We are often asked on the NEC helpline, 'will there be changes to W2/Y(UK)2 as a result of the new Act?'
The Local Democracy, Economic Development and Construction Act 2009 contains a substantial number of provisions in the broad areas of local democracy and involvement, local authority governance and audit, boundary and electoral change, local and regional economic development and construction contracts. It received Royal Assent on 12 November 2009. Part 8 of the Act amends the Housing Grants, Construction and Regeneration Act 1996 to improve payment practices and dispute resolution in the construction industry. The new Act is enacted but not in force, which commentators consider is now likely to happen mid-2011 or in October that year.
The NEC Panel have been monitoring progress and have produced most of the necessary changes to NEC3 contracts which will be issued when this finally comes into force as they will not be needed until then.
Rob
Monday 13 December 2010
Sunday 5 December 2010
Most negotiated terms and conditions - IACCM
The International Association for Contract & Commercial Management (IACCM) has launched its' 10th annual study of ‘the most negotiated terms and conditions’. This unique study is used by companies and advisors around the world to develop and inform their contracting and negotiation strategies. As a contributor to the survey, they will then provide you the results.
This survey will take 5 – 10 minutes to complete and they ask you to tell them which terms you negotiate with greatest frequency, as well as your view regarding some key trends in negotiation. The results of this study offer insights to jurisdictional, geographic and industry perspectives, ensuring that it can immediately be put to practical use as well as inspiring new ideas and approaches to managing today’s complex negotiations environment.
I will paste a link to the results when they are out if you don't want to complete the survey.
What's the relevance to NEC? My opinion is that the past few years of this research has been quite enlightening, although showing things like limitation of liability is very frequently discussed, the future is far more likely to be around goals of the parties - something close to the heart of NEC.
Thanks,
Rob
http://www.iaccm.com/research/current/
This survey will take 5 – 10 minutes to complete and they ask you to tell them which terms you negotiate with greatest frequency, as well as your view regarding some key trends in negotiation. The results of this study offer insights to jurisdictional, geographic and industry perspectives, ensuring that it can immediately be put to practical use as well as inspiring new ideas and approaches to managing today’s complex negotiations environment.
I will paste a link to the results when they are out if you don't want to complete the survey.
What's the relevance to NEC? My opinion is that the past few years of this research has been quite enlightening, although showing things like limitation of liability is very frequently discussed, the future is far more likely to be around goals of the parties - something close to the heart of NEC.
Thanks,
Rob
http://www.iaccm.com/research/current/
Tuesday 16 November 2010
Retention
Rudi Klein would be delighted to explain why retention is an out of date method of providing some security to the buyer. I still see retention included in many contracts. So, whilst I concur with Rudi, we still need to advise those using retention to make sure they are familiar with some unique provisions of (most) NEC3 contracts and how they deal with retention.
Considering the NEC3 Engineering and Construction Contract (ECC), secondary Option X16 provides for retention. So, point to note is that retention is not automatically included in the contract unless expressly stated in Contract Data part one (1st bullet). The second point is that the % figure to be held is determined by the buyer (the Employer in ECC) who states this at time of tender. Half of the retention held is released upon Completion of the whole of the works and the remainder upon the defects date. This is similar to most standard form contracts.
One difference is that Completion of any sections of the works does not result in a reduction or paying back of retention, this is linked to Completion of the whole of the works. The main feature I wanted to point out here is the retention free amount. If you think about it, on say a 2 year contract, why do we take retention each month from the Contractor when really we only want security at the back end of the contract to provide a stick to get the Contractor back to correct Defects? Who pays for the financing of such monies held? The buyer of course. Is this good value? Probably not. So, a key differentiator with retention on NEC3 contracts is that you can specify a retention free amount whereby retention is only held after the retention free amount is reached. This eases the Contractor's cash flow burden, must reduce the financing charges and therefore the price payable.
So, if one absolutely must have retention, then think both about the retention % but more importantly how much retention free amount can properly be included.
Any thoughts?
Considering the NEC3 Engineering and Construction Contract (ECC), secondary Option X16 provides for retention. So, point to note is that retention is not automatically included in the contract unless expressly stated in Contract Data part one (1st bullet). The second point is that the % figure to be held is determined by the buyer (the Employer in ECC) who states this at time of tender. Half of the retention held is released upon Completion of the whole of the works and the remainder upon the defects date. This is similar to most standard form contracts.
One difference is that Completion of any sections of the works does not result in a reduction or paying back of retention, this is linked to Completion of the whole of the works. The main feature I wanted to point out here is the retention free amount. If you think about it, on say a 2 year contract, why do we take retention each month from the Contractor when really we only want security at the back end of the contract to provide a stick to get the Contractor back to correct Defects? Who pays for the financing of such monies held? The buyer of course. Is this good value? Probably not. So, a key differentiator with retention on NEC3 contracts is that you can specify a retention free amount whereby retention is only held after the retention free amount is reached. This eases the Contractor's cash flow burden, must reduce the financing charges and therefore the price payable.
So, if one absolutely must have retention, then think both about the retention % but more importantly how much retention free amount can properly be included.
Any thoughts?
Wednesday 10 November 2010
Postive cash flow anyone?
The UK construction industry in my experience is a terrible one for payment. Some of the records of payment terms are worse than archaic. Is there a worse industry around I wonder?
Why do we expect the next guy down the chain to basically fund the next guy up the chain? Can you imagine popping into your local supermarket, taking the goods and commenting you will probably pay some time in the next 100 days or so if they are lucky - unlikely (if you want to avoid arrest), but that is basically quite often how we operate.
The UK government is trying to address this and has a very noble aim (through the Fair Payment initiative) to get monies from clients all the way down to tier 3 all within 30 days of an assessment date. Of course it can be achieved, there is simply no reason at all why not. Cut through most beaurocratic processes and paying becomes straightforward. There is of course the facility of a project bank account on the right sized job, such a provision can be found on http://www.neccontract.com/.
