NEC 4: Managing An Engineering and Construction Contract / Volume 4

NEC 4 : managing an engineering
and construction contract / Volume 4.

pp. 1-121
, (June, 2017) NEC 4 : managing an engineering and construction contract / Volume 4. NEC
Staff and students of Aston University are reminded that copyright subsists in this extract and the
work from which it was taken. This Digital Copy has been made under the terms of a CLA licence
which allows you to:
• access and download a copy;
• print out a copy;
Please note that this material is for use ONLY by students registered on the course of study as
stated in the section below. All other staff and students are only entitled to browse the material and
should not download and/or print out a copy.
This Digital Copy and any digital or printed copy supplied to or made by you under the terms of this
Licence are for use in connection with this Course of Study. You may retain such copies after the
end of the course, but strictly for your own personal use.
All copies (including electronic copies) shall include this Copyright Notice and shall be destroyed
and/or deleted if and when required by Aston University.
Except as provided for by copyright law, no further copying, storage or distribution (including by e-
mail) is permitted without the consent of the copyright holder.
The author (which term includes artists and other visual creators) has moral rights in the work and
neither staff nor students may cause, or permit, the distortion, mutilation or other modification of
the work, or any other derogatory treatment of it, which would be prejudicial to the honour or
reputation of the author.
Course of Study: EC2CMA - Construction Contract Management & Administration 2

Title: NEC 4 : managing an engineering and construction contract / Volume 4.
Name of Author:
Name of Publisher: NEC

USER GUIDE
managing an engineering and

construction contract
volume 4
.
ly
on
es
os
rp
pu
g
in
in
ra
rt
Fo
.
ly
on
ty
sir
ve
ni
U
on
t
As
by
se
ru
Fo
June 2017
Fo
ru
se
by
As
to
n
U
ni
ve
rs
ity
on
ly
.
Fo
rt
ra
in
in
g
pu
rp
os
es
on
ly.
MANAGING AN
Engineering and Construction
Contract
.
ly
on
s
se
VOLUME 4
rpo
pu
g
in
in
This document provides guidance on the management of an NEC4 Engineering and
tra
Construction Contract
r
Fo
An NEC document
.
ly
on
June 2017
ity
rs
ve
ni
U
n
to
As
by
se
ru
Fo
The Government Construction Board, Cabinet Office UK

The Government Construction Board (formerly Construction Clients’ Board) recommends
that public sector organisations use the NEC contracts and in particular the NEC4 contracts
where appropriate, when procuring construction. Standardising use of this comprehensive
suite of contracts should help to deliver efficiencies across the public sector and promote
behaviours in line with the principles of the Government Construction Strategy.
The Development Bureau, HKSAR Government

The Development Bureau recommends the progressive transition from NEC3 to NEC4 in public
works projects in Hong Kong. With suitable amendments to adapt to the Hong Kong local
environment, NEC4 is expected to further enhance collaborative partnering, unlock innovations
and achieve better cost management and value for money in public works projects.
NEC is a division of Thomas Telford Ltd, which is a wholly owned subsidiary of the Institution
of Civil Engineers (ICE), the owner and developer of the NEC.
The NEC is a suite of standard contracts, each of which has these characteristics:
• Its use stimulates good management of the relationship between the two parties to the
contract and, hence, of the work included in the contract.
• It can be used in a wide variety of commercial situations, for a wide variety of types of
work and in any location.
.
ly
• It is a clear and simple document – using language and a structure which are
on
straightforward and easily understood.
s
se
This is a User Guide for the NEC4 Engineering and Construction Contract.
rpo
pu
ISBN (complete box set) 978-0-7277-6391-4 g
in
in
ISBN (this document) 978-0-7277-6235-1
tra
ISBN (Engineering and Construction Contract) 978-0-7277-6209-2

ISBN (Establishing a Procurement and Contract Strategy) 978-0-7277-6223-8
r
Fo
ISBN (Preparing an Engineering and Construction Contract) 978-0-7277-6224-5

ISBN (Selecting a Supplier) 978-0-7277-6234-4
.
ly
on
ISBN (Engineering and Construction Contract Flow Charts) 978-0-7277-6267-2 (e-only)

ity
rs
ve
First edition June 2017

ni
Reprinted with amendments January 2019

U
n
to
As
by
se
ru
Fo
British Library Cataloguing in Publication Data for this publication is available from the
British Library.
© Copyright nec 2017
All rights, including translation, reserved. The owner of this document may reproduce the
Contract Data and forms for the purpose of obtaining tenders, awarding and administering
contracts. Except as permitted by the Copyright, Designs and Patents Act 1988, no part of
this publication may be otherwise reproduced, stored in a retrieval system or transmitted in
any form or by any means, electronic, mechanical, photocopying, recording or otherwise,
without the prior written permission of the NEC Director, Thomas Telford Ltd, One Great
George Street, Westminster, London SW1P 3AA.
Typeset by Manila Typesetting Company
Printed and bound in Great Britain by Bell & Bain Limited, Glasgow, UK
Contents
Contents
Foreword v
Preface vii
Acknowledgements ix
How to use the NEC4 user guides x
Chapter 1 Introduction 1
.
ly
Engineering and construction subcontract (ECS) 1
on
s
Chapter 2 Core and main Option clauses 3
se
1 General 3
r po
2 The Contractor’s main responsibilities 21
pu
3 Time 27
g
in
4 Quality management 36
in
tra
5 Payment 46
r
6 Compensation events 54
Fo
7 Title 74
.
ly
8 Liabilities and insurance 76

on
9 Termination 78
ity
rs
Chapter 3 Clauses for resolving and avoiding disputes 81

