or
should we use the NEC4 Term Service Contract?
We wish to purchase large quantities of rock salt for treating roads during
winter periods. Is the NEC4 Supply Short Contract sufficient, or should we
use the NEC4 Supply Contract because of the large quantities?
When should we use the new NEC4 Design Build and Operate Contract?
Do the NEC4 contracts comply with the requirements of the Housing Grants,
Construction and Regeneration Act 1996, and the Local Democracy, Economic
Development and Construction Act 2009?
We wish to use the NEC4 Engineering and Construction Contract for a series of
projects, and assume that the contracts include all the necessary ancillary
documents to be incorporated into the contract, for example:
Form of Agreement
Performance Bond
Parent Company Guarantee
Advanced Payment Bond
Novation Agreement
Collateral Warranty
Retention Bond
We wish to appoint a Contractor to carry out some work with the Client's
design team on pre-construction value engineering and buildability options
for a proposed project, for which we may eventually appoint him to be our
Contractor to build the project, or we may decide to carry out a selective
tendering process to select our Contractor, can we do this with an NEC4
contract?
We have been using the NEC3 Engineering and Construction Contract for a
number of years, and have used all the Main Options except Option D (target
contract with bill of quantities), and wonder, why anyone would use that
option?
When would it be appropriate to use Option E within the NEC4 Engineering and
Construction Contract?
We would like to use the NEC4 Engineering and Construction Contract to carry
out a project using Construction Management as a procurement method. We note
that Main Option F is a Management Contract, but there is no Construction
Management Option?
We wish to use the NEC4 contracts for a number of international
infrastructure projects in various locations around the world, is that
possible?
Roles
What is the role of the Project Manager on an NEC4 Engineering and
Construction Contract, and does he have an obligation to act impartially
between the Parties?
What construction discipline is best suited to being the Supervisor on an
NEC4 Engineering and Construction Contract, and how much "supervising" does
the Supervisor actually have to do?
General
Under Clause 14.2 of the NEC4 Engineering and Construction Contract, the
Project Manager or Supervisor may delegate actions. What does this mean? Is
there anything that the Project Manager or Supervisor cannot, or must not,
delegate?
What is the meaning of the wording in Clause 10.1 and 10.2 of the NEC4
contracts, the parties named "shall act as stated in the contract" and "act
in a spirit of mutual trust and co-operation"?
What is the order of precedence of documents in an NEC4 contract?
What does the term "Working Areas" mean in an NEC4 Engineering and
Construction Contract? Presumably this is simply, the Site?
How do the NEC4 contracts deal with verbal communications? What do the words
"in a form which can be read, copied and recorded" mean?
We wish to name Subcontractors which the Contractor is required to use in an
NEC4 Engineering and Construction Contract. How can we do that?
What happens under an NEC4 Engineering and Construction Contract Option B
(priced contract with bill of quantities) if something is clearly indicated
on the tender drawings, but it is missing from the bill of quantities?
In an NEC4 Engineering and Construction Contract Option E (cost reimbursable
contract), how are insurance premiums recovered by the Contractor?
We wish to include for price fluctuations within a NEC4 Engineering and
Construction Contract. How can we do that?
A new legal requirement has just come into force, the Contractor on an NEC4
Engineering and Construction Contract Option C (target contract with activity
schedule) has stated that he is entitled to additional payment to recover
this. Is he correct?
We are entering into a partnering arrangement with the Contractor within an
NEC4 Engineering and Construction Contract. What can we do in order to
achieve this?
Within the NEC4 Engineering and Construction Contract, when would we use
Option X15 (The Contractors Design)?
We note that the NEC3 Engineering and Construction Contract includes Option
X17 (low performance damages). What is this, and how is it calculated and
paid to the Client?
We do not understand NEC4 Engineering and Construction Option X18 (limitation
of liability). When would this be applied?