Anyway, all of this still promotes a negative cash flow running through the supply chain. So why not conisder flipping this over and promoting positive cash flow contracts - guess what, these are usually quite a bit cheaper than the negative cash flow contract as the seller(s) no longer funds/charges the chain above.
In the NEC3 Engineering and Construction Contract (ECC) there is secondary Option X14 Advanced payment to the Contractor. Decide the amount of advance payment to be made (within 4 weeks of the Contract Date), get an advanced payment bond, decide over how many months the Contractor repays the amount and away you go.
In the private sector, ask tenderers at tender stage to price with/without the advanced payment (make it a very reasonable amount) - if you decide the saving is worth doing then go for it.
In the public sector there is some work to do. The rules are different, it appears, in that goods, works or services should not be paid for before receiving them - this surely is nonesense. This is one rule (as a UK taxpayer) I would love to change - why on earth should this rule exist, actually does anyone know precisely where it does exist?! If I can get things x% cheaper as a taxpayer with the slight risk associated, wouldn't this mean I get more bangs for my buck, isn't that best value? When Latham/Egan said we were inefficient, there was waste in the system, then surely the simple consideration of equitable payment terms can make a huge difference?
What do you think?
Rob
Why do we expect the next guy down the chain to basically fund the next guy up the chain? Can you imagine popping into your local supermarket, taking the goods and commenting you will probably pay some time in the next 100 days or so if they are lucky - unlikely (if you want to avoid arrest), but that is basically quite often how we operate.
The UK government is trying to address this and has a very noble aim (through the Fair Payment initiative) to get monies from clients all the way down to tier 3 all within 30 days of an assessment date. Of course it can be achieved, there is simply no reason at all why not. Cut through most beaurocratic processes and paying becomes straightforward. There is of course the facility of a project bank account on the right sized job, such a provision can be found on http://www.neccontract.com/.
Anyway, all of this still promotes a negative cash flow running through the supply chain. So why not conisder flipping this over and promoting positive cash flow contracts - guess what, these are usually quite a bit cheaper than the negative cash flow contract as the seller(s) no longer funds/charges the chain above.
In the NEC3 Engineering and Construction Contract (ECC) there is secondary Option X14 Advanced payment to the Contractor. Decide the amount of advance payment to be made (within 4 weeks of the Contract Date), get an advanced payment bond, decide over how many months the Contractor repays the amount and away you go.
In the private sector, ask tenderers at tender stage to price with/without the advanced payment (make it a very reasonable amount) - if you decide the saving is worth doing then go for it.
In the public sector there is some work to do. The rules are different, it appears, in that goods, works or services should not be paid for before receiving them - this surely is nonesense. This is one rule (as a UK taxpayer) I would love to change - why on earth should this rule exist, actually does anyone know precisely where it does exist?! If I can get things x% cheaper as a taxpayer with the slight risk associated, wouldn't this mean I get more bangs for my buck, isn't that best value? When Latham/Egan said we were inefficient, there was waste in the system, then surely the simple consideration of equitable payment terms can make a huge difference?
What do you think?
Rob
Wednesday 20 October 2010
Student NEC research
Hi,
Another survey if you would be so kind. Some words from the student below.....
I am a student completing a study into the useage and percieved effectiveness of the NEC family of contracts within the UK construction industry. To assist in this I have developed a survey for industry bodies to complete in order to better aid the understanding of user's perceptions of the NEC.
The survey should take less than 5 minutes to complete and can reached by clicking on the link below. Your input would be greatly appreciated.
http://www.surveymonkey.com/s/JLYGYFW
Rob
Another survey if you would be so kind. Some words from the student below.....
I am a student completing a study into the useage and percieved effectiveness of the NEC family of contracts within the UK construction industry. To assist in this I have developed a survey for industry bodies to complete in order to better aid the understanding of user's perceptions of the NEC.
The survey should take less than 5 minutes to complete and can reached by clicking on the link below. Your input would be greatly appreciated.
http://www.surveymonkey.com/s/JLYGYFW
Rob
Monday 11 October 2010
NEC in use statistics?
We get quite a few queries on the use of NEC contracts - who, where, how many etc. We get such questions coming as part of student research and from potential clients in particular, looking to assess the market's knowledge of NEC before they implement NEC in their organisations.
I recall a good few years back that NEC Users' Group members were asked to feedback some brief contract particulars to help keep some sort of basic handle on NEC use, alas very few replies were received.
The only 'independent' survey of contracts in use to my knowledge comes from the RICS and this is, in my opinion, flawed to render it almost useless. I will separately blog why I feel that way soon.
Any ideas therefore as to
(1) Do we actually need some statistics on who, where etc?
(2) How do we capture reliable data, and do so both timely and efficiently?
Look forward to your thoughts.
Rob
I recall a good few years back that NEC Users' Group members were asked to feedback some brief contract particulars to help keep some sort of basic handle on NEC use, alas very few replies were received.
The only 'independent' survey of contracts in use to my knowledge comes from the RICS and this is, in my opinion, flawed to render it almost useless. I will separately blog why I feel that way soon.
Any ideas therefore as to
(1) Do we actually need some statistics on who, where etc?
(2) How do we capture reliable data, and do so both timely and efficiently?
Look forward to your thoughts.
Rob
Student dissertation
Dear all,
A questionnaire on Key Dates if you would be kind enough to contribute to the research. Some background is below.
Rob
http://www.surveymonkey.com/s/65QBFNN
I am currently studying for a Masters Degree in Construction Law and Dispute Resolution at Leeds Metropolitan University. As part of my course I am writing a dissertation on ‘The NEC ECC3 Key Dates - What do they achieve?’
It is noticeable that the NEC3 has recently gaining support and increased use, and is probable that endorsement by Government bodies has driven this. However it is generally accepted that owing to its intended use of simple language concepts and that little legal authority has at this time been offered, some aspects of the contract are potentially unclear.
