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Practical Guide to the NEC3 Engineering and Construction Contract, 2nd Edition

ISBN: 978-1-119-03299-1
360 pages
May 2016, Wiley-Blackwell
Practical Guide to the NEC3 Engineering and Construction Contract, 2nd Edition (1119032997) cover image

Description

Launched in 1993, the NEC Engineering and Construction Contract has become one of the UK's leading standard forms of contract for major construction and civil engineering projects. The third edition, popularly known as NEC3, is a process based contract embodying project and commercial management best practice, so its basic philosophy differs from the more adversarial approach of other standard construction contracts. Since the first edition of this book, the third edition of the contract has seen the introduction of a new secondary option for use in the UK and amendments to a number of clauses. In addition, in September 2011, changes were introduced to cater for the amendments to the Housing Grants, Construction and Regeneration Act 1996 contained in the Local Democracy, Economic Development and Construction Act 2009, which became effective for all new contracts entered into from 1 October 2011. These amendments have been incorporated into the text. A Practical Guide to the NEC3 Engineering and Construction Contract will be useful to everyone in the construction industry working on a project under this contract. It will be of interest to the complete construction supply chain, including employers, construction professions, contractors and sub-contractors, as well as consultants and lawyers advising any of these parties, either in the preparation of contract documentation or the day to day management or the resolution of problem situations which may arise.
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Table of Contents