ve
ni
U
Chapter 4 Secondary Option clauses 85

n
Option X1: Price adjustment for inflation (used only with Options A, B, C and D) 85
to
As
Option X2: Changes in the law 86

by
Option X3: Multiple currencies (used only with Options A and B) 87

se
Option X4: Ultimate holding company guarantee 87

ru
Option X5: Sectional Completion 88

Fo
Option X6: Bonus for early Completion 88

Option X7: Delay damages 88
Option X8: Undertakings to the Client or Others 89
Option X9: Transfer of rights 90
Option X10: Information Modelling 90
Option X11: Termination by the Client 91
Option X12: Multiparty collaboration (not used with Option X20) 91
Option X13: Performance bond 93
Option X14: Advanced payment to the Contractor 93
Option X15: The Contractor’s design 94
Option X16: Retention (not used with Option F) 94
Option X17: Low performance damages 95
Option X18: Limitation of liability 95
Option X20: Key Performance Indicators (not used with Option X12) 96
Option X21: Whole life cost 96
Option X22: Early Contractor Involvement (used only with Options C and E) 97
© nec 2017 neccontract.com Managing an Engineering and Construction Contract iii

Contents
Option Y(UK)1: Project Bank Account 99

Option Y(UK)2: The Housing Grants, Construction and Regeneration Act 1996 99
Option Y(UK)3: The Contract (Rights of Third Parties) Act 1999 100
Chapter 5 Schedule of Cost Components (SCC) 101
Chapter 6 Short Schedule of Cost Components (SSCC) 105
Appendix 1 Contract start-up checklist 106
Appendix 2 Contract close down checklist 110
Appendix 3 Example communication forms 112
Appendix 4 Example joint compensation event tracking schedule 120
.
ly
on
Appendix 5 Example quotation of a compensation event 121
s
se
rpo
pu
g
in
in
r tra
Fo
.
ly
on
ity
rs
ve
ni
U
n
to
As
by
se
ru
Fo
iv Managing an Engineering and Construction Contract neccontract.com © nec 2017

Foreword
Foreword
Continuous improvement in project delivery is required to build confidence in the UK
construction sector so that we can attract more investment. The Infrastructure and Projects
Authority (IPA) is the government’s centre of expertise for infrastructure and major projects.
We sit at the heart of government, reporting to the Cabinet Office and HM Treasury.
The application of the right contract is central to the success of the overall project delivery
system. The NEC suite of contracts has been in existence for over the 20 years and has linked
the projects, people and processes together to create the correct environment for successful
delivery.
This new and updated NEC4 contract embraces the digital changes that are happening in the
.
ly
construction industry, especially around BIM, which I believe will be central to creating a step
on
change in performance. Whilst looking forward it also builds on the fundamentals required
s
for an effective contract.
se
po
The use of NEC4 on public sector projects will help to deliver the Government Construction
r
pu
Strategy as we seek to improve central government’s capability as a construction client to
deliver further savings in the order of £1.7bn across the Government estate. The IPA looks
g
in
forward to collaborating with industry to make the delivery of projects more efficient and
in
effective.
r tra
Tony Meggs, Chief Executive, Infrastructure and Projects Authority

Fo
.
ly
on
ity
rs
ve
ni
Reporting to Cabinet Office

U
and HM Treasury
n
to
As
by
se
ru
Fo
© nec 2017 neccontract.com Managing an Engineering and Construction Contract v

Fo
ru
se
by
As
to
n
U
ni
ve
rs
ity
on
ly
.
Fo
r tra
in
in
g
pu
rpo
se
s
on
ly
.
Preface
Preface
NEC was first published as a new and innovative way of managing construction contracts in
1993 – some 24 years ago. It was designed to facilitate and encourage good management of
risks and uncertainties, using clear and simple language.
The NEC approach to managing contracts was endorsed in “Constructing the team – The
Latham Report”, which was a government/industry review of procurement and contractual
arrangements in the UK construction industry. This led to a second edition in 1995
incorporating the further recommendations of that review. This contract was used increasingly
in the UK and overseas, and a major revision was made with the third edition in 2005.
NEC has played a part in helping the industry do things differently and better. It has done
.
ly
so by introducing effective project management procedures into the contract itself. These
on
require pro-active management of risk and change, and the day-to-day use of an up-to-date
s
programme. The range of pricing options has given Clients flexibility in the allocation of risk
se
and the ability to share risk and manage it, collaboratively.
r po
The NEC suite has evolved over three decades, embedding consultation responses and user
pu
feedback, and reflecting industry development, including new procurement approaches and
g
management techniques such as alliances, management of information (BIM) and supply
in
in
chain engagement. This feedback and the new procurement approaches formed the driver
tra
for the development of the next generation contracts and the launch of NEC4.
r
Fo
There were three key objectives in drafting NEC4:

.
ly
• provide greater stimulus to good management

on
• support new approaches to procurement which improve contract management and

ity
rs
• inspire increased use of NEC in new markets and sectors.

ve
ni
It was to be evolution, not revolution.