We wish to include for Key Performance Indicators (KPIs) with an NEC4
Engineering and Construction Contract? How can we do this?
How should Z clauses be incorporated into an NEC4 contract? Are there any
recommended Z Clauses?
We are confused by the fact that within the NEC4 Engineering and Construction
Contract, there is the Schedule of Cost Components and the Short Schedule of
Cost Components? What are these for and what is the difference between the
two?
How are Subcontractors dealt with within the NEC4 Engineering and
Construction Contract Schedules of Cost Components?
Some of the NEC4 Contracts include a Price List. What is this and how do we
use it?
Can you explain what a Task, and a Task Order are under the NEC4 Term Service
Contract?
Chapter 1
Early Warnings and Risk Registers
Is there a standard format within the NEC4 contracts for an early warning
notice? Is there any remedy if the Project Manager or the Contractor fail to
give an early warning?
What is an Early Warning Register, and what is its purpose within the NEC4
Engineering and Construction Contract?
What is the purpose of an early warning meeting within the NEC4 contracts?
Chapter 2
Contractors Design
We wish to use the NEC4 Engineering and Construction Contract and the NEC4
Engineering and Construction Short Contract for a number of design and build
projects, can we do this and if so, how?
In a design and build contract using the NEC4 Engineering and Construction
Contract, which takes precedence, the Client's Requirements or the
Contractor's Proposals?
If the Project Manager on an NEC4 Engineering and Construction Contract
accepts the Contractor's design and it is later found that the design will
not work, or it is not approved by a third party regulator, who is liable?
We wish to novate a design consultant from the Client to the Contractor under
an NEC4 Engineering and Construction Contract with full Contractors design.
Can we do this?
The Contractor has designed a temporary access walkway bridging across two
areas of the Site. He has not submitted his design proposals for the Project
Managers acceptance before constructing the walkway, but we insist that he
is in breach of contract by failing to do so. What can we do to remedy this
breach?
Chapter 3
Time and the Accepted Programme
Can we include liquidated or unliquidated damages in an NEC4 contract? How
are these deducted in the event of delayed Completion?
Do the NEC4 contracts have provision for Sectional Completion where the
Client may wish to take over parts of the works before completion of the
whole project?
In an NEC4 Engineering and Construction Contract, what is the relationship
between "Completion" and "Take Over"?
We have a project where we require the Contractor to provide "as built"
drawings, maintenance manuals and staff training as part of the contract, how
do we include this requirement within an NEC4 Engineering and Construction
Contract?
We have a project under the NEC4 Engineering and Construction Contract Option
C (target contract with activity schedule) to build a new college where we
will require the Contractor to complete wall finishings to classrooms in
order that a third party directly employed by the Client will be able to
install audio visual equipment fixed to the walls. How can we incorporate
this requirement into the contract?
The Contractor on an NEC4 Engineering and Construction Contract was required
to submit a programme with his tender. He has stated that as we accepted his
tender, then we have also accepted his programme, and this is the first
Accepted Programme, but how can it be so if it does not comply with Clause
31.2?
Who owns the float in an Accepted Programme within an NEC4 Engineering and
Construction Contract?
The Contractor on an NEC4 Engineering and Construction Contract has failed to
submit a programme to the Project Manager, what can we do to remedy this? Is
there any remedy where the Project Manager fails to respond to a programme
submission within the required two weeks?
How often must the Contractor in an NEC4 Engineering and Construction
Contract submit a revised programme?
In an NEC4 Engineering and Construction Contract being carried out under
Option A (priced contract with activity schedule), can we require the
Contractor to bring forward Completion if the Client has a need to take over
the project earlier?
Chapter 4
Quality Management
We have identified a number of Defects on a project which a Contractor is
carrying out under the NEC4 Engineering and Construction Contract, but the
Contractor denies that they are Defects. How do the NEC4 contracts define a
Defect?
