A Practical Guide to the NEC3 Engineering and Construction Contract

Michael Rowlinson MSc, DipArb, MRICS, FCIOB, FCIA, FCICES, is a director of Alway Associates, Construction Contracts & Commercial Consultants based in Banbury, Oxfordshire. He is an experienced construction professional, having qualified initially as a Chartered Quantity Surveyor and later as a Chartered Builder. After over 20 years with private practice and contractors Michael joined Alway Associates in 1998, specialising in Construction Contracts and Law. As part of his work Michael has lectured extensively for the Construction Study Centre and direct for his own clients, predominantly on the NEC suite of Contracts. He has written a number of articles on this suite of contracts which have been published in the Civil Engineering Surveyor and the NEC User Group's Newsletter, as well as on Alway Associates website.

1 Introduction 1 1.1 General 1 1.2 Mechanics not law 2 1.3 A simple formula for understanding a contract 2 1.4 Mandatory or discretionary 3 1.5 Conditions precedent 4 1.6 Note on use of upper case in key words and phrases 4 2 Background to the NECECC 5 2.1 The background: First edition 5 2.2 The second edition 6 2.3 The third edition 7 2.4 Endorsement of NEC3 by the Office of Government Commerce 7 2.5 General philosophy: Aims and objectives 8 2.6 Flexibility 8 2.7 Clarity and simplicity 9 2.8 Stimulus to good management 9 2.9 Other characteristics 10 3 The Options: An Overview 13 3.1 General arrangement of the ECC 13 3.2 Other documents referred to 15 3.3 Contract Data 16 3.4 The published documents 16 3.5 Main Options: General outline 17 4 'Spirit of Mutual Trust and Cooperation' 19 4.1 Introduction 19 4.2 Core clause 10.1 19 4.3 What does it mean? 21 4.4 Practical issues 22 5 The Cast of Characters 25 5.1 Introduction 25 5.2 The Employer 25 5.3 The Project Manager 27 5.4 The Supervisor 29 5.5 The Contractor 30 5.6 The Adjudicator 31 5.7 Subcontractors 32 5.8 'Others' 32 5.9 Designers 33 5.10 CDM Coordinator 34 5.11 Principal Contractor 34 5.12 Practical issues 35 6 Communications, Early Warnings and other General Matters 37 6.1 Introduction 37 6.2 Communications: The clause 37 6.3 Communications: Practical issues 38 6.4 Early warnings: The clause 40 6.5 Early warnings: Practical issues 42 6.6 Other matters: The clauses 44 6.7 Other matters: Practical issues 47 7 The Contractor's Main Responsibilities 49 7.1 Introduction 49 7.2 Providing the Works 49 7.3 Contractor's design 51 7.4 Other matters 52 7.5 Practical issues 55 8 Subcontracting 59 8.1 Introduction 59 8.2 Definition of a Subcontractor 59 8.3 The core clauses 60 8.4 Provisions in the Main Options 61 8.5 Practical issues 61 8.6 Options for forms of subcontract in the NEC3 family 62 9 Testing and Defects 65 9.1 Introduction 65 9.2 Tests and inspections 65 9.3 What is a Defect? 67 9.4 The Defect procedure 68 9.5 The Defects Certificate 70 9.6 Uncorrected Defects 70 9.7 Practical issues 71 10 Title 73 10.1 Introduction 73 10.2 The core clauses 73 10.3 Practical issues 74 11 Risks and Insurance 77 11.1 Introduction 77 11.2 The core clauses 77 11.3 Practical issues 80 12 Time 85 12.1 Introduction 85 12.2 The programme: Contents 86 12.3 The programme: Submitting, accepting and revising 91 12.4 The programme: Practical issues 93 12.5 Starting and finishing 102 12.6 Other matters 105 12.7 Secondary Options related to Time 108 12.8 Practical issues 110 13 Payment 113 13.1 Introduction 113 13.2 The payment process 113 13.3 Payments in multiple currencies 116 13.4 The amount due and the Price for Work Done to Date 116 13.5 Supporting documents and records 126 13.6 The Contractor's share 129 13.7 The Contractor's share: Practical issues 131 13.8 Special provisions for the UK 132 13.9 Related Secondary Options 134 13.10 Practical issues 136 14 The Schedules of Cost Components 139 14.1 Introduction 139 14.2 The Schedule of Cost Components 139 14.3 The Shorter Schedule of Cost Components 144 14.4 Application to Subcontractors 145 14.5 Practical issues 146 15 Compensation Events: Theory and Events 151 15.1 Introduction 151 15.2 The theory 151 15.3 The events 153 15.4 Practical issues 168 16 Compensation Events: Procedures 171 16.1 Introduction 171 16.2 Notification by the Project Manager 172 16.3 Notification by the Contractor and the Project Manager's reply 175 16.4 Other matters associated with notifying compensation events 178 16.5 Quotations: Substance 180 16.6 Quotations: Submission and reply 182 16.7 Assessments by the Project Manager 186 16.8 Implementing compensation events 188 16.9 Practical issues 189 17 Compensation Events: Assessment 195 17.1 Introduction 195 17.2 Changes to the Prices 196 17.3 Changes to the Completion Date and any Key Dates 200 17.4 Project Manager's assumptions 203 17.5 Other related matters 204 17.6 Practical issues 206 18 Termination 209 18.1 Introduction 209 18.2 Reasons for termination 209 18.3 Implementing termination 213 18.4 Procedures after termination 214 18.5 Assessing the amount due after termination 215 18.6 Practical issues 217 19 Dispute Resolution 219 19.1 Introduction 219 19.2 Option W1 220 19.3 Option W2 223 19.4 Practical issues 228 20 Secondary Options 231 20.1 Introduction 231 20.2 X2: Changes in the law 231 20.3 X4: Parent company guarantee 232 20.4 X12: Partnering 232 20.5 X13: Performance bond 237 20.6 X17: Low performance damages 238 20.7 X18: Limitation of liability 238 20.8 X20: Key Performance Indicators 239 20.9 Y(UK)3: The Contracts (Rights of Third Parties) Act 1999 240 20.10 Z: Additional conditions of contract 240 20.11 Practical issues 241 21 Completing the Contract Data 243 21.1 Introduction 243 21.2 Purpose and form of the Contract Data 243 21.3 Part One: Data for the core clauses 244 21.4 Part One: Data for the Main Option clauses 248 21.5 Part One: Data for the Secondary Option clauses 249 21.6 Part Two: Data for the core clauses 252 21.7 Part Two: Data for the optional statements 253 21.8 Part Two: Data for Main Options A or B 255 21.9 Part Two: Data for Main Options C, D or E 256 21.10 Practical issues 257 22 The Supporting Documents: Need and Content 261 22.1 Introduction 261 22.2 Works Information 261 22.3 Site Information 270 22.4 Practical issues 271 Bibliography 273 Appendix 1 Tables of Clause Numbers, Case Law and Statutes 275 Appendix 2 Tables of Employer's, Project Manager's, Supervisor's, Contractor's and Adjudicator's Actions 285