The NEC Engineering and Construction Contract - Essay Example

? NEC Assignment 2 The NEC Engineering and Construction Contract (ECC) developed by the of Civil Engineers is a guideline for creating documents in the engineering and construction industry related to tenders, awarding and conducting contracts. It comprises of some standard contracts, based on these principles: encouraging co-operation between parties to the contract, suitability for various commercial projects (Eggleston, 2006). This scenario is about a contract related to the design and construction of the Tiger House for the Chinese consulate. The contractor has apparently sublet the building of a steel framed glazed structure to a subcontractor; this arrangement is known as the Engineering and Construction Subcontract Contract (ECS). The ECS contract is parallel to ECC in detail and complications of contractual demands; however, the names of the parties to the contract and timescales for completion are changed to meet the deadlines under the ECC contract (GMH Planning, 2012). Clause 11.2(17) lays down the criteria for a subcontractor. Firstly, someone involved in construction or installation of part of the work which indicates that a contractor can’t sublet an entire project to another individual or organization. Secondly, it can be someone who provides a service necessary to provide the works, this shows that services of others can be utilized and no limitation is placed on only subletting a part of the project. The third category describes individuals and organizations that would not be considered as sub-contractors. They enter into a contract regarding the provision of plant and material which they partly or completely designed for a specific project. The imperative point to remember is that the burden of responsibility of the contactor towards the employer is not shifted to a subcontractor (Eggleston, 2006). NEC3 requires government departments, agencies and other non-departmental bodies on which they exert direct control to explicitly state in the contracts for any works, goods or services to make payments to subcontractors within particular timescale. The NEC contact shall contain fair payment charter, KPI checking and reporting concerning the time and manner of payments, an undertaking to pay within 10 days and inclusion of a fair payment timescale clause to subcontractors in the main and subcontracts (Gould, 2007). NEC3 provides that the construction or installation of part of the work can be sublet to a sub-contractor and offers two options. The first option if NEC3 Engineering and Construction Subcontract (ECS) with slight changes in the timescales and names of the parties involved in the project. Clause 62.3 makes changes in the time period for submission of and response to quotations and clause 51 makes change in the time period of payment. The payment period in Secondary Option Y (UK) 2 of ECS is similar to ECC type of the similar secondary option ensuing in same payment time limits. Main contractors can amend these periods by using the provisions of Subcontract Data Part One (Patterson, 2007). The second option under NEC3 is the Engineering and Construction Short Subcontract (ECSS) used for projects which don’t involve complex management techniques, consist of uncomplicated work and entail low risks. It prohibits delegating design responsibility to the subcontractor, simplifies work by adhering to Works information but it doesn’t simplify processes concerning compensation events. It is obligatory for the subcontractor to report compensation events within seven days of becoming knowledgeable of such an event and will have similar liabilities as a Contractor does under the ECC in case of failure to give notification. However, ECSS does not include deemed acceptance procedure for not replying unlike ECS. Therefore, we can conclude that the burden of compensation event procedures lies with the Subcontractor under ECSS. In this instance, the subcontractor did not adhere to the precise requirements provided in the Works Information concerning installation of a complimentary glazed entrance so the Contractor should demand for its completion and notify the Project Manager of any future delays that might occur (Rowlinson, 2011). The ECC does not nominate or provide for any subcontractor; however, the Contractor at his prerogative can sublet a project wholly or partially to a sub-contractor, subject to certain conditions. The second class of subcontractors as defined by clause 11.2(17) of ECC comprise of individuals or organisations ‘who provide a service necessary to provide the works’. Thus, Contractors can use the services of a sub-contractor for a part of or the entire project. The definition has been specifically coined for designers who are eligible for becoming subcontractors as directed by the ECC. This is further validated by the Guidance notes. Section 8.6 indicates that there is no restriction on to subletting an entire design of a project to a single designer (Eggleston, 2006). But the final responsibility of the project rests with the on the contractor regardless of any subcontracts entered into by him (clause 26.1). It will be deemed as if he owns the employees and equipment of the subcontractor since the Contactor can’t transfer his obligations towards the Employer to another party. In this instance, the Project Manager has rightly complained about not being notified of any subcontracts since clause 26.2 clearly instructs the Project Manager to present the name of every single proposed subcontractor before the manager for his due acceptance. The manager can only decline a subcontract where he believes it will hinder the Contactor to achieve his task; any other factor will lead to a compensation event (clause 60.1(9) and section 15.3.9). However, the Contractor is not legally entitled to appoint a subcontract without the prior approval of the manager as in this case (clause 26.2). Such an appointment for major portion of the project is one of the reasons of termination of contract (clause 91.2). The contactor is bound to put forward to the manager, the proposed provisions unless the manager agrees no such submission is required or a NEC contract is entered into such as this instance (clause 26.3). Again a project cannot be sublet until the manager approves except for two reasons. The first being the same as clause 26.1 and the other being non-inclusion of a statement of co-operation and trust between the parties (Eggleston, 2006). Appendix 18 of NEC3 contains a list of events that can be presumed as compensation events. The directive of the Project Manager