U
n
Some features of NEC4 include:

to
As
• a new design build and operate contract to allow flexibility between construction and
by
operational requirements in timing and extent

se
• a new multi-party alliance contract based upon an integrated risk and reward model
ru
Fo
• new forms of subcontract to improve integration of the supply chain.
Further enhancements include:
• finalising cost elements during the contract
• incorporating a party-led dispute avoidance process into the adjudication process
• increasing standardisation between contracts and
• providing enhanced guidance to give greater practical advice to users.
NEC has always been known for its innovative approach to contract management, and this
revision continues that approach. No other contract suite has had such a transformative effect
on the built environment industry as NEC. It has put the collaborative sharing of risk and
reward at the heart of modern procurement. It is also unique in providing a complete, back-to-
back procurement solution for all works, services and supplies in any sector and any country.
NEC4 continues to set the benchmark for best practice procurement worldwide.
Peter Higgins BSc (Hons), CEng, FICE

Chair of NEC4 Contract Board
© nec 2017 neccontract.com Managing an Engineering and Construction Contract vii

Fo
ru
se
by
As
to
n
U
ni
ve
rs
ity
on
ly
.
Fo
r tra
in
in
g
pu
rpo
se
s
on
ly
.
Acknowledgements
Acknowledgements
The original NEC was designed and drafted by Dr Martin Barnes then of Coopers and
Lybrand with the assistance of Professor J. G. Perry then of the University of Birmingham,
T. W. Weddell then of Travers Morgan Management, T. H. Nicholson, Consultant to the
Institution of Civil Engineers, A. Norman then of the University of Manchester Institute of
Science and Technology and P. A. Baird, then Corporate Contracts Consultant, Eskom, South
Africa.
This fourth edition of the NEC suite was produced by the Institution of Civil Engineers
through its NEC4 Contract Board.
The NEC4 Contract Board is:
.
ly
on
P. Higgins, BSc (Hons), CEng, FICE (Chair)
P. T. Cousins, BEng (Tech), DipArb, CEng, MICE, FCIArb
s
se
I. Heaphy, BSc (Hons), FRICS, FCIArb, MCInstCES, MACostE
po
J. N. Hughes-D’Aeth, BA (Hons), MA (Cantab)
r
pu
S. Rowsell, BSc, CEng, FCIHT, FICE, MCIPS
The NEC4 drafting team consisted of: g

in
in
tra
M. Garratt, BSc (Hons), MRICS, FCIArb

R. Gerrard, BSc (Hons), FRICS, FCIArb, FCInstCES
r
Fo
R. Hayes, BSc (Hons), MEng, CEng, MICE, MAPM

S. Kings, BSc (Hons), MRICS, MCIPS, PhD
.
ly
T. Knee-Robinson, BEng (Hons), CEng, MICE, MAPM, MCIHT

on
J. J. Lofty, MRICS
ity
R. Patterson, BA, MBA, CEng, MICE

rs
B. Trebes, BSc (Hons), MSc, FRICS, FInstCES, FAPM

ve
B. Walker, BSc (Hons), GMICE, ACIArb

ni
U
Proofreading by:
n
to
As
P. Waterhouse, BEng (Hons), MBA, CEng, FICE, FCIArb, FCInstCES, FCMI

by
The Institution of Civil Engineers acknowledges the help in preparing the fourth edition
se
given by the NEC4 Contract Board and NEC4 drafting team and the support of the following
ru
organisations in releasing their staff:

Fo
Anthony Collins Solicitors LLP

Berwin Leighton Paisner LLP
CEMAR
Costain plc
Mott MacDonald Ltd
© nec 2017 neccontract.com Managing an Engineering and Construction Contract ix

How to use the NEC4 user guides
How to use the NEC4 user

guides
The NEC4 User Guides have been designed to support users as they select the most
appropriate NEC contract strategy, prepare the contract, select a supplier and manage the
contract to deliver the Client’s or Purchaser’s objectives. The guides and the corresponding
flow charts are not contract documents. They should not be used for legal interpretation of
the meaning of the contracts.
They include a step-by-step process for setting up an NEC contract and managing it through
to completion. The starting point assumes that the Client has resolved the following:
.
ly
on
• the business case and project objectives,
s
se
• the risk profile has been analysed and an overall management strategy established
po
including, in broad terms, decisions made with regard who is best placed to manage the
r
pu
risks and
• g
a decision has been made to use the NEC, but the contract strategy has not been
in
in
determined.
tra
Users should work through the following sections of guidance in the logical sequence
r
Fo
provided.
.
ly
Volume 1 – Establishing a Procurement and Contract Strategy: guides users in

on
identifying the best way of achieving the Client’s or Purchaser’s objectives through the
ity
selection of the most appropriate procurement route, NEC contract and main and secondary
rs
Options. This document applies across all contracts.

ve
ni
Volume 2 – Preparing an NEC Contract: guides users in preparing the particular NEC
U
contract including Contract Data and other the documents required, ready for supplier
n
to
selection to commence. There is a version of this document for each contract, except the
As
subcontracts. For the subcontracts, the guidance is included in the relevant main contract
version of the document.
by
se
Volume 3 – Selecting a Supplier: guides users through the supplier selection process
ru
including, where necessary, tendering, issuing an invitation to tender and subsequent

Fo
evaluation and assessment. This document applies across all contracts.
Volume 4 – Managing an NEC Contract: guides users in managing the relevant contract
correctly after it comes into existence. Detailed guidance is provided which explains the
content of each NEC contract and its Options and how to operate them to achieve a
successful outcome. There is a version of this document for each contract, except the
subcontracts. For the subcontracts, the guidance is included in the relevant main contract
version of the document.
Due to their size, Volume 2 and 4 have been combined into one book for both the Dispute
Resolution Service Contract and the Framework Contract.
x Managing an Engineering and Construction Contract neccontract.com © nec 2017