In consideration of a subject for research for my Masters dissertation, I wanted to consider this potential problem with the NEC3 ECC. I have formed the opinion through literature review that the Key Date Mechanism is one of these concepts that has limited authoritative interpretation and may result in the parties to a contract being unclear about the risks they are managing under a contract containing this mechanism. With this in mind the following aim developed:
The aim of this dissertation is to consider the Key Date Mechanism under the NEC form of contract in relation to existing authority on Time and Damages mechanisms under Construction Contracts and through industry opinion.
I therefore ask if you would be willing to complete the attached questionnaire, as part of this process and should take approximately 15 minutes.
My dissertation may be made available to other students and the general public in the University Library. I will ensure your anonymity by excluding identifiable personal data from the dissertation. However, please be aware that one of your colleagues or another person who knows you have taken part in the study may be able to recognise your input from what is said. Your participation in this study is on a voluntary basis. The first question of the survey is a consent, please answer this question ‘yes’ if you wish your input to be used in this research.
Should you have any further comments with regards NEC ECC3 Key Dates, please do not hesitate to contact me.
May I take this opportunity to thank you for taking the time to complete this questionnaire, I am all aware your time is very valuable, your response if very much appreciated.
Kind Regards,
Jennifer Chadwick
Student
MSc Construction Law and Dispute Resolution, Leeds Metropolitan University
A questionnaire on Key Dates if you would be kind enough to contribute to the research. Some background is below.
Rob
http://www.surveymonkey.com/s/65QBFNN
I am currently studying for a Masters Degree in Construction Law and Dispute Resolution at Leeds Metropolitan University. As part of my course I am writing a dissertation on ‘The NEC ECC3 Key Dates - What do they achieve?’
It is noticeable that the NEC3 has recently gaining support and increased use, and is probable that endorsement by Government bodies has driven this. However it is generally accepted that owing to its intended use of simple language concepts and that little legal authority has at this time been offered, some aspects of the contract are potentially unclear.
In consideration of a subject for research for my Masters dissertation, I wanted to consider this potential problem with the NEC3 ECC. I have formed the opinion through literature review that the Key Date Mechanism is one of these concepts that has limited authoritative interpretation and may result in the parties to a contract being unclear about the risks they are managing under a contract containing this mechanism. With this in mind the following aim developed:
The aim of this dissertation is to consider the Key Date Mechanism under the NEC form of contract in relation to existing authority on Time and Damages mechanisms under Construction Contracts and through industry opinion.
I therefore ask if you would be willing to complete the attached questionnaire, as part of this process and should take approximately 15 minutes.
My dissertation may be made available to other students and the general public in the University Library. I will ensure your anonymity by excluding identifiable personal data from the dissertation. However, please be aware that one of your colleagues or another person who knows you have taken part in the study may be able to recognise your input from what is said. Your participation in this study is on a voluntary basis. The first question of the survey is a consent, please answer this question ‘yes’ if you wish your input to be used in this research.
Should you have any further comments with regards NEC ECC3 Key Dates, please do not hesitate to contact me.
May I take this opportunity to thank you for taking the time to complete this questionnaire, I am all aware your time is very valuable, your response if very much appreciated.
Kind Regards,
Jennifer Chadwick
Student
MSc Construction Law and Dispute Resolution, Leeds Metropolitan University
Wednesday 8 September 2010
Student dissertation
Another NEC questionnaire for those with 10 mins to spare.
Thank you,
Rob
http://www.surveymonkey.com/s/NECSurvey1
Thank you,
Rob
http://www.surveymonkey.com/s/NECSurvey1
Thursday 19 August 2010
ICE endorses NEC
For those of you who perhaps have missed this recent announcement, ICE has withdrawn from its own conditions of contract and will now solely endorse the NEC3 suite of contracts. There is a joint statement to this effect from ICE, ACE & CECA below. NEC is instigating transitional guidance for ICE contract users and will be available shortly - see www.neccontract.com
Rob
http://www.acenet.co.uk/joint-statement-from-ace-ceca-and-ice-ice-to-withdraw-from-ice-conditions-of-contract/126/6/1/3
Rob
http://www.acenet.co.uk/joint-statement-from-ace-ceca-and-ice-ice-to-withdraw-from-ice-conditions-of-contract/126/6/1/3
Wednesday 11 August 2010
NEC student research
I wonder if anyone has done a survey of the most popular dissertation topics - NEC must be up there?!
Anyway, another quick questionnaire for you to kindly assist with.
https://www.surveymonkey.com/s/DMNECMT
Regards,
Rob
Anyway, another quick questionnaire for you to kindly assist with.
https://www.surveymonkey.com/s/DMNECMT
Regards,
Rob
Monday 9 August 2010
NEC student research
Dear all,
Please spare 5 mins for another student's research please.
Rob
http://www.surveymonkey.com/s/95N786V
Please spare 5 mins for another student's research please.
Rob
http://www.surveymonkey.com/s/95N786V
Thursday 29 July 2010
NEC or NEC3 or ECC or EEC?
There seems to bit a bit of confusion with the NEC acryonyms looking at articles and Users' Group helpline queries!
Often we get the question...we are using NEC3 Option C or NEC Option C - well, we know it's a target cost form of contract, but which particular NEC contract?
NEC is basically now a brand name. Within the NEC family there are contracts, guidance notes and flow charts. So, NEC is a generic brand name (not to be confused with the NEC near Birmingham!); NEC3 is the third edition of the NEC suite of documents; ECC is an abbreviation of just one of the NEC contracts, likely to be the NEC3 Engineering and Construction Contract (so hopefully you can see how we NEC2 ECC and NEC3 ECC now). EEC is nothing to do with NEC at all, it's a game that member states of Europe play!
Clear as mud?!
Rob
Often we get the question...we are using NEC3 Option C or NEC Option C - well, we know it's a target cost form of contract, but which particular NEC contract?
