A Practical Guide to the NEC3 Professional Services Contract

Michael Rowlinson MSc, DipArb, MRICS, FCIOB, FCIArb, FCICES, is a Director of Alway Associates (London) Ltd. 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 the Alway Associates website. This is his second book about a contract from the NEC3 suite.

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 NEC Family of Contracts 6 2.1 The background: First editions 6 2.2 The second edition 7 2.3 The third edition 8 2.4 Endorsement of NEC3 by the Office of Government Commerce 8 2.5 General philosophy: Aims and objectives 9 2.6 Flexibility 9 2.7 Clarity and simplicity 10 2.8 Stimulus to good management 11 2.9 Other characteristics 12 3 The Options: An Overview 13 3.1 General arrangement of the PSC 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' 18 4.1 Introduction 18 4.2 Core clause 10.1 18 4.3 What does it mean? 20 4.4 Practical issues 21 5 The Cast of Characters 25 5.1 Introduction 25 5.2 The Employer 25 5.3 The Employer's Agent 27 5.4 The Consultant 29 5.5 The Adjudicator 29 5.6 Subconsultants 30 5.7 'Others' 30 5.8 CDM Coordinator 31 5.9 Principal Contractor 32 5.10 Practical issues 32 6 Communications, Early Warnings and other General Matters 34 6.1 Introduction 34 6.2 Communications: The clause 34 6.3 Communications: Practical issues 36 6.4 Early warnings: The clause 38 6.5 Early warnings: Practical issues 39 6.6 Other matters: The clauses 42 6.7 Other matters: Practical issues 44 7 The Parties' Main Responsibilities 46 7.1 Introduction 46 7.2 The Employer's obligations 46 7.3 The Consultant's obligations 47 7.4 Other matters 48 7.5 Practical issues 52 8 Subconsulting 55 8.1 Introduction 55 8.2 Definition of a Subconsultant 55 8.3 The core clauses 56 8.4 Provisions in the main options 56 8.5 Practical issues 57 8.6 Using the PSC as a Subcontract 58 9 Quality 59 9.1 Introduction 59 9.2 Quality management system 59 9.3 What is a Defect? 60 9.4 The Defects procedure 61 9.5 Uncorrected Defects 62 9.6 Practical issues 62 10 Rights to Material 65 10.1 Introduction 65 10.2 The core clauses 65 10.3 Secondary option X9 66 10.4 Practical issues 67 11 Indemnity, Insurance and Liability 68 11.1 Introduction 68 11.2 The core clauses 68 11.3 Secondary option X18: Limitation of liability 70 11.4 Practical issues 71 12 Time 74 12.1 Introduction 74 12.2 The programme: Contents 75 12.3 The programme: Submitting, accepting and revising 79 12.4 The programme: Practical issues 82 12.5 Starting and finishing 90 12.6 Other matters 93 12.7 Secondary options related to Time 95 12.8 Practical issues 97 13 Payment 100 13.1 Introduction 100 13.2 The payment process 100 13.3 Payments in multiple currencies 102 13.4 The amount due and the Price for Services Provided to Date 103 13.5 Supporting documents and records 107 13.6 The Consultant's share 111 13.7 The Consultant's share: Practical issues 112 13.8 Special provisions for the UK 114 13.9 Related secondary options 116 13.10 Practical issues 118 14 Compensation Events: Theory and Events 120 14.1 Introduction 120 14.2 The theory 120 14.3 The events 122 14.4 Practical issues 130 15 Compensation Events: Procedures 132 15.1 Introduction 132 15.2 Notification by the Employer 133 15.3 Notification by the Consultant and the Employer's reply 136 15.4 Other matters associated with notifying compensation events 139 15.5 Quotations: Substance 141 15.6 Quotations: Submission and reply 142 15.7 Assessments by the Employer 147 15.8 Implementing compensation events 148 15.9 Practical issues 149 16 Compensation Events: Assessment 154 16.1 Introduction 154 16.2 Changes to the Prices 155 16.3 Changes to the Completion Date and any Key Dates 159 16.4 Employer s assumptions 162 16.5 Other related matters 163 16.6 Practical issues 165 17 Termination 168 17.1 Introduction 168 17.2 Reasons for termination 168 17.3 Secondary option X11: Termination by the Employer 171 17.4 Implementing termination 171 17.5 Procedures after termination 172 17.6 Payment on termination 173 17.7 Practical issues 174 18 Dispute Resolution 176 18.1 Introduction 176 18.2 Option W1 177 18.3 Option W2 180 18.4 Practical issues 185 19 Secondary Options 188 19.1 Introduction 188 19.2 X2: Changes in the law 188 19.3 X4: Parent company guarantee 189 19.4 X8: Collateral warranty agreements 189 19.5 X12: Partnering 190 19.6 X13: Performance bond 194 19.7 X20: Key Performance Indicators 195 19.8 Y(UK)3: The Contracts (Rights of Third Parties) Act 1999 196 19.9 Z: Additional conditions of contract 196 19.10 Practical issues 197 20 Completing the Contract Data 199 20.1 Introduction 199 20.2 Purpose and form of the Contract Data 199 20.3 Part One: Data for the core clauses 200 20.4 Part One: Data for the main option clauses 204 20.5 Part One: Data for the secondary option clauses 205 20.6 Part Two: Data for the core clauses 209 20.7 Part Two: Data for the optional statements 209 20.8 Practical issues 211 21 The Supporting Documents: Need and Content 214 21.1 Introduction 214 21.2 Scope 214 21.3 Practical issues 221 Bibliography 224 Further Reading 225 Appendix 1 Tables of Clause Numbers, Case Law and Statutes 226 Appendix 2 Tables of Employer s, Consultant s and Adjudicator's Actions 233