MANAGE
Introduction
CHAPTER 1
Introduction
CHAPTER 1
The purpose of this guide is to explain the clauses of the NEC4 Engineering and Construction
Contract (ECC) from a practical management perspective.
The convention of using italics for terms which are identified in the Contract Data of the ECC
and capital initials for terms defined in the ECC has been used in this guide.
CHAPTER 2
Good management is important to achieve better outcomes for projects and reducing
misunderstandings and disputes. The Client’s objectives (refer to Volume 1 - Establishing a
Procurement and Contract Strategy) for the project should be fully understood and reflected
.
ly
in a clear and simple contract document (refer to Volume 2 - Preparing an Engineering and
on
Construction Contract) to promote effective management and delivery of the works (this
s
Volume).
se
po
In some of the sections of this guidance there are illustrated typical communications required
CHAPTER 3
pu
on a project. This is referenced through this guide by phrases like ‘On our project…..’ or
‘from our fictitious project…’. This fictitious project is the construction of a bypass based
g
in
in the UK and the entry examples are taken from the Contract Data worked example in
in
Appendix 1 of Volume 2.
r tra
It may be useful for the Parties to consider preparing checklists of key duties, certainly for
Fo
the start-up and close down of a contract. It is sometimes quite surprising how many duties
.
there are to be done, certainly at the start of a contract. The actions may be tabulated and
ly
on
probably advisable to be based on the structure of the ECC. Many of these are best done
CHAPTER 4
jointly by the parties and could be included in a project execution plan, if one is required.
ity
rs
An example checklist of start-up duties for the Client, Project Manager, Supervisor and
ve
Contractor is included in Appendix 1. This covers say the first month or so after the Contract
ni
U
Date assuming the starting date follows soon after.

n
to
An example checklist of close down duties for the Client, Project Manager, Supervisor and
As
Contractor is included in Appendix 2. This covers the period from just before the defects
by
date.
CHAPTER 5
se
ru
Fo
ENGINEERING AND CONSTRUCTION SUBCONTRACT (ECS)

Detailed guidance notes for the ECS have not been prepared since the principles can be
understood from the ECC guidance notes. However, there are some issues that users will
need to be aware of when using the ECS.
In the ECS the roles of the Client, Project Manager and Supervisor have all been combined
CHAPTER 6
into one (the Contractor), as it was considered that, while different people in the Contractor’s
organisation may perform the separate functions, it would be too complicated to have
different legal persons for each separate subcontract. This has required some amendments
where the ECC text describes actions by the Client, Project Manager and Supervisor. To avoid
confusion, the following items have been prefixed ‘subcontract’
• works,
• starting date,
APPENDICES
• Completion Date and
• Scope.
© nec 2017 neccontract.com Managing an Engineering and Construction Contract 1

MANAGE
Introduction
Other changes are
• Subsubcontractor for Subcontractor,

CHAPTER 1
• Subcontract Data for Contract Data,
ECC is referred to as the main contract.
Time periods stated in the ECS have been adjusted to allow for associated actions under
the main contract. Time limits in the subcontract for sending information to the Contractor
are less than the times stated in the main contract for sending information to the Project
Manager to allow time for the Contractor to incorporate or process the information. Time
limits in the subcontract for transmitting decisions or payments to the Subcontractor are
CHAPTER 2
greater than the equivalent times stated in the main contract, for similar reasons.
If there is termination under the main contract, the Contractor will wish to do the same
under the subcontracts and this is provided for as an additional ground for termination in the
.
ly
ECS.
on
A provision has been included to cater for a dispute arising under the main contract which
s
se
concerns the subcontract works. This enables the Contractor to require that such a dispute
po
can be dealt with jointly with the dispute under the main contract by the main contract
CHAPTER 3
r
pu
Adjudicator. This avoids two different adjudicators making different decisions on the same
dispute. Note this will only apply if Options W1 or W2 apply to the main contract.
g
in
in
r tra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES
2 Managing an Engineering and Construction Contract neccontract.com © nec 2017

MANAGE
Core and main Option clauses
CHAPTER 2
CHAPTER 1
1. GENERAL
Actions 10
CHAPTER 2
10.1 This clause obliges the Parties (who are the Client and the Contractor, see clause 11.2(13)),
the Project Manager and the Supervisor to do everything which the contract states they do.
It is the only clause which uses the future tense. It is also the only clause that uses the word
‘shall’, which is quite different to other standard forms of contract and, as written, it means
.
ly
this word is not required to be used again anywhere else in the contract. For simplicity,
on
everything else is in the present tense.
s
se
Where actions are permitted but not obligatory, the term ‘may’ is used.
rpo
CHAPTER 3
10.2 The Parties, the Project Manager and the Supervisor are also required to act in a spirit of
pu
mutual trust and co-operation. This is particularly needed in managing parts of the contract
g
such as early warning, payment, programme and compensation events. However, this clause
in
in
does not change the obligations of the Parties, the Project Manager and the Supervisor, as
tra
set out in the contract.

r
Fo
Identified and 11 The main definitions used in the contract are given in clause 11.2. Other definitions are given
defined terms 11.1 in optional clauses where they are specific to a particular main or secondary Option. Capital
.
ly
initial letters are used in the ECC for the defined terms to distinguish them from undefined
on
CHAPTER 4
terms.
ity
rs
Any term that is identified in the Contract Data is written in italics.

ve
ni
The Project Manager cannot change identified or defined terms.

U
n
A combination of these two systems is used when the details of a term in italics may need to
to
As
be changed during the course of the contract – e.g. the Completion Date, clause 11.2(3). The
definition of the defined term (the Completion Date) includes a reference to the same term in
by
italics (the completion date) but also refers to the possibility of changes ‘in accordance with
CHAPTER 5
se
the contract’. This combination therefore provides

ru
Fo
• a basis for tenders and the contract at the Contract Date, at which time the defined term
is the same as the italicised term,
• the flexibility to change the term, for example as the result of a compensation event, and
• the continual use of the defined term throughout the contract.

Not all the defined terms in clause 11.2 are commented further on below. Some are obvious
CHAPTER 6
enough and others may be further described in the parts of the contract that refer to such
terms.
It is important to realise that the drafting style of the ECC is such that there are no cross-
references within it so users should look cover to cover to see how the clauses relate. An
example of this related to Key Dates is as follows.
• The Contractor is obliged to do the work such that the Condition stated for each Key
Date is met by the Key Date (clause 30.3).
APPENDICES
• A Key Date and its Condition are defined terms and stated in clause 11.2(11).
• Key Dates are to be shown on each programme the Contractor submits for acceptance
(clause 31.2).