regarding an alteration in the original design constitutes compensation event as clause 60.1(7) states that if the Project Manager gives an instruction for dealing with an object of value or of historical or other interest found in the site, it will be deemed as a compensation event. The construction of a glazed roof for traditional pitched and tiled alternative meets this criterion. If a compensation event ensues from a request made by the Project Manager or supervisor like this case, then the contractor needs to submit a quotation which will also comprise of any revision programmes (clause 60). NEC3 directs the Contractor to intimate the Project Manager of any event which has occurred or is expected by him to occur as a compensation event, in case where the contractor concluded that it is a compensation event and the Project Manager has not informed him so (clause 61.3). Failure to inform the Project Manager within eight weeks after becoming knowledgeable of such an event will not entitle the Contractor to alter the price, date of completion and other Key dates except where the Project Manager notified him. In addition, the contractor should take clause 60.1(18) into account, which elaborates that breach of contract is not the same as a compensation event. For this reason, it can be construed that clause 61.3 will strip the Contractor from claiming time and financial resources from breach of contract where he fails to inform. Moreover, the Contractor should not report to the Project Manager when he confronts conditions which an experienced contractor would deem on the Contract date having a minimal chance of happening, hence it would be unjustified to ask for an alteration in the contract price, bearing in mind the entire information available according to clause 60.2 (Gould, 2007). NEC3 grants supervisor the function of quality control on behalf of the employer. His responsibilities consist of testing and inspection of work, notifying defects, supplying a defection certificate and marking off-site good and materials as Employers assets. In light of the aforementioned duties, the supervisor did not do anything out of the ordinary by expressing his professional critique of the work done (clause 42). The supervisor cannot ask the Contractor to remove the personnel but he can report the events that occurred on the site to the Project Manager. He in turn can ask the Contractor for the removal of the person as he represents the employer (Rowlinson, 2011). Compensation events can be defined as events not occurring because of any default on the Contractor’s part and entitle him to compensation for any consequences on price or completion date. The compensation process involves preparation of new quotations, revisions and assessments using a resource forecast approach to agree over terms concerning the entire cost and time. The Project Manager should recognize the burden of a compensation event and issue a notice at the time of giving directions or revising an earlier decision (clause 61.1 and 61.3) (Gould, 2007). Clause 16 also entitles the Contractor to intimate the manager regarding a relevant matter which would result in increased cost or delay or impair performance. An early warning meeting can then be convened at the request of either party to resolve the issue by focusing on what action needs to be taken next. According to clause 60 if a compensation event is occurs which entitles the Contractor to more money or time, then these should be dealt individually. On the other hand, the Project Manager can ask the Contractor for a reduction in the revised price by offering justified reasons. Clause 61.3 instructs the Contactor to contact the manager within a maximum period of eight weeks after becoming aware of a compensation event or otherwise he would not be entitled to claim compensation for time or financial resources (GMH Planning, 2012). In this case, the Contractor made changes without notifying and seeking the manager’s acceptance. Furthermore, he failed to intimate him of any compensation event until eight weeks elapsed so the Project Manager can hold back payment because neither did he have any knowledge of the changes made nor did he give his consent. A contract can be legally terminated where one of the parties has breached it in a way that it endangers the interests of the other. Termination can ensue from several reasons triggered by the contractor, employer, both the parties and even a third party. One of the reasons in clause 91.1 is the insolvency of either the employer or the contractor such as this scenario. The project manager needs to issue a certificate of termination immediately after which the contractor will do nothing to provide the works (clause 90.5) and instead new procedures and rights will have to be observed (core clause 9). The procedures to be followed will be taken from the Termination Table (clause 90.2). in addition, it is the project managers duty to assess and verify the amount due within 13 weeks from the date of termination which will be deemed as the date on which the Certificate of Termination is effective (clause 90.4) (Eggleston, 2006). Reasons to be taken into account while assessing the amount due will be in accordance with the relevant reason for termination (section 18.4). The project manager will have to use professional judgement and forecast the amount of losses for completing the project as pointed out by Amount Due A3. Procedure P3 will apply as Project Manager initiated termination due to default on the part of the contractor. Under this, the employer is granted the right to use the machinery and equipment of the contractor which he holds title to for completion of the project. When he feels he no longer requires particular machinery, then it is obligatory for him to return it to the contractor. However, as the employer does not own the equipment, thereby he can’t enter into arrangements to sell or dispose it (Patterson, 2007). Bibliography Eggleston, B., 2006. The NEC 3 Engineering and Construction Contract: A Commentary. London: Wiley-Blackwell. GMH Planning, 2012. NEC3 Guidance Notes. [Online] Available at: HYPERLINK "http://gmhplanning.co.uk/nec3-guidance-notes/introduction/" http://gmhplanning.co.uk/nec3-guidance-notes/introduction/ [Accessed 8 April 2012]. Gould, N., 2007. NEC3: Early Warning and Compensation Events. Research Report. London: Fenwick Elliot Fenwick Elliot. Patterson, R., 2007. NEC3: Introduction to NEC contracts. In NEC Annual Seminar. Wellington, 2007. Rowlinson, M., 2011. A Practical Guide to the NEC3 Engineering and Construction Contract. London: Wiley Blackwell. Read More