NEC is basically now a brand name. Within the NEC family there are contracts, guidance notes and flow charts. So, NEC is a generic brand name (not to be confused with the NEC near Birmingham!); NEC3 is the third edition of the NEC suite of documents; ECC is an abbreviation of just one of the NEC contracts, likely to be the NEC3 Engineering and Construction Contract (so hopefully you can see how we NEC2 ECC and NEC3 ECC now). EEC is nothing to do with NEC at all, it's a game that member states of Europe play!
Clear as mud?!
Rob
Friday 23 July 2010
NEC Student Research
Summer is here of course, good time to start doing some research, and here's another short survey for NEC research by a student you to complete.
Thank you,
Rob
http://dissertation.limequery.com/45922/lang-en
Thank you,
Rob
http://dissertation.limequery.com/45922/lang-en
NEC Student Research
And another short questionnaire for you to complete please.......
http://www.surveymonkey.com/s/2BWKWZQ
Rob
http://www.surveymonkey.com/s/2BWKWZQ
Rob
NEC Student Research
Dear all,
Another online NEC student questionnaire for you to generously give no more than 10 mins to I'm assured!
http://www.kwiksurveys.com/online-survey.php?surveyID=KCLKOO_f781f3fa
Thank you,
Rob
Another online NEC student questionnaire for you to generously give no more than 10 mins to I'm assured!
http://www.kwiksurveys.com/online-survey.php?surveyID=KCLKOO_f781f3fa
Thank you,
Rob
Friday 9 July 2010
NEC Student Research
Dear all,
Another quick survey for you to give a bit of time to please - closing date of 23rd July for this one....
Thank you,
Rob
http://dissertation.limequery.com/78457/lang-en
Another quick survey for you to give a bit of time to please - closing date of 23rd July for this one....
Thank you,
Rob
http://dissertation.limequery.com/78457/lang-en
Wednesday 7 July 2010
What are the top negotiated terms?
Funny you might ask! The International Association for Contract and Commercial Management (IACCM) suggest negotiations are out of step with business needs. Further, negotiators themselves believe they are negotiating the wrong things.
What were the top 5 issues being negotiated in 2008? Well, the IACCM found they were:
1. Limitation of liability
2. Indemnification
3. Price/Charge/Price Changes
4. Intellectual Property
5. Confidential Information/Data Protection
What do the IACCM think will be the top 5 in the future?
1. Scope and Goals
2. Change Management
3. Responsibilities of the Parties
4. Communications and Reporting
5. Service Levels and Warranties
I find this fascinating - is it just me or isn't the future the very sorts of things that NEC has strived to offer the parties for a very long time? The move away from traditional buyer/seller, master/servant relationships/contracts can only be a good thing. Imagine parties focusing on scope and goals, presumably of each other, what a difference that would finally make to outcomes!
Their report is somewhat out of date (2009, link below) representing negotiations in 2008 and the world is a different place right now, but is still very interesting. I will try and get an update and report back.
http://www.iaccm.com/contractingexcellence.php?storyid=923
The future is already here with NEC!
Rob
What were the top 5 issues being negotiated in 2008? Well, the IACCM found they were:
1. Limitation of liability
2. Indemnification
3. Price/Charge/Price Changes
4. Intellectual Property
5. Confidential Information/Data Protection
What do the IACCM think will be the top 5 in the future?
1. Scope and Goals
2. Change Management
3. Responsibilities of the Parties
4. Communications and Reporting
5. Service Levels and Warranties
I find this fascinating - is it just me or isn't the future the very sorts of things that NEC has strived to offer the parties for a very long time? The move away from traditional buyer/seller, master/servant relationships/contracts can only be a good thing. Imagine parties focusing on scope and goals, presumably of each other, what a difference that would finally make to outcomes!
Their report is somewhat out of date (2009, link below) representing negotiations in 2008 and the world is a different place right now, but is still very interesting. I will try and get an update and report back.
http://www.iaccm.com/contractingexcellence.php?storyid=923
The future is already here with NEC!
Rob
NEC3 contracts do not refer to CDM - so what?
A few times now I've had discussions with legal advisors asking why NEC contracts do not refer to certain UK statutes, CDM in particular. I can't really level with this apparent craving to refer to certain UK statutes in contracts. Why should a contract refer to any UK statute, it's not exactly an opt-in, opt-out set of rules? The exception that I can see are those statutes that do need complimentary provisions such as provided through Y(UK)2 or those that are a sort of opt-in, such as provided for in Y(UK)3.
I refer to an article printed in ribajournal.com linked below (to scroll down touch on the red vertical line, which took me a while to discover!!):
http://www.ribajournal.com/index.php/feature/article/why_make_life_more_complicated/
Anyway, in there it states "... the PSC does not contain specific provisions requiring the consultant to comply with the CDM Regulations. Clients therefore generally tend to insert a Z-clause to this effect (even though a consultant would be required to comply regardless of whether or not a provision had been included)..."
So, this looks like legal advice to me, you have to comply with UK statute. If anyone thinks a single sentence in a contract actually makes people design/build safer I think they are wrong. So can someone please tell me why on earth we can justify padding out contract terms with unnecessary references to UK statute that apply anyway?
Rob
I refer to an article printed in ribajournal.com linked below (to scroll down touch on the red vertical line, which took me a while to discover!!):
http://www.ribajournal.com/index.php/feature/article/why_make_life_more_complicated/
Anyway, in there it states "... the PSC does not contain specific provisions requiring the consultant to comply with the CDM Regulations. Clients therefore generally tend to insert a Z-clause to this effect (even though a consultant would be required to comply regardless of whether or not a provision had been included)..."
So, this looks like legal advice to me, you have to comply with UK statute. If anyone thinks a single sentence in a contract actually makes people design/build safer I think they are wrong. So can someone please tell me why on earth we can justify padding out contract terms with unnecessary references to UK statute that apply anyway?