MANAGE
• The Project Manager may give an instruction to the Contractor which changes …. a Key
Date (clause 14.3) which would be a compensation event (60.1(4).
CHAPTER 1
• Should the Contractor or Project Manager become aware of a matter which could delay
meeting a Key Date, they are obliged to notify the other by giving an early warning
(clause 15.1).
• If the Project Manager decides that the work does not meet the Condition stated for a
Key Date by the date stated and, as a result, the Client incurs additional cost …. on the
same project, the additional cost which the Client has paid or will incur is paid by the
Contractor (clause 25.3).
CHAPTER 2
• There are also other clauses that deal with Key Dates such as acceleration (clause 36),
compensation events (clause 60 to 66) and Contractor’s proposals (X22).
The point is that users need to learn to navigate around the contract to join up the various
.
provisions to see how they properly work together. A good starting point for appreciating
ly
on
where in the contract each term or phrase will be found is the index to the ECC. Whilst it
may not cover all terms or phrases, it is a good starting point to help map out the provisions.
s
se
11.2(1) The definition of the Accepted Programme is worded to allow for the two possible situations,
po
where there may or may not be a programme referred to in the Contract Data part two. The
CHAPTER 3
r
pu
Client should have made it clear to tenderers if it intended the tender programme to become
the Accepted Programme by this means, and ideally any such tender programme should
g
in
broadly comply with the requirements of clause 31.2.
in
tra
There is only ever one Accepted Programme and that is the latest one accepted by the
r
Project Manager.
Fo
(4) The Contract Date is used to define the date when the contract comes into existence,
.
ly
regardless of the means by which this is achieved (which could be by means of a counter-
on
offer and its acceptance, sometimes after extended negotiations and discussions).
CHAPTER 4
ity
rs
The Parties will need to be aware when the Contract Date is because several other provisions
ve
rely upon this date. These include:

ni
U
• Deciding upon Corrupt Acts (clause 18 and 11.2(6)).

n
to
• A part of the test of judging prevention (clause 19.1), the associated compensation event
As
(60.1(19)) and possible termination (clause 91.7).

by
CHAPTER 5
• Determining by when the quality policy statement and quality plan are to be provided
se
(clause 40.2).
ru
Fo
• Determining by when the first programme is to be submitted for acceptance if no

programme was identified in Contract Data part two.
• A part of the test of judging a physical condition compensation event (clause 60.1(12))
and a change in the law (Option X2).
• Determining the amount due for certain terminations (clause 93.2).

CHAPTER 6
• A part of the test of judging certain compensation events (clause 60.4, Option B and D).
• Determining the date by which an ultimate holding company guarantee or a

performance bond is to be given (Option X4 and X13).
• Determining the date by which undertakings to Others are to be provided (Option X8).
• Determining the date by when the Project Bank Account is to be established (Option
APPENDICES
Y(UK)1).
(5) The word ‘Defect’ has a restricted definition. This tells us what a ‘Defect’ is and therefore
what it is not. Where a problem arises during the works, the Supervisor and Contractor will
need to ask, “is this a Defect?” and act accordingly. This definition should quickly guide the
Parties to how to deal with the matter in accordance with the contract.

MANAGE
(9) The definition of Equipment is broad and avoids using separate terms for items which are
treated in the same way under the contract. It covers, for example, construction plant,
vehicles, consumables, tools, temporary works, cabins, temporary access roads and other
CHAPTER 1
such facilities. The term ‘Equipment’ has been used where it has been customary to use
‘plant’ or ‘constructional plant’ in UK building and civil engineering practice. This change is
made so that the ECC can be used internationally and for other engineering work where it is
customary for ‘the plant’ to mean part of the works to be provided.
(10) The Fee includes all the costs of the Contractor that are not included in Defined Cost,
together with its profit and any allowance for its risks (see clause 52.1). The Fee is calculated
by applying the fee percentage stated in the Contract Data part two to the Defined Cost.
CHAPTER 2
The Fee is used in assessing compensation events, calculating amount due on certain
terminations (clause 93.2) and, for Options C, D, E and F, in assessing amounts due to the
Contractor.
(12) The defined term ‘Others’ provides a convenient means of reference to people and
.
ly
organisations not directly involved in the contract. However, there are instances where such
on
a general term is not appropriate, e.g. in clause 15.2. In these cases the term ‘other people’ is
s
used to avoid any impression of a typing error which might have been given if ‘others’ were
se
to be used without the capital initial.
rpo
CHAPTER 3
(14) Items temporarily used in the construction but removed at or before Completion are
pu
excluded from the definition of Plant and Materials; they are Equipment.
g
in
(15) The definition of Provide the Works is very widely written to cover all the obligations of the
in
Contractor. This not only includes the physical works themselves involving, for example, people,
tra
Equipment, Plant and Materials but also the supporting activities such as planning, buying,
r
Fo
procurement, accounts and so on. The importance of this can be seen in clause 20.1 where
.
“The Contractor Provides the Works in accordance with the Scope.”

ly
on
(16) Scope is information about the works to be provided. Scope can be changed by the Project
CHAPTER 4
ity
Manager during the course of the contract (clause 14.3).

