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Practical Guide to the NEC3 Professional Services Contract

ISBN: 978-0-470-67234-1
264 pages
July 2012, Wiley-Blackwell
Practical Guide to the NEC3 Professional Services Contract (047067234X) cover image
Currently in its third edition, the NEC suite has become one of the UK’s leading families of standard forms of contract for major construction and civil engineering projects. Part of the NEC suite, the Professional Services Contract (PSC) was drafted with the same process-based approach and objectives, offering a standard contract for the appointment of consultants providing professional services in an engineering or construction project. Embodying best practice in terms of project management, the basic philosophy of the PSC differs from the principles and approach of other standard contracts used to appoint consultants.

This book is a practical guide to the application of the PSC. Starting with a brief discussion of the background and philosophy behind the PSC, it identifies the roles and responsibilities of each of the named functions within the contract, explains the approaches required to achieve a successful working relationship between all parties, and examines all the procedures in the PSC. The book explains the links between the various sections of the contract to assist the reader with cross referencing, and covers all the variations created by the Main and Secondary Options. As a very practical guide it will aid users in the transition from their use and understanding of the other standard contracts to the collaborative project management-based approach of the PSC.

Written for anyone working in the construction and related industries using the PSC to procure or provide consultancy services in relation to a construction project, it will be of interest to the complete construction supply chain, particularly architects, structural engineers, services (M&E) engineers, civil engineers, quantity surveyors and interior designers, together with Contractors and Sub-Contractors who have a design liability and employ consultants to assist them. It will also be of interest to consultants and lawyers advising any of these parties, either in the preparation of contract documentation or the resolution of problem situations which may arise.

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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

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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.
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