Rob
NEC student research
Dear all,
Another questionnaire from a student who would appreciate your considered input. This time on the dreaded z clauses!
Many thanks,
Rob
http://www.surveymonkey.com/s/CHLNSDS
Another questionnaire from a student who would appreciate your considered input. This time on the dreaded z clauses!
Many thanks,
Rob
http://www.surveymonkey.com/s/CHLNSDS
Monday 21 June 2010
The use of NEC has a benefit to health and safety
That's quite a proposition and I cannot support it as yet, but hopefully this is an area to be explored and challenged. My knee jerk reaction to this a while back was no, I don't think so. Adam Wilson, an experience H&S professional undertaking a masters degree found otherwise.
Importantly this is the first research, to make a significant connection between H&S performance and the type of contract used. Even if the research can’t yet prove a “statistical significance” based on the admittedly good but statistically non-robust data samples, he found that using the target cost option of NEC ECC there were the least accident frequency rates than any other contract. That's quite an outcome.
It is something, I honestly cannot imagine the NEC Panel debated as being a likely outcome, for target cost contracts. Adam is keen to do more to prove or otherwise this outcome and I will keep you updated of progress, maybe you can help with any surveys he undertakes, or data required?
In the meantime why might this possible outcome be the case? Thinking about hands off, non-collaborative design and build contracts not using NEC. Programmes are non-existent, objectives are not aligned, people tend to work in a reactive and hindsight based capacity. Perhaps this has an impact on H&S? Thinking about NEC3 ECC Option C then surely the reverse applies? The programme is at the heart of things, objectives are aligned, people are tending through the early warning and compensation event processes to work in a proactive and foresight based capacity. All of this must theoretically result in a positive impact on H&S, even when not explicitly controlled by contractual agreements.
What do you think?
Rob
Importantly this is the first research, to make a significant connection between H&S performance and the type of contract used. Even if the research can’t yet prove a “statistical significance” based on the admittedly good but statistically non-robust data samples, he found that using the target cost option of NEC ECC there were the least accident frequency rates than any other contract. That's quite an outcome.
It is something, I honestly cannot imagine the NEC Panel debated as being a likely outcome, for target cost contracts. Adam is keen to do more to prove or otherwise this outcome and I will keep you updated of progress, maybe you can help with any surveys he undertakes, or data required?
In the meantime why might this possible outcome be the case? Thinking about hands off, non-collaborative design and build contracts not using NEC. Programmes are non-existent, objectives are not aligned, people tend to work in a reactive and hindsight based capacity. Perhaps this has an impact on H&S? Thinking about NEC3 ECC Option C then surely the reverse applies? The programme is at the heart of things, objectives are aligned, people are tending through the early warning and compensation event processes to work in a proactive and foresight based capacity. All of this must theoretically result in a positive impact on H&S, even when not explicitly controlled by contractual agreements.
What do you think?
Rob
Friday 18 June 2010
Letters of intent are rubbish!
In the RICS Construction Journal legal helpline page 27 June-July 2010 is stated that a letter of intent 'should only be used where there are good reasons to start work in advance of concluding the formal contract'. Whilst such circumstances dictate that an urgent agreement between the parties is required, I personally deplore the use of letters of intent and would never advise of their use! Further, I would consider the use of them often to be negligent.
How do I arrive at this opinion? Well, some of those I have seen are devoid of essential terms in any contract such as insurance, change management, (jurisdiction compliant) payment procedures and dispute particulars. They often state what works can be progressed and what the cap is in terms of payment, but that is it. I also struggle to see how a client can ask for a scope of works to be delivered but places a cap on the amount they will pay - what is that all about? What if it genuinely costs more to deliver than is permitted in the cap?
We have at our disposal in the industry cost reimbursable contracts such as the NEC3 Engineering and Construction Contract (ECC), main option E. This contains all the essential terms a contract should contain. Why would you want a half baked letter of intent, or pay for the creation of a bespoke 'adequate' form? What an uncertain and wasteful process that serves only to benefit those that generate an income from it.
A letter of intent was never intended to say 'go' it was merely a letter to state there is an intention to place a contract with the preferred seller. So, it is the combination of insufficient terms and the fact there are standard industry forms available (such as ECC), that form my view that all too often, the use of letters of intent is negligent and actually quite unnecessary.
Focus on agreeing the terms as soon as possible if that is the stumbling block. Lock yourselves in a room until agreement is reached. If the seller commences work without all the terms agreed, even with a letter of intent in place, then the bargaining position is compromised. If emergency works occur, use ECC option E, and focus quickly on the detail of the work scope itself.
I've never advised the use of a letter of intent and never will. I loathe the flippancy of advice clients get to use them. Don't do it. Be professional, advise the use of properly thought out standard cost reimbursable contracts such as ECC Option E if you absolutely have to award today for a part of the scope to be delivered.
That's got that off my chest, any thoughts?!
Rob
How do I arrive at this opinion? Well, some of those I have seen are devoid of essential terms in any contract such as insurance, change management, (jurisdiction compliant) payment procedures and dispute particulars. They often state what works can be progressed and what the cap is in terms of payment, but that is it. I also struggle to see how a client can ask for a scope of works to be delivered but places a cap on the amount they will pay - what is that all about? What if it genuinely costs more to deliver than is permitted in the cap?
We have at our disposal in the industry cost reimbursable contracts such as the NEC3 Engineering and Construction Contract (ECC), main option E. This contains all the essential terms a contract should contain. Why would you want a half baked letter of intent, or pay for the creation of a bespoke 'adequate' form? What an uncertain and wasteful process that serves only to benefit those that generate an income from it.
A letter of intent was never intended to say 'go' it was merely a letter to state there is an intention to place a contract with the preferred seller. So, it is the combination of insufficient terms and the fact there are standard industry forms available (such as ECC), that form my view that all too often, the use of letters of intent is negligent and actually quite unnecessary.