rs
(17) The purpose of the definition of the Site is to illustrate precisely what is and is not the Site
ve
itself. The Client is responsible for providing access to and use of the Site to the Contractor as
ni
U
necessary for the work (clause 33.1). If the Contractor requires further areas to carry out the
n
works, called Working Areas, it is responsible for providing them. The boundaries of the site
to
will normally be shown on a drawing which is identified in the Contract Data part one.
As
(19) There is quite comprehensive drafting of what is (and therefore what is not) a Subcontractor
by
under the contract. The main purpose is to exclude persons or organisations who are
CHAPTER 5
se
ordinary suppliers of Plant and Materials and Equipment and instead allow the Parties to
ru
focus on those persons or organisations providing something particular on the project who
Fo
need to be accepted by the Project Manager, according to the provisions of clause 26.
(20) Working Areas are important in respect of payments to the Contractor under Options C, D
and E (see the Schedule of Cost Components), for assessing compensation events (see the
Schedule of Cost Components and the Short Schedule of Cost Components) and in relation
to title (see clauses 70 and 717). The working areas proposed by the Contractor in the
Contract Data part two only become the Working Areas if they comply with this definition.
CHAPTER 6
Interpretation and 12
the law 12.3 Whilst this provision is not something that the Project Manager is directly responsible for, it
may well be the Project Manager that helps the Parties by facilitating discussions to effect
a change to the contract to which they have entered into. It is most likely that legal advice
would be necessary here too.
It could be that economic circumstances change such that both Parties would prefer mutual
termination but on different grounds to that provided in the contract. Or that a Subcontractor
APPENDICES
is potentially going into insolvency and both Parties wish to keep the organisation solvent by
paying monies directly into the Subcontractor’s bank account. Or that the Completion Date
and Key Dates should be changed to suit the Client’s business interests but the Parties (for
whatever reason) did not want to use the acceleration or compensation event processes to
effect this. These sorts of difficult circumstances may be better dealt with constructively and
practically outside of the conditions of contract but this clause brings the resolution back into
the contract, giving the resulting protection the Parties will generally desire.

MANAGE
If the Parties are considering changes, they should take suitable care and advice to ensure
that those changes are drafted to reflect clearly and completely what they have agreed to
achieve. In addition, care should be taken to ensure that any ambiguity or inconsistency with
CHAPTER 1
the rest of the contract is avoided.
Communications 13 The ECC requires various communications to be given. These might include an instruction,
an acceptance or a notification, to name a few. These communications are threaded into the
contract processes alongside the obligations of the various parties. For example, clause 32.2
of the ECC states
‘‘The Contractor submits a revised programme to the Project Manager for

acceptance ... ’’
CHAPTER 2
This clause, read together with clause 31.1 obliges the Contractor at different times in the
contract to produce a programme, to revise it and submit it for acceptance. The required
communication in this clause takes the form of a submission of the revised programme by
.
ly
the Contractor to the Project Manager.
on
In turn, clause 31.3 states
s
se
po
‘‘Within two weeks of the Contractor submitting a programme for acceptance,
the Project Manager notifies the Contractor of the acceptance of the
CHAPTER 3
r
pu
programme or the reasons for not accepting it.’’
g
in
Here, the Project Manager has a certain time period either to accept the programme or to
in
tra
notify reasons for not accepting it. The communications here take the form of the Project
Manager either accepting (the programme) or notifying (that the Project Manager does not
r
Fo
accept the programme, together with reasons).

.
ly
Clause 13.1 details the communications the contract requires to be given, what form they
on
take and what language the writing should be in.

CHAPTER 4
ity
‘‘Each communication which the contract requires is communicated in a form

rs
ve
which can be read, copied and recorded. Writing is in the language of the
ni
contract.’’
U
n
On this basis, NEC has produced several simple, basic forms for users to manage their ECC
to
contracts better. These are the minimum number of communication forms that are required.
As
by
Users can take the forms and adapt them to suit their projects as they see fit. Forms available
CHAPTER 5
for the ECC include for:

se
ru
• an instruction
Fo
• a notification
• a submission
• an acceptance
CHAPTER 6
• a payment certificate
• a Completion certificate
• a take over certificate
• a Defects Certificate.
The forms are included in Appendix 3 and are written neutrally. So, the ‘instruction’ form can
come from the Supervisor, Project Manager or Contractor, as the contract requires.
APPENDICES
These communication forms, together with the Contract Data for the ECC are available as
part of the membership of the NEC Users’ Group (see www.neccontract.com).

MANAGE
Users should note that it is intended that some forms have multiple uses. For example, the
notification form can be used to notify matters such as:
CHAPTER 1
• a change of address for receiving communications (clause 13.2),
• early warnings (clause 15.1),
• compensation events (clause 61.1 and 61.3),
• failure of Project Manager in respect of compensation events (clause 61.4, 62.6 and
64.4) and
• a dispute (clause W1.1(2)) or intention to refer to tribunal (clause W2.4(2)).
CHAPTER 2
Clause 13.7 states
‘‘A notification or certificate which the contract requires is communicated
.
ly
separately from other communications.’’
on
Except for notifications and certificates, other communications could potentially be
s
se
communicated together.
rpo
CHAPTER 3
It is usual to have a start-up meeting where matters such as communications protocol
pu
would likely feature. Who is going to act on behalf of the Contractor and to whom should
g
communications be sent? Is the address in Contract Data part two the one to be used for
in
in
communications to the Contractor? Are there any delegates of the Project Manager on this
tra
project?
r
Fo
The communication forms to be issued in an ECC can be both various and sometimes quite
extensive. Consider an ECC Option A with a well written Scope, minimal instructed change
.
ly
to it and minimal problems that arise through the early warning process. In this case, the
on
number of communications might be quite small. Contrast this with an ECC Option E with
CHAPTER 4
ity
a developing Scope undergoing constantly instructed change, along with considerable

rs
problems that arise through the early warning process. Here, the number of communications
ve
could be quite extensive. It is the Scope and the risks surrounding this that in the main causes
ni
the increase in communications, not the underlying contract itself.

