Contract practice (L2)

Question 1

On the Yew tree farm project, why was NEC 3 option A the most suitable form of contract?

Answer 1

• The contract was awarded under the lot 9 NMS Framework Agreement which uses an amended NEC3 ECC standard form of contract
• However, having said that an NEC3 ECC form of contract was suitable given
• it can be used with traditional procurement routes,
• the project was a civil engineering project for the construction of a storage tank on the wastewater network
• The client is a public sector client and thus use of NEC is required and
• Selected Contractors are familiar with the form of contract
• Main Option A was suitable given
• it can be used with traditional (lump sum) procurement routes
• the client wanted cost certainty, and
• the scope/ design was well developed

Question 2

What other options were considered?

Answer 2

• Main option B
• However, the client wanted the most cost certainty due to limited sanction
• However, no other form of contract was considered due the contract being awarded under the Lot 9 NMS Framework Agreement (DRAP)

Question 3

What was included within the contract documents you compiled?

Answer 3

• Form of Agreement – to enable both parties to execute the contract
• Conditions of contract – i.e. the
   core clauses,
   main option clauses,
   dispute resolution option clauses,
   secondary option clauses and
   Z/ additional conditions of contract clauses
• Contract Data part one and two – defines the details of the agreement which is the contract
• Activity Schedule (Pricing document)
• Works Information – specifies and describes the works (including any contractor design responsibilities)
   Drawings
   Site boundary plan
   Electrical load assessment
• Site Information (NOT USED) – describes the site and its surrounding
   Subsoil investigation e.g. boreholes
   Reports concerning physical conditions of the site e.g. mapping
   References to publicly available information
   Some documents may contained both Works Information and Site Information e.g. foundation drawing and related borehole info

Question 4

Were there any amendments ( Z clauses) if so what were these and why do you think they were necessary.

Answer 4

• No
• There were no Z clauses only
• Framework amendments to the NEC 3 ECC conditions of contract which include amendments to
   Timescales
   deemed acceptances and
   CEs for example

Question 5

Tell me about the amendment to delay damages you drafted on the Williamsgate project.

Answer 5

To clarify I was involved in the drafting which involved reviewing the legal drafting to ensure it aligned with the Parties intent

Question 6

Tell me about one of the amendments you suggested and why you considered it necessary.

Answer 6

• During settlement negotiations it was agreed that the employer would repay all delay damages levied to date and not levy delay damages going forward (milestone payment incentivised achieving Completion)
• However, the initial legal drafting did not account for the repayment of delay damages levied to date and so I suggested this be amended such that the drafting aligned with the Parties intent

Question 7

Tell me about a time you have dealt with sectional completion,

Answer 7

• On the MEICA project
• Under the Employer’s amended NEC contract, the Contractor is required to give the Project Manager 7 days notice of when Completion will occur together with any evidence listed in the Works Information, Framework Agreement or which the Project Manager requires
• This involved distributing this information to the Project team for review to ascertain if all work related to that section had been complete
• Additionally, the Defects register was reviewed with the Supervisor to ensure there were no uncorrected Defects that would prevent the Employer from using the works or others doing their work
• This was managed such that the sectional Completion could be certified within one week of Completion being achieved

Question 8

What would happen if an application was not submitted on time?

Answer 8

• Under NEC3, the onus is on the Project Manager to assess the amount due at each assessment date even if he has not received a submission from the Contractor
• Under NEC4, the Contractor is obliged to submit applications, if one is not submitted the amount due will the lesser of the amount at the previous assessment or what the Project manager asses

Question 9

What was the change control procedure on the Yew tree farm project?

Answer 9

• Yew Tree Farm used an NEC3 ECC form of contract meaning
• Change occurs through the compensation event process
• There are 19 events which if they occur may entitle the contractor to claim time and money
• The process usually starts with a notification of the compensation event which either party can provide as soon as they become aware
   However, the Contractor only has 8 weeks to notify certain CEs else he loses his entitlement
• Following notification, an instruction is given for the contractor to submit a quotation if it is in fact a compensation even
• Such assessment is largely based upon the forecast impact on both cost and time
• A compensation event is implemented either when the Project Manager
   accepts the Contractor’s quotations
   notifies the Contractor of his own assessment or
   the Contractors quotation is treated as having been accepted by the PM (due to no reply)
• Although an early warning may not lead to a compensation event the process is somewhat linked as the Contractor is incentivised to give an early as failure to do so may reduce the assessment of a related compensation event

Question 10

What was the process under this contract for the Final account?

Answer 10

• The Project is not yet complete
• However, given the project utilises NEC3 ECC there is no reference to final accounts as the final account is adjusted as the project proceeds by following the compensation event procedure
• The final payment has to be certified within 4 weeks of the defect certificate

Question 11

Can you advise how the level of L&A damages was set on one of your projects?

Answer 11

• On Yew Tree Farm
• Delay Damages were calculated based on a genuine pre-estimate/ breakdown of the loss suffered as a result of the delay, this included:
   Accounting for prolonged involvement of staff and changes in their rates such as
• Project management staff
• Commercial management staff
• Engineering support staff
   Increase in interest on capital borrowed and changes in the interest rate (due to extended period) and
   Miscellaneous and other UU costs such as land rental

Question 12

What happens if LAD’s are left blank in a signed contract?

Answer 12

If the relevant section of the contract is left blank, unliquidated damages will apply

Question 13

Can the client recover any costs if left blank?

Answer 13

Yes, but the Employer will have to collate records and prove the actual loss suffered as a result of the breach

Question 14

How do you assess the appropriate insurances and levels to be set on projects?

Answer 14

• It is not something I have had involvement with as most of the projects I have been involved with have been awarded under a Framework Agreement
• However, I am aware that it would involve a detailed analysis of the project’s risks, legal requirements and contractual obligations and may require consulting an insurance expert