Focus on agreeing the terms as soon as possible if that is the stumbling block. Lock yourselves in a room until agreement is reached. If the seller commences work without all the terms agreed, even with a letter of intent in place, then the bargaining position is compromised. If emergency works occur, use ECC option E, and focus quickly on the detail of the work scope itself.
I've never advised the use of a letter of intent and never will. I loathe the flippancy of advice clients get to use them. Don't do it. Be professional, advise the use of properly thought out standard cost reimbursable contracts such as ECC Option E if you absolutely have to award today for a part of the scope to be delivered.
That's got that off my chest, any thoughts?!
Rob
Wednesday 16 June 2010
Competent NEC3 ECC Project Manager (PM) Part II
What makes a competent NEC3 ECC Project Manager (PM) ?
My previous post on this I talked about the PM's duty to notify compensation events that arise from PM instructions to change the Works Information.
The essence of the compensation event process is to agree change in real time, not to park the change management process until some point in the future, which was historically the typical outcome. If change is parked, exactly what is the benefit to the parties to the contract? All it brings is uncertainly for the period it remains not agreed and can likely benefit only those who derive an income from disputes, which is not the parties themselves.
So what measures does the ECC include to force the PM to play their part in the process? Well, this is dealt with in the compensation event process and, in basic terms, forces the PM to press on with the process to reach conclusion even where the Contractor does not play their part. If the PM does not do what they should be doing eg does not assess a compensation event under clause 64.1 then the Contractor can force the issue by notification of the PM's default which may lead to a deemed accepted quotation. More about deemed acceptance another time. The issue I wanted to concentrate on was default by the Contractor in the compensation event process.
Clause 61.3 offers a time bar to those compensation events notifed by the Contractor more than eight weeks of the Contractor becoming aware of the event. The exception here is those compensation events which the PM should have notified to the Contractor but did not. So, assuming we have a notified compensation event which the PM decides is not one of the 4 matters stated in clause 61.4 then the PM should notify the Contractor the event is a compensation event and instructs the Contractor to submit a quotation.
The first hurdle to get over here is the Contractor (clause 62.3) submitting a quotation within three weeks of the PM instruction to do so. If the Contractor does not submit a quotation then it falls to the PM to assess the compensation event - see first bullet of clause 64.1. The show goes on!
If the Contractor does submit a quotation within the three weeks then within two weeks of the submission the PM replies to say 'yes, accepted', 'no not accepted and please submit a revised quotation' or 'no not accepted and I will be making my own assessment'. Assuming the last outcome, then this must happen if one of the last three bullets of clause 64.1 apply - not assessed correctly, no programme/alterations submitted or latest programme not submitted.
So, assuming a compensation event is not time barred under clause 61.3, the compensation event process forces the PM to keep the process going even where the Contractor does not play their part in eg submitting quotations on time, to the detail required or not at all. The PM cannot wait for these things to happen, the PM makes these things happen with or without the assistance of the Contractor. A lesson to the Contractor therefore is for goodness sake positively play your part in the process.
Is this a sound, sensible process, or are parties better off leaving the process of assessing compensation events until some point in the future - what do you think?
Rob
My previous post on this I talked about the PM's duty to notify compensation events that arise from PM instructions to change the Works Information.
The essence of the compensation event process is to agree change in real time, not to park the change management process until some point in the future, which was historically the typical outcome. If change is parked, exactly what is the benefit to the parties to the contract? All it brings is uncertainly for the period it remains not agreed and can likely benefit only those who derive an income from disputes, which is not the parties themselves.
So what measures does the ECC include to force the PM to play their part in the process? Well, this is dealt with in the compensation event process and, in basic terms, forces the PM to press on with the process to reach conclusion even where the Contractor does not play their part. If the PM does not do what they should be doing eg does not assess a compensation event under clause 64.1 then the Contractor can force the issue by notification of the PM's default which may lead to a deemed accepted quotation. More about deemed acceptance another time. The issue I wanted to concentrate on was default by the Contractor in the compensation event process.
Clause 61.3 offers a time bar to those compensation events notifed by the Contractor more than eight weeks of the Contractor becoming aware of the event. The exception here is those compensation events which the PM should have notified to the Contractor but did not. So, assuming we have a notified compensation event which the PM decides is not one of the 4 matters stated in clause 61.4 then the PM should notify the Contractor the event is a compensation event and instructs the Contractor to submit a quotation.
The first hurdle to get over here is the Contractor (clause 62.3) submitting a quotation within three weeks of the PM instruction to do so. If the Contractor does not submit a quotation then it falls to the PM to assess the compensation event - see first bullet of clause 64.1. The show goes on!
If the Contractor does submit a quotation within the three weeks then within two weeks of the submission the PM replies to say 'yes, accepted', 'no not accepted and please submit a revised quotation' or 'no not accepted and I will be making my own assessment'. Assuming the last outcome, then this must happen if one of the last three bullets of clause 64.1 apply - not assessed correctly, no programme/alterations submitted or latest programme not submitted.
So, assuming a compensation event is not time barred under clause 61.3, the compensation event process forces the PM to keep the process going even where the Contractor does not play their part in eg submitting quotations on time, to the detail required or not at all. The PM cannot wait for these things to happen, the PM makes these things happen with or without the assistance of the Contractor. A lesson to the Contractor therefore is for goodness sake positively play your part in the process.
Is this a sound, sensible process, or are parties better off leaving the process of assessing compensation events until some point in the future - what do you think?
Rob
Tuesday 6 April 2010
NEC Student Research
Dear all,
More student research so please fill in the survey as soon as you can.
Thank you,
Rob
http://www.esurveyspro.com/Survey.aspx?id=2bba3745-d8cb-48e7-ad63-0459fef5547a
More student research so please fill in the survey as soon as you can.
Thank you,
Rob
http://www.esurveyspro.com/Survey.aspx?id=2bba3745-d8cb-48e7-ad63-0459fef5547a
Friday 26 March 2010
Student NEC Research
More student research & another dissertation the student would appreciate your time in answering his questionnaire.