U
n
Users will therefore need to consider several factors when deciding the communication
to
As
system that is appropriate for their needs. On an ECC, the following should be considered, if
not already addressed in the Scope:
by
CHAPTER 5
se
• Which main Option is it and what would be the communication implications of each?
ru
• How clearly defined is the Scope, what degree of change to this is likely?
Fo
• Does the Client/Contractor/Project Manager already have an appropriate communication

system in place?
• What extent of risk is likely to occur during the contract?
• What is the geographical spread of the contract?

CHAPTER 6
These considerations will help shape the appropriate communication system for the project,
which could range from a manual based system, using the communication forms in this
guidance, through to one of several technology based process systems available to users.
Many organisations will operate quality management systems and have in place processes
for recording the flow of contractual communications. Simple schedules could be kept
for the individual roles under the contract (and collaboratively of course) collecting up the
various communications, an example communication schedule for our project is shown
APPENDICES
below. This could have further columns included if the Parties require, such as:

MANAGE
• date by when reply required and
• specific clause number.

CHAPTER 1
Additionally
• there could be individual lists for each type of communication and
• each list could be split by section of project and so on.
Whilst there is any number of ways to track these communications, the Parties should try and
make this useful but as simple as possible.
CHAPTER 2
Contractor (in and out communications):
.
COMM. REF. DATE DESCRIPTION REPLY COMM. REF. DATE COMMENT
ly
on
CN/1 7/10/17 15.1 – problem with testing of free-issue beams n/a n/a
s
se
EWR/1 7/10/17 EWR/1 issued. n/a n/a
po
CHAPTER 3
r
pu
PMN/1 10/10/17 14.2 delegation of PM actions to Mary Miles n/a n/a
g
in
in
Submission/1 11/10/17 31.1 – 1st programme submitted Acceptance/1 18/10/17
tra
Payment cert/1 1/11/17 51.1 – payment certificate nr 1 n/a n/a

r
Fo
PMI/1 13/11/17 14.3 – procure trees n/a n/a

.
ly
PMN/2 13/11/17 61.1 – PMI/1 is a CE and submit quotation n/a n/a

on
CHAPTER 4
ity
Submission/2 18/11/17 62.3 – quotation for PMI/1 CE PMN/3 24/11/17

rs
CN/2 15/1/18 43.2 – collapse Defect drain run A-B Have we corrected
ve
this yet?
ni
U
Inform/1 31/1/18 41.3 – supervisor to carry out tests on imported n/a n/a
n
fill at XYZ
to
As
SI/1 4/3/18 43.1 – uncover drain run MH1–MH2 to search

by
for Defect
CHAPTER 5
se
CC/1 15/10/18 30.2 – Completion of the whole of the works n/a n/a Advise insurers
ru
achieved.
Fo
TOC/1 15/10/18 35.3 – Client takes over works n/a n/a Advise insurers
DC/1 15/10/19 44.3 – issue of Defects Certificate n/a n/a

CHAPTER 6
APPENDICES

MANAGE
Project Manager (in and out communications):
COMM. REF. DATE DESCRIPTION REPLY COMM. REF. DATE COMMENT
CHAPTER 1
CN/1 7/10/17 15.1 – problem with testing of free-issue beams n/a n/a
PMN/1 10/10/17 14.2 delegation of PM actions to Mary Miles n/a n/a
Submission/1 11/10/17 31.1 – 1st programme submitted Acceptance/1 18/10/17
CHAPTER 2
Payment cert/1 1/11/17 51.1 – payment certificate nr 1 n/a n/a
PMI/1 13/11/17 14.3 – procure trees n/a n/a
PMN/2 13/11/17 61.1 – PMI/1 is a CE and submit a quotation n/a n/a
.
ly
on
Submission/2 18/11/17 62.3 – CE quotation for PMI/1 PMN/3 24/11/17
s
CC/1 15/10/18 30.2 – Completion of the whole of the works n/a n/a
se
achieved.
po
r
CHAPTER 3
TOC/1 15/10/18 35.3 – Client takes over works n/a n/a
pu
DC/1 15/10/19 44.3 – issue of Defects Certificate n/a
g n/a Need to do
in
assessment.
in
r tra
A more comprehensive schedule might be appropriate to help manage the compensation

Fo
event process. This could take the form as shown in Appendix 4.

.
ly
Note there is no requirement to number compensation events but it is helpful for

on
management purposes. Ideally the compensation event schedule is jointly accessible to both
CHAPTER 4
ity
Contractor and Project Manager and should always be kept up to date. An event will start
rs
the compensation event process off. It will be notified by Contractor or Project Manager
ve
and will progress, or not, from there. If there are iterations of the quotation for example,
ni
more lines can be taken so eventually a row, or a series of rows, maybe even coloured to
U
differentiate, will tell a story from left to right of the journey of each compensation event.
n
to
As
An alternative approach is perhaps to have a summary sheet for each compensation event
which records in date order the communications arising for each. When each one concludes,
by
it can be archived in whatever format suits.
CHAPTER 5
se
ru
There are no explicit rules within the contract for these sorts of things, the Parties will need
Fo
to develop what is right for them to suit their circumstances.

To finish, below are a few useful tips for users to help comply with the ECC requirements for
communications:
• Follow the processes carefully – use ‘notify’, ‘accept’, ‘instruct’ etc. as the clause requires.
• If not already stated in the Scope, decide if a manual system or technology based system
CHAPTER 6
is best for the contract.
–– If manual system, agree whether the simple ECC communication forms will be used,
add to them if needed, create others if needed; fill in the repetitive data; decide on
the use of a tracker schedule.
–– If technology based system, which one is best for the Parties on the contract.
• Finally, and when completing the communication forms, use the language of the
APPENDICES
contract (which is stated in the Contract Data), the present tense and write in a simple,
straightforward and unambiguous manner.
13.1 The phrase ‘in a form which can be read, copied and recorded’ includes a document sent by
post, telex, cable, electronic mail, facsimile transmission, and on disk, magnetic tape or other
electronic means.

