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
Monday 21 June 2010
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
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