On an Engineering and Construction Contract using Option C (target contract
with activity schedule), the Contractor has advised us that he is entitled to
be paid for correcting a Defect, we disagree that we should be paying him for
correcting Defects.
What is the meaning of the term "search for a Defect" under Clause 43.1 of
the NEC4 Engineering and Construction Contract?
What can be done on an NEC4 Engineering and Construction Contract if the
Contractor fails to correct Defects?
When is the Defects Certificate issued under an NEC4 Engineering and
Construction Contract, and who issues it?
Our project, which we are about to carry out using the NEC4 Engineering and
Construction Contract Option B (priced contract with bill of quantities),
will be on completion a very high security building with restricted access.
Once the Client has taken over the works, we cannot allow the Contractor to
return to correct any defects. How do we then deal with any defects which may
arise?
The Contractor has installed the wrong suspended ceiling tiles to the
training rooms within our new building, however, we urgently need to take
over the works and cannot wait for him to correct the defect. How can we
manage this issue?
Chapter 5
Payment Provisions
We wish to make use of a Project Bank Account. Can we do this with an NEC4
contract?
We note that the NEC4 Engineering and Construction Contract does not include
provision for retention on payments to the Contractor. Why is this, and how
can we include for retention?
We need to pay the Contractor on an NEC4 Engineering and Construction
Contract, partly in US dollars and partly in the local currency of the
country in which the project is located. How can we do this?
We wish to pay the Contractor on an NEC4 Engineering and Construction
Contract a mobilisation payment equating to 10% of the value of the contract.
How can we do this?
What is the Fee in an NEC4 Engineering and Construction Contract intended to
cover?
The Contractor on an NEC4 Engineering and Construction Contract has failed to
submit a programme to the Project Manager, what can we do to remedy this?
On an NEC4 Engineering and Construction Contract Option A (priced contract
with activity schedule), if the Contractor has completed an activity, should
he paid for that activity if it contains Defects?
We are Contractors tendering for a series of NEC4 Engineering and
Construction Contracts using Option A (priced contract with activity
schedule). How should we price our Preliminaries costs within the activity
schedule so that we are paid correctly?
On an NEC4 Engineering and Construction Contract Option B (priced contract
with bill of quantities), the Contractor contends that if the quantities
change, he is entitled to revise his rates, is that true?
What are "accounts and records" as required under an NEC4 Engineering and
Construction Contract Option C, D, E and F? The Contractor has stated that
there are certain accounts and records of costs that he cannot make available
to the Project Manager as they are confidential, and also in some cases would
breach data protection law. How can we pay the Contractor these costs?
What are Disallowed Costs and how are they deducted from payments due? Can
Disallowed Cost be applied retrospectively to a payment made in a previous
month? Is there a maximum time period for deducting Disallowed Cost?
How is the Contractor's Share under the NEC4 Engineering and Construction
Contract Option C (target contract with activity schedule) set and
calculated?
How are unfixed materials on or off Site dealt with under the NEC4
contracts?
How is interest calculated on late payments on an NEC4 Engineering and
Construction Contract?
The Contractor on an NEC4 Engineering and Construction Contract has failed to
submit an application for payment by the assessment date, the Project Manager
has stated that no payment is therefore due to the Contractor this month. Is
this correct?
We have a contract under the NEC4 Engineering and Construction Contract where
the Contractor has stated that he must be paid for compensation events if he
has done the relevant work. Is the Project Manager required to certify
payments "on account" for compensation events not yet agreed?
We have heard that there are some substantial changes to the payment terms
within the NEC4 Professional Service Contract? What are they?
Chapter 6
Managing compensation events
How do the NEC4 contracts deal with unforeseen ground conditions on the
Site?
How do the NEC4 contracts deal with delays and/or costs incurred by
exceptionally adverse weather conditions?
Do the NEC4 contracts include provision for "force majeure" events?
How long do the Project Manager and the Contractor have on an NEC4
Engineering and Construction Contract to notify compensation events?