1 Introduction 1

1.1 General 1

1.2 Mechanics not law 2

1.3 A simple formula for understanding a contract 3

1.4 Mandatory or discretionary 4

1.5 Conditions precedent 4

1.6 Note on use of upper case in key words and phrases 5

2 Background to the NECECC 7

2.1 The background: First edition 7

2.2 The second edition 8

2.3 The third edition 9

2.4 The third edition (re?]printed) 9

2.5 Endorsement of NEC3 by the Office of Government Commerce 10

2.6 General philosophy: Aims and objectives 11

2.7 Flexibility 11

2.8 Clarity and simplicity 11

2.9 Stimulus to good management 12

2.10 Other characteristics 13

3 The Options: An Overview 15

3.1 General arrangement of the ECC 15

3.2 Other documents referred to 17

3.3 Contract Data 18

3.4 The published documents 18

3.5 Main Options: General outline 19

4 ‘Spirit of Mutual Trust and Cooperation’ 23

4.1 Introduction 23

4.2 Core clause 10.1 23

4.3 What does it mean? 25

4.4 Practical issues 26

5 The Cast of Characters 29

5.1 Introduction 29

5.2 The Employer 29

5.3 The Project Manager 31

5.4 The Supervisor 33

5.5 The Contractor 34

5.6 The Adjudicator 35

5.7 Subcontractors 36

5.8 ‘Others’ 36

5.9 Named Suppliers 37

5.10 Designers 37

5.11 Principal Designer 38

5.12 Principal Contractor 39

5.13 Practical issues 39

6 Communications, Early Warnings and other General Matters 41

6.1 Introduction 41

6.2 Communications: The clause 41

6.3 Communications: Practical issues 42

6.4 Early warnings: The clause 45

6.5 Early warnings: Practical issues 46

6.6 Other matters: The clauses 49

6.7 Other matters: Practical issues 52

7 The Contractor’s Main Responsibilities 55

7.1 Introduction 55

7.2 Providing the Works 55

7.3 Contractor’s design 57

7.4 Other matters 58

7.5 Practical issues 61

8 Subcontracting 65

8.1 Introduction 65

8.2 Definition of a Subcontractor 65

8.3 The core clauses 66

8.4 Provisions in the Main Options 67

8.5 Practical issues 67

8.6 Options for forms of subcontract in the NEC3 family 68

9 Testing and Defects 71

9.1 Introduction 71

9.2 Tests and inspections 71

9.3 What is a Defect? 73

9.4 The Defect procedure 73

9.5 The Defects Certificate 75

9.6 Uncorrected Defects 76

9.7 Practical issues 77

10 Title 81

10.1 Introduction 81

10.2 The core clauses 81

10.3 Practical issues 82

11 Risks and Insurance 85

11.1 Introduction 85

11.2 The core clauses 85

11.3 Practical issues 88

12 Time 91

12.1 Introduction 91

12.2 The programme: Contents 92

12.3 The programme: Submitting, accepting and revising 97

12.4 The programme: Practical issues 99

12.5 Starting and finishing 108

12.6 Other matters 111

12.7 Secondary Options related to Time 114

12.8 Practical issues 117

13 Payment 121

13.1 Introduction 121

13.2 The payment process 121

13.3 Payments in multiple currencies 124

13.4 The amount due and the PWDD 124

13.5 Supporting documents and records 134

13.6 The Contractor’s share 138

13.7 The Contractor’s share: Practical issues 139

13.8 Special provisions for the UK 141

13.9 Related Secondary Options 143

13.10 Practical issues 148

14 The Schedules of Cost Components 153

14.1 Introduction 153

14.2 The Schedule of Cost Components 153

14.3 The Shorter Schedule of Cost Components 158

14.4 Application to Subcontractors 159

14.5 Practical issues 160

15 Compensation Events: Theory and Events 165

15.1 Introduction 165

15.2 The theory 165

15.3 The events 167

15.4 Practical issues 182

16 Compensation Events: Procedures 187

16.1 Introduction 187

16.2 Notification by the Project Manager 189

16.3 Notification by the Contractor and the Project Manager’s reply 192

16.4 Other matters associated with notifying compensation events 195

16.5 Quotations: Substance 197

16.6 Quotations: Submission and reply 199

16.7 Assessments by the Project Manager 204

16.8 Implementing compensation events 206

16.9 Practical issues 207

17 Compensation Events: Assessment 215

17.1 Introduction 215

17.2 Changes to the Prices 216

17.3 Changes to the Completion Date and any Key Dates 220

17.4 Project Manager’s assumptions 223

17.5 Other related matters 224

17.6 Practical issues 226

18 Termination 229

18.1 Introduction 229

18.2 Reasons for termination 229

18.3 Implementing termination 233

18.4 Procedures after termination 234

18.5 Assessing the amount due after termination 235

18.6 Practical issues 237

19 Dispute Resolution 239

19.1 Introduction 239

19.2 Option W1 240

19.3 Option W2 243

19.4 Practical issues 248

20 Secondary Options 251

20.1 Introduction 251

20.2 X2: Changes in the law 251

20.3 X4: Parent company guarantee 252

20.4 X12: Partnering 252

20.5 X13: Performance bond 257

20.6 X17: Low performance damages 258

20.7 X18: Limitation of liability 258

20.8 X20: Key Performance Indicators 259

20.9 Y(UK)3: The Contracts (Rights of Third Parties) Act 1999 260

20.10 Z: Additional conditions of contract 260

20.11 Practical issues 262

21 Completing the Contract Data 263

21.1 Introduction 263

21.2 Purpose and form of the Contract Data 263

21.3 Part One: Data for the core clauses 264

21.4 Part One: Data for the Main Option clauses 268

21.5 Part One: Data for the Secondary Option clauses 269

21.6 Part Two: Data for the core clauses 273

21.7 Part Two: Data for the optional statements 274

21.8 Part Two: Data for Main Option A or B 275

21.9 Part Two: Data for Main Option C, D or E 276

21.10 Practical issues 278

22 The Supporting Documents: Need and Content 283

22.1 Introduction 283

22.2 Works Information 283

22.3 Site Information 293

22.4 Practical issues 294

Bibliography 297

Appendix 1 Tables of Clause Numbers, Case Law and Statutes 299

Appendix 2 Tables of Employer’s, Project Manager’s, Supervisor’s, Contractor’s and Adjudicator’s Actions 309

Appendix 3 Tables of Communication Forms and Their Uses 337

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Author Information

Michael Rowlinson MSc, DipArb, MRICS, FCIOB, FCIArb, FCInstCES, is principal of Michael Rowlinson Associates Limited. An experienced construction professional having qualified initially as a Chartered Quantity Surveyor and later as a Chartered Builder, Michael specialises in all aspects of contract drafting, contract management, contract administration, construction law, claims and dispute resolution. As part of his work Michael lectures extensively and has written many published articles and two books the NEC3 family of contracts.
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