The rate in the variations pricing schedule may bear no relationship to the money that will be saved if the work is not undertaken. Nor may it bear any relationship to the figures used by the contractor in calculating its lump sum price. Such issues are illustrated by MT Hojgaard v E.ON. To put simple, this option is a priced lump sum contract. The price is then broken down into an activity schedule. Of course, it would also serve to increase the Contractor’s tender so that he may not be competitive.

Hong Kong Institute of Construction Adjudicators, Public Consultation for the HKICAdj NEC4 Adjudication Rules, published 6 June 2019, accessed 30 May 2022 The first contract was published in 1993 and was pioneered by Dr Martin Barnes CBE, founding member of APM, honorary fellow and past chairman. Hawkswell Kilvington, New NEC4 Contracts Announced, published 3 March 2017, accessed 31 October 2022 If during the execution of the Works the Contractor shall encounter physical conditions (other than weather conditions or conditions due to weather conditions) or artificial obstructions which conditions or obstructions could not in her/his opinion reasonably have been foreseen by an experienced contractor the Contractor shall as early as practicable give written notice thereof to the Engineer. Z clauses [ edit ]The NEC family of contracts are deliberately written to formalise the requirement to carry out good practice project management systems that the respective Parties should want to be doing for themselves anyway. The contractual rules should assist the project teams in understanding the status and associated liability for both time and cost for the lifecycle of the project. The NEC family form a suite of contracts, with NEC being the brand name for the “umbrella” of contracts. When it was first launched in 1993, it was simple the “New Engineering Contract”. Under NEC2 (published 1995) this specific contract was renamed the “Engineering and Construction Contract” which is the main contract used for any construction based project. It now sits along side a number of other contracts that together should mean that the NEC suite is suitable for what ever stage of a lifecycle the project is at and what ever party you are within a project. The latest versions of the contracts is NEC4, which was published in 2017. NEC4 is now being widely used, although it will be several years before the use of NEC3 contracts are phased out as many long term frameworks still in existence were awarded under NEC3. The contracts available within the NEC4 suite are: Engineering and Construction Contract (ECC) However, as mentioned above, the Guidance Notes prescribe, for Option A at least, that the list of activities is prepared by the Contractor. The Guidance Notes are silent on this point for Option C. It must be remembered, of course, that the Guidance Notes, while helpful, do not form part of the Contract and so the Parties are free to decide who prepares the list amongst themselves. What should be included in the schedule? Contractor should break activity schedule down into suitable sized chunks as they only get paid upon completed items i.e. no 80% paid for an item that is 80% complete. It is 100% or nothing Under Option C, as we are only concerned with the total of the Prices, the errant activity will serve to increase the ‘target’ cost changing the Contractor’s share to his benefit.

Evans, S. C., NEC3 compensation events: a practical guide, published April 2013, accessed 13 June 2023 Before moving on, clause 54.1 of the Contract assists us further in seeking a definition by telling us what the Activity Schedule is not: Contractors should also not overlook the inclusion of the design services when negotiating/preparing the Activity Schedule. It is important to note that in Options C and D the Defined Cost is the cost that will be incurred before the next assessment date, asforecastby the Project Manager. This keeps the Contractor in a cash neutral position because he is paid in advance what is forecast to be incurred, rather than what has actually been incurred.

Real costs and rates

In principle, it is for the Contractor to identify how it intends to deliver the works and therefore to identify the activities that it considers necessary. In practise, however, the Employer is likely to want to specify at least a core set of activities to create some consistency during the tender process.

The application will contain a breakdown of the contractors’ cumulative “defined cost” plus fee minus any “disallowed cost”. This combined is known as the “Price for Work Done to Date” (PWDD). The timely issuing of notifications is essential to the NEC’s collaborative way of working. Continuous communication between all parties will ensure disputes are kept to a minimum. Assessments for changed Prices for compensation events are in the form of changes to the Activity Schedule. Use under Option A This option is a cost-reimbursable option. Works are paid on an open book basis. Under this option, the contractor is paid all of their incurred “Defined Cost” and an agreed overhead and profit percentage. The client often takes on huge financial risk with this option.The clauses of these options have been be adapted for simpler less risky work (short contracts), for use as subcontracts, and for professional services such as design as below.