We are working on an Option A (priced contract with activity schedule) under
the NEC4 Engineering and Construction Contract and have submitted quotations
for compensation events to the Project Manager, but he has not responded, and
he has said he will discuss them with us when we submit the Final Account.
Can he do this?
How should a Contractor under the NEC4 Engineering and Construction Contract
prepare a quotation for a compensation event?
We are Contractors carrying out a refurbishment contract under NEC4
Engineering and Construction Contract Option A (priced contract with activity
schedule) and have had several individual compensation events, each with time
delays of less than one day.
However, the total cumulative effect of all these compensation events will
cause a delay to the Completion Date of approximately 9 days, how do we
recover these delays and their associated costs under the contract?
We have a Consultant carrying out survey work under Option A (priced contract
with activity schedule) of the NEC4 Professional Service Contract. The survey
has been substantially delayed due to extremely bad weather conditions. Is
such a delay the Consultant's own risk?
We have a compensation event in an NEC4 Engineering and Construction Contract
where, in discussion with the Contractor during an early warning meeting he
has stated that it is extremely difficult to price one element of the work,
and we agree with him. The Contractor has suggested including a Provisional
Sum within his quotation, which he can adjust later? Can he do this?
How should a Project Manager on an NEC4 Engineering and Construction Contract
make his own assessment of a compensation event?
The Project Manager on an NEC4 Engineering and Construction Contract has
instructed the omission of a part of the works. Can the Contractor claim for
loss of profit on the omitted works?
We have an Engineering and Construction Contract Option B (priced contract
with bill of quantities), and a description of a product in the bill of
quantities states "or similar approved". If the Contractor then proposes a
cheaper alternative (which is approved) does this saving get administered as
a negative compensation event?
We would like to include value engineering within the NEC4 contracts and to
reward the Contractor if he proposes a change which can save the Client
money. Is there any provision for value engineering within the NEC4
contracts?
What does the term "implemented" mean within the NEC4 contracts when
referring to compensation events?
Chapter 7
Title
During excavations for the foundations to a new building as part of a project
to build a new school using the NEC4 Engineering and Construction Contract
Option A (priced contract with activity schedule), the Contractor has
discovered some archaeological remains. How should this discovery be dealt
with under the contract?
Chapter 8
Indemnity, insurance and liability
What are the insurance requirements within the NEC4 contracts?
Can we include a requirement in an NEC4 contract for a Contractor or a
Consultant to have Professional Indemnity (PI) insurance?
Chapter 9
Termination provisions
We are Contractors on an NEC4 Engineering and Construction Contract Option A
(priced contract with activity schedule), and we wish to terminate our
employment under the contract due to non-payment by the Client. Can we do
this, and if so how?
Chapter 10
Dealing with disputes
What is the difference between Option W1, W2 and W3 within the NEC4
Engineering and Construction Contract?
When are we required to select and name the Adjudicator on our NEC4
contract?
What is the NEC4 Dispute Resolution Service Contract, and when should we use
it?
In an NEC4 contract, what is the tribunal?
Chapter 11
Preparing and assessing tenders
What documents do we need to compile to invite tenders for an NEC4
Engineering and Construction Contract using Option B (priced contract with
bill of quantities)?
We are preparing the Bill of Quantities for a project to be carried out under
Option B (priced contract will bill of quantities). Is the preparation of the
Bill of Quantities any different to any other contract? The Client wishes to
make a decision about certain landscaping elements as the project proceeds,
so we are intending to include Provisional Sums within the Bill of Quantities
for the time being?
Kelvin Hughes has been a leading authority on the NEC contracts for over 20 years, during which time he has advised on numerous NEC based projects and provided over 1,700 NEC training courses at all levels from Introduction through Advanced to Masterclass. He was also Secretary of the NEC Users Group representing worldwide users of the contract, for ten years.
