Current issues with tender documentation for NEC3 ECC contracts (9 Jun 2020) Issues | Date added The NEC ECC Conditions of Contract being modified by the Schedule to the Articles of Agreement © Modification that equates the date for calculation of inflation to | 14/4/2020 the date of delivery of interim statement ArchSD had since the Tin Shun Wai Hospital pilot NEC3 ECC contract adopted a set of contract conditions for Milestone Payment which are similar to the Special Conditions of Contract Clause SCC56 for D&B GCC contract, However the D&B GCC version refers to two dates, viz. the date at the end of each period of interim certificates and the date of delivery of the Contractor's statement. The former date relates to the calculation of fluctuation (date of period ending is stated in the payment certificate) and the latter date relates to the certification of payment (date of delivery Is stated in the covering letter). In the NEC version, there is however only one date, viz. the assessment date which is the date of delivery of the Contractor's statement. This single date is used both for the calculation of inflation and for the certification of payment. The interval for calculation of inflation would therefore likely to be inconsistent which is undesirable. ‘it is suggested for future NNEC contracts to further amend the conditions to follow the same practice as the GCC contract. jpdated status on the issue: 9/6/2020 © For 1 contract in the construction stage under the purview of CST, the LOS concur that future tender documents should be amended to avoid the trouble. For 2 contracts in the tendering stage under the purview of CST, suggestions had been made to ArchSD for Tender Addendum before tender close, but the LOSs are not interested in dealing with the extra trouble.@ Deviation from NEC3 ECC Option A/8's spirit of not requiring the | 14/4/2020 Contractor to keep record for substantiation of Defined Cost Only Options C, D, E and F contain Clause 52.2 that requires the Contractor to keep records to substantiate the Defined Cost. Options A and B do not contain such requirement because the Defined Cost is intended to be used for compensation events ‘only and compensation events in NEC are supposed to be forecasts only and should therefore not be required to be substantiated, This is however not in ine with the government philosophy which requires everything to be substantiated, An evidence of government’s philosophy of checking everything is the implementation of the additional conditions of contract clause C9 “Tender Requirements for Subcontracting” which not only applies to Options C and D but also to compensation events under Options A and B. This clause has stringent requirement ‘on subcontracting which often invokes practical concern in reality, This contradictory spirit put the QS practitioners under a dilemma. To ask for substantiation or not to ask, this is a big problem. pdated status on the issue: * No actual action has been made so far yet. Waiting for a right moment to raise it up. 9/6/2020‘Schedule of Cost Components (SCC) / Shorter Schedule of Cost Components (SSCC} ‘© Modification to exclude management and supervisory staff from being defined as “people” in the cost components for Defined Cost DEVB list of standard amendment contains an amendment to ‘the cost component of People in the default SCC (for Option C or D) or SSCC (for Option A or B) of the NEC3 ECC contract to ‘exclude people who discharge the duties of the Contractor's management and supervisory staff. “Optional amendment” to Schedule of Cost Components (SCC) (Note: Approval is to be sought from public officer of D2 rank or above for use of this clause or not) People 1 Default wording Proposed amended wording The following components of |The following components of the cost of the cost of © people who are direcly |e people who are directly | employed by the Contractor | employed by the Contractor and whose normal place of | and _do_not discharge the | working is within the | duties _of the Contractor's | Working Areas and ‘management_and_ supervisory | © people who are directly | staff and whose normal place | employed by the Contractor | of working is within the and whose normal place of | Working Areas and working is not within the | people who are directly Working Areas but who are | employed by the Contractor working in the Working | and _do not discharge _the Areas. duties of the Contractor's management and supervisory staff and whose normal place of working is not within the Working Areas but who are working in the Working _ Areas. | 14/4/2020“Amendment” to Shorter Schedule of Cost Components (SSC) (Note: Approval is to be sought from public officer of D2 rank or above for Use of this clause or net) People 1 Default wording Proposed amended wording The following components of the cost of * people who are directly ‘employed by the Contractor and whose normal place of working is within the Working Areas, © people who are directly employed by the Contractor and whose normal place of working is not within the Working Areas but who are working in the Working Areas and ® people who are not directly employed by the Contractor but are paid for him according to the time worked while they are within the Working Areas. ® people who are directly employed by the Contractor and_do_not_discharge the duties_of the Contractor’s management and supervisory staff and whose normal place of working is within the Working Areas, * people who are directly employed by the Contractor and_do_not_discharye the duties of the Coniractor’s ‘management and supervisory staff and whose normal place of working is not within the Working Areas but who are working in the Working Areas and * people who are not directly employed by the Contractor and_do_not_discharge the duties_of the Contractor's management and supervisory staff but are paid for him according to the time worked while they are within the Working Areas.The Pros and Cons of this amendment and the problem with lack of consistency Pros: By excluding the cost of management and supervisory staif from the cost component of People of the Defined Cost, the cost of management and supervisory staff is deemed to be included in the Fee. The effort of ascertaining the Defined Cost of People would be much reduced, especially that the cost of management and supervisory staff is regarded as confidential by the contractor Cor There are always chances that the extent of the works fo be done in compensation events are not sufficiently large in proportion to the cost of management and supervisory staff such that the Fee thereof could not cover the staff cost. This would likely lead to hardship in final account settlement which may eventually lead to even more work for the QS practitioners. Lack of consistency: Lack of consistency could lead to confusion. The eurrent approach to adopting this amendment is to decide case-by- case. As this amendment has a significant impact on the pricing level of the fee percentage by the tenderers and the tenderers may not be aware of the fact that the provision varies from project to project, the lack of consistency could easily lead to over-pricing or under-pricing by the tenderers. Suggestion In view of the Pros and Cons, it is suggested to follow the approach of the default NEC contract, i.e. the amendment not be adopted. In order to overcome the difficulty of obtaining information from the Contractor for ascertaining the cost of management and supervisory staff under Option A and B, itis, suggested to add clauses similar to NEC Clause 52.2 and 52.3 under Option C and D and make it a Disallowed Cost if the records are not provided. It is also necessary for all Options to change “The Contractor allows the Project Manager to inspect” in 52.3 to “The Contractor allows the Project Manager to inspect and copy”. Updated status on the issu: * For all contracts under the purview of CST, the LOS had no objection to the above proposal and therefore the default NEC definition had been adopted. 9/6/2020~The unreasonable approach in excluding insurances from the ‘cost components of Defined Cost in default NEC conditions, and the confusing amendment by DEVB in including insurances in the cost components of Defined Cost in amended NEC conditions In the default NEC Contract, it was stated in the cost component 7 (insurances) in the Schedule of Cost Components / Shorter Schedule of Cost Components that “The following are deducted from cost: the cost of events for which this contract requires the Contractor to insure and”, The rationale as stated in the Guidance Note being “deductions avoids the Employer having to pay for costs which the Contractor should have insured against”. ‘The above rationale however couldn't explain the following: © Why is the Contractor not compensated for the additional cost incurred in a compensation event? © Why is the Contractor not be paid for insurances which he is required to insure, yet be paid for insurances which he is not required to insure? The standard amendment by DEVB make things even more confusing because : ‘© Under cost component 7 (Insurances), a new bullet point added which states “premiums for insurances taken out by the Contractor except for the premiums for insurances as stated in item 7A below.” This provision appears to overlap with the 1" bullet of cost component 7. © Under cost component 7A, a list of premiums for insurances required to be procured is to be included. This contradicts with the 1 bullet of cost component 7 which remains. 9/6/2020