Thank you,
Rob
http://www.kwiksurveys.com/online-survey.php?surveyID=KJOEKM_68d8b747
Thank you,
Rob
http://www.kwiksurveys.com/online-survey.php?surveyID=KJOEKM_68d8b747
Friday 19 March 2010
Student NEC Research
Dear all,
Another student who would be very grateful for your time in completing an online questionnaire.
Thank you in advance,
Rob
http://www.zoomerang.com/Survey/WEB22ACXGQPYGW
Another student who would be very grateful for your time in completing an online questionnaire.
Thank you in advance,
Rob
http://www.zoomerang.com/Survey/WEB22ACXGQPYGW
Monday 15 March 2010
Competent NEC3 ECC Project Manager (PM) Part I
What makes a competent NEC3 ECC Project Manager (PM)?
Doing what the contract tells them to is about the best answer I can give. I cannot see anywhere in the contract (assume NEC3 Engineering and Construction Contract (ECC)) that tells any PM to be tardy, subjective (but for a few limited circumstances), waive or change any terms (of a contract they are NOT party to), do what they want, when they want, sit back and wait for things to happen etc.
The clue is in the title, the person(s) acting as PM is/are doing exactly that, acting as project manager. ECC is not about sitting back, waiting for things to happen and being reactive. It's about being proactive, using foresight and making timely decisions.
There are a whole host of responsibilities to properly get your head around when acting as PM on an ECC contract. Let's look at one, which is very different to many contracts I have seen, and that is the positive duty to notify certain compensation events to the Contractor. Most other standard contracts have a 'light the touch paper and stand back' approach ie instigate the change, wait for the Contractor to spot the change then, at some point in the future, the Contractor asks for more time and/or money as a result of this change. So properly keeping the Employer informed of the time/cost effect of such change becomes extremely difficult as you have no idea of what the Contractor may or may not ask for until such time that he actually does. Multiply this many times for many different changes and the task becomes practically impossible.
In the ECC the PM has the right to change the Works Information and this basically becomes a compensation event. Clause 61.1 then obliges the PM to postively inform the Contractor of this compensation event and instructs the Contractor to submit a quotation (which is to be all-inclusive of both time and cost). The contract even tells the PM to separate the instruction to change the Works Information from the notification that it is a compensation event - this is to make the change quite obvious, there being no surprises and kick start the ongoing final account process for each and every compensation event as soon as possible.
In turn this has to be a business benefit for both Employer and Contractor and must be a better process than parking change until some time after the end of the job then being surprised at the amount claimed.
Do you agree?
Rob
Doing what the contract tells them to is about the best answer I can give. I cannot see anywhere in the contract (assume NEC3 Engineering and Construction Contract (ECC)) that tells any PM to be tardy, subjective (but for a few limited circumstances), waive or change any terms (of a contract they are NOT party to), do what they want, when they want, sit back and wait for things to happen etc.
The clue is in the title, the person(s) acting as PM is/are doing exactly that, acting as project manager. ECC is not about sitting back, waiting for things to happen and being reactive. It's about being proactive, using foresight and making timely decisions.
There are a whole host of responsibilities to properly get your head around when acting as PM on an ECC contract. Let's look at one, which is very different to many contracts I have seen, and that is the positive duty to notify certain compensation events to the Contractor. Most other standard contracts have a 'light the touch paper and stand back' approach ie instigate the change, wait for the Contractor to spot the change then, at some point in the future, the Contractor asks for more time and/or money as a result of this change. So properly keeping the Employer informed of the time/cost effect of such change becomes extremely difficult as you have no idea of what the Contractor may or may not ask for until such time that he actually does. Multiply this many times for many different changes and the task becomes practically impossible.
In the ECC the PM has the right to change the Works Information and this basically becomes a compensation event. Clause 61.1 then obliges the PM to postively inform the Contractor of this compensation event and instructs the Contractor to submit a quotation (which is to be all-inclusive of both time and cost). The contract even tells the PM to separate the instruction to change the Works Information from the notification that it is a compensation event - this is to make the change quite obvious, there being no surprises and kick start the ongoing final account process for each and every compensation event as soon as possible.
In turn this has to be a business benefit for both Employer and Contractor and must be a better process than parking change until some time after the end of the job then being surprised at the amount claimed.
Do you agree?
Rob
Student NEC research
2 students would be very grateful for users to spend a few minutes answering their surveys to help them with their NEC dissertations.
Many thanks in advance.
Rob
http://www.surveymonkey.com/s/L5FDFRR
http://www.survey.ljmu.ac.uk/spearson/
Many thanks in advance.
Rob
http://www.surveymonkey.com/s/L5FDFRR
http://www.survey.ljmu.ac.uk/spearson/
Tuesday 23 February 2010
NEC NEEDS CASE LAW
Or does it? A friend of a friend recently said(ish) that they could not advise or approve NEC for client use as there had been no major litigation on it and therefore they found it legally ambiguous.
'What' I hear you say. 'What complete tosh' I say! So let me get this right, there needs to be case law tearing standard form contracts apart limb by limb presumably overs years and years in order for somebody (no doubt quite bright) to be able to say, 'yes, this is proven contract, the Courts tried their best but could not find a way through'.
In the meantime our industries can hopefully get on and make some significant improvements to the way in which we do business, free of Court intervention if at all possible. If we can stop legal and other advisers pursuing 'interesting points of law', at the expense of somebody else, that seem to me to do little other than take from the balance sheet of other organisations then we will be well on our way to maturing as an industry.
Robert Gerrard
'What' I hear you say. 'What complete tosh' I say! So let me get this right, there needs to be case law tearing standard form contracts apart limb by limb presumably overs years and years in order for somebody (no doubt quite bright) to be able to say, 'yes, this is proven contract, the Courts tried their best but could not find a way through'.
