NEC3 Engineering and Construction Contract Option A: Price contract with activity schedule

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In contrast to the NEC3 which includes separate fees for the Direct and Subcontract costs, the NEC4 takes a simpler approach by replacing both with a single fee percentage. The Fee is calculated by multiplying the total Defined Cost (Direct and Subcontracted) by the Fee Percentage stated in the Contract Data Part 2. This follows from Clause 63.1 which states that the change to the Prices (the contract sum) is the effect of the CE on the Defined Cost or work done, the work not yet done, and the resulting Fee.

Three other NEC contracts – the Engineering and Construction Contract (ECC), Term Service Contract (TSC) and Professional Services Contract (PSC) are also approved further reading for the APM Body of Knowledge 6th edition. compensation events – events which will give rise to time and money and procedures for dealing with these; This option includes a target contract linked to an activity schedule. The target contract contains a price commonly referred to as a target cost. Another new contract introduced within NEC4 which again will be fairly niche sector of the industry. These allow a Client to set up a single contract where multiple Parties all sign up to a single common agreement. All of the Parties will then live/breathe/succeed/fail together so is very much a collaborative contract where all Parties are trying to help each other to achieve a common goal to the maximum benefit (or least pain) to all of those under the agreement. Guidance Notes and FlowchartsGMH Planning Ltd., NEC4 Term Service Contract – review of changes from NEC3, and NEC4 Engineering and Construction Subcontract – review of changes from NEC3, both accessed 28 November 2022 The NEC family form a suite of contracts, with NEC being the brand name for the “umbrella” of contracts. When it was first launched in 1993, it was simple the “New Engineering Contract”. Under NEC2 (published 1995) this specific contract was renamed the “Engineering and Construction Contract” which is the main contract used for any construction based project. It now sits along side a number of other contracts that together should mean that the NEC suite is suitable for what ever stage of a lifecycle the project is at and what ever party you are within a project. The latest versions of the contracts is NEC4, which was published in 2017. NEC4 is now being widely used, although it will be several years before the use of NEC3 contracts are phased out as many long term frameworks still in existence were awarded under NEC3. The contracts available within the NEC4 suite are: Engineering and Construction Contract (ECC)

Both schedules identify categories of cost that the Contractor may incur. These include costs for people, equipment, plant and materials, charges, manufacture and fabrication, design and insurance. To put simple, this option is a priced lump sum contract. The price is then broken down into an activity schedule. It should be noted that unlike Option B, this is not a re-measure contract. So, any error in measurement which won’t amend the price and could cause a financial loss. Activity Schedule – A list of activities (prepared by the contractor), which they expect to carry out while providing the works. Each activity is linked to a price (prepared by the contractor) to be paid by the client.In principle, it is for the Contractor to identify how it intends to deliver the works and therefore to identify the activities that it considers necessary. In practise, however, the Employer is likely to want to specify at least a core set of activities to create some consistency during the tender process.

there are some potentially surprising approaches taken to recoverable costs, and these need to be worked through in detail - particularly if the same mechanism is stepped down to subcontracts; Under Option C, as we are only concerned with the total of the Prices, the errant activity will serve to increase the ‘target’ cost changing the Contractor’s share to his benefit. Subcontractors – a new category for NEC4 where Subcontractors costs can now be included as a lump sum, rather than having to break it down into the other categories listed Originally contracts in the civil engineering and construction industries were bespoke and drafted by Chancery pleaders using their knowledge of leases rather than building processes. In 1879, Royal Institute of British Architects for construction projects created RIBA forms which lead to the Joint Contracts Tribunal, JCT forms. For civil engineering the need for a formalized approach to contracts led the Institution of Civil Engineers (ICE) to produce a formalised set of conditions of contract. In 1986, the ICE commissioned the development of a new form of contract as it was felt that there was a need for a form that had clearer language, clearer allocation of responsibilities and reduced opportunities for contractual “gamesmanship”. In 1991, this resulted in a consultative form of the New Engineering Contract form of contract. The first edition was published in 1993. [8] Wider use of the NEC was recommended by the Latham Report in 1994. [ citation needed]It goes without saying that as the Activity Schedule is a list of activities which the Contractor expects to carry out in Providing the Works, that it should corralate with the works included in the Works Information. This is an abbreviated version of the ECC contract and most suitable when there is considered “low risk” (not necessarily low value) on a project with little change expected. This contract is still between the Client and Contractor but does not use all of the processes of the ECC making it simpler and easier to manage and administer. The Engineering and Construction Short Subcontract (ECSS) The parties agree two separate fee percentages: one for subcontracted work; and one for other work. This reflects the possibility that the risk and profit for (and the work required in managing) direct work as against subcontracted work may well be different. Often the percentages will be agreed at the same figure, but if there is a difference, the percentage for sub-contracted work is likely to be higher. The Contractor provides information which shows how each activity on the Activity Schedule relates to the operations on each programme which he submits for acceptance. The amount due is the Price for Work Done to Date (the calculation of which varies between options as identified below).