In the meantime our industries can hopefully get on and make some significant improvements to the way in which we do business, free of Court intervention if at all possible. If we can stop legal and other advisers pursuing 'interesting points of law', at the expense of somebody else, that seem to me to do little other than take from the balance sheet of other organisations then we will be well on our way to maturing as an industry.
Robert Gerrard
Friday 19 February 2010
NEC3 Supply Contracts launched
Two additions to the NEC3 family of contracts launched on Thursday 11 February. The NEC3 Supply Contract and NEC3 Supply Short Contract are the first standardised contracts available for supply and purchasing of goods. Like all NEC contracts they are designed to save time and money for all parties by resolving issues before they turn into problems.
These two new documents have already seen significant interest with the entire first print run selling out pre-publication. The contract has been adopted in pre-launch trials and given a resounding endorsement by Meridian Energy – the largest electricity supplier in New Zealand, as well as several big names in the UK.
Want to know more? Take a look at the NEC website at: www.neccontract.com/supply
These two new documents have already seen significant interest with the entire first print run selling out pre-publication. The contract has been adopted in pre-launch trials and given a resounding endorsement by Meridian Energy – the largest electricity supplier in New Zealand, as well as several big names in the UK.
Want to know more? Take a look at the NEC website at: www.neccontract.com/supply
Monday 8 February 2010
Student NEC research
There are many procurement topics for students to base dissertations on these days and we get plenty of requests to help in the research by forwarding online surveys to the NEC Users' Group, partake in interviews and so on.
What would be really helpful is to see some of the results of the research and, with appropriate copyright holders' permission, it is intended to post NEC relevant dissertations on the website for the benefit of others on the site:
http://www.neccontract.com/products/Academia.asp
Here's a recent survey request on guaranteed maximum price/target cost contracts for you to complete. I can add others to this Blog as and when they are received.
http://www.surveymonkey.com/s/5LTZDDB
Rob
What would be really helpful is to see some of the results of the research and, with appropriate copyright holders' permission, it is intended to post NEC relevant dissertations on the website for the benefit of others on the site:
http://www.neccontract.com/products/Academia.asp
Here's a recent survey request on guaranteed maximum price/target cost contracts for you to complete. I can add others to this Blog as and when they are received.
http://www.surveymonkey.com/s/5LTZDDB
Rob
Tuesday 2 February 2010
NEC in Academia
My first Blog, what are the rules of the game, I've no idea?! No doubt someone will tell me I have ignored protocol but a good outcome has to be engagement and debate followed by improvement. So what's an NEC subject close to my heart? It has to be the whole NEC learning aspect and academia in particular. So here goes......
Some years back, when there were just a few standard forms of contract available to users, the choice was very limited and academia could focus on eg JCT for building courses and ICE for civils. Each had a body of law that followed it around influencing learning, teaching and future drafting. Then along came NEC and posed a much needed question to those teaching our future professionals - how much time do I give to NEC, the new kid on the block?
For this to be answered people looked around at reports, such as those produced by the RICS - just how much is NEC used in the construction industry? My opinion is far more than suggested in out of date RICS reports, which I think is basically flawed in its research in any case and more about that in another Blog, another time! Anyway, lecturers know from experience with their undergraduates in their year out and those on part-time courses, just how much interest and use there is of NEC and are needing to emphasise accordingly.
We need to make sure there are no barriers preventing NEC becoming a key part of any appropriate course curricula and NEC in Academia is a new product to help lecturers with a range of tools from NEC to assist. See the link below for more details, including links to a possible grant source.
www.neccontract.com/products/Academia.asp
There is plenty to do - make sure lecturers are up to speed with all things NEC; make sure professional bodies have the right project management competencies promoted by NEC within their learning processes (for pre and post chartership); encourage and assist students in their learning and research; make sure that we synchronise industry best practice with academia, and so on.
So what do you think? Do you agree? Have I missed anything? What other matters are worthy of a damn good Blog?!
Robert Gerrard
Some years back, when there were just a few standard forms of contract available to users, the choice was very limited and academia could focus on eg JCT for building courses and ICE for civils. Each had a body of law that followed it around influencing learning, teaching and future drafting. Then along came NEC and posed a much needed question to those teaching our future professionals - how much time do I give to NEC, the new kid on the block?
For this to be answered people looked around at reports, such as those produced by the RICS - just how much is NEC used in the construction industry? My opinion is far more than suggested in out of date RICS reports, which I think is basically flawed in its research in any case and more about that in another Blog, another time! Anyway, lecturers know from experience with their undergraduates in their year out and those on part-time courses, just how much interest and use there is of NEC and are needing to emphasise accordingly.
We need to make sure there are no barriers preventing NEC becoming a key part of any appropriate course curricula and NEC in Academia is a new product to help lecturers with a range of tools from NEC to assist. See the link below for more details, including links to a possible grant source.
www.neccontract.com/products/Academia.asp
There is plenty to do - make sure lecturers are up to speed with all things NEC; make sure professional bodies have the right project management competencies promoted by NEC within their learning processes (for pre and post chartership); encourage and assist students in their learning and research; make sure that we synchronise industry best practice with academia, and so on.
So what do you think? Do you agree? Have I missed anything? What other matters are worthy of a damn good Blog?!
Robert Gerrard
Tuesday 26 January 2010
NEC3 Supply Contract - exclusive preview
The NEC3 Supply and Supply Short Contracts are due for publication on 11th Feb, however we've arranged for a special preview of the Supply Contract in the form of a page turner.
Click here to have a look, and remember to post any comments below.
Click here to have a look, and remember to post any comments below.
Welcome
Pleased to welcome you to our new blog - we hope to keep your interest by updating you on all things NEC. Watch out for our new posts on NEC supply contract, Academia, new marketing initiatives, new events for 2010, project information and lots more to keep you busy.
Tell us what you want to hear and how we can help you in your day to day use of the NEC
Tell us what you want to hear and how we can help you in your day to day use of the NEC
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