MANAGE
13.2 Modern contract management practice includes for the use of sophisticated contract
management systems which have mapped out the ECC processes and use technology to help
the Parties follow the contract provisions quite closely. If the Client requires communications
CHAPTER 1
or information to be provided in a particular electronic or paper form, this should be set out
in the Scope.
13.3 These clauses establish the use of a period for reply wherever the term (identified in the
and Contract Data part one) is used in the conditions of contract or wherever no response period
13.4 is specifically stated for any communication.
In some circumstances, it may have been appropriate to specify more than one period for
reply in the Contract Data. The obvious example would be for a response by the Project
CHAPTER 2
Manager to submissions of the Contractor’s design. Such specific cases should have been
described by reference to specific clauses of the contract, and it should have been made
clear that the ‘general’ period of reply applies to all other cases. Relying on clause 13.5 for
this purpose may not be sufficient, as the Contractor may not agree, and it is better for the
.
Contractor to know how long the Project Manager will need to review design submissions
ly
on
when it is preparing its programme.
s
se
Failure of the Project Manager or Supervisor to reply within the period for reply, when
po
applicable, may cause a compensation event to occur (see clause 60.1(6)). Potentially, if this
CHAPTER 3
r
period is completely unworkable, the Parties could look at changing this through clause 12.3.
pu
This may, however, lead the Contractor to seek a change to the Completion Date and Prices.
g
in
13.5 This clause provides for extending the period for reply that is stated in the Contract Data or
in
within the contract by agreement. Note there may be multiple periods for reply stated in
tra
the Contract Data. Where other periods for action are stated in the ECC, provisions for their
r
Fo
extension (if any) are stated in the relevant clauses.

13.7 The requirement to notify information or certificates required by the contract separately
.
ly
is included to avoid important things being overlooked. For example, so that delays which
on
CHAPTER 4
could be avoided are not missed, submission of a revised programme which shows a delay
ity
does not count as an early warning of the delay. Requiring separate notices or certificates
rs
also makes it much easier to track the procedure following the issue of the notice or
ve
certificate.
ni
U
Note that giving an early warning of a matter which has already been notified as a
n
to
compensation event is not required (see clause 15.1).

As
13.8 The ECC contains a number of examples of situations in which the Contractor is required
by
to submit information to the Project Manager. Reasons for not accepting are listed in the
CHAPTER 5
se
contract, and the first example is in clause 13.4.

ru
As clause 13.8 says, the Project Manager has authority to withhold acceptance of a
Fo
submission for any reason, although it is clearly not sensible for the Project Manager to
withhold acceptance for a reason which has no bearing on the interests of the Client.
However, some of these reasons may be quite outside the influence of the Contractor or
may arise due to factors which the Contractor had no means of foreseeing. The mechanism
described in clause 13.8 is introduced to limit the Contractor’s risk in this situation. The
Contractor does carry the risk of the Project Manager withholding acceptance for a reason
CHAPTER 6
stated in the contract. Withholding acceptance for any other reason is a compensation event
(clause 60.1(9)).
The Project 14 The Project Manager is the key individual involved in the management of the contract from the
Manager and the Client’s point of view. The Project Manager’s duties and authority are described in the clauses
Supervisor of the contract. They are not summarised in a single clause. A quick look at the ECC index will
highlight just how many provisions of the contract are dealt with by the Project Manager.
It is assumed that the Project Manager will confer with the Client as necessary in deciding
APPENDICES
which of various possible actions to take and in making other decisions which affect the
outcome of the project as far as the Client is concerned. For example, the Project Manager
has full authority to arrange an acceleration of work, although the Client would normally
be vitally interested. The fact that the Client is not often mentioned in the contract does
not mean that the Client has only a minor role. It does mean that, for the purposes of the
contract, almost all dealings with the Contractor are handled by the Project Manager.

MANAGE
However, it is important to understand that when it comes to the Project Manager exercising
judgement, such as deciding
CHAPTER 1
• whether something is a compensation event,
• the assessment of a compensation event or
• the amount to be paid to the Contractor,
that judgement must be exercised independently and in accordance with the contract. The
Client must ensure that the Project Manager has the authority to make these decisions.
The Project Manager should advise the Client whenever the Project Manager sees fit, or
CHAPTER 2
when the Project Manager’s conditions of engagement require, of any action which the
Project Manager is considering. For example, the Project Manager may inform the Client
of acceptable quotations for compensation events and consult with the Client on which
alternative quotation most suits the Client’s requirements.
.
ly
on
The Contractor will expect that all decisions which the contract envisages will be taken by
s
the Project Manager will be taken within the time limits stated in the contract. In some
se
organisations, this may require the Project Manager to pass on decisions to the Contractor
po
which have in fact been taken by the Client. This creates no difficulty if the internal
CHAPTER 3
pu
arrangements between the Client and the Project Manager enable the decisions to be made
g
and communicated to the Contractor through the Project Manager within the contractual
in
time limits.
in
tra
The Supervisor will be appointed by the Client. The Supervisor’s main function is to check
r
Fo
that work is carried out in compliance with the Scope. This may include testing of materials
and workmanship and observing tests which the Contractor carries out. The Supervisor
.
ly
is also concerned with identifying and correcting Defects and, eventually, certifying
on
the remaining Defects, if any, when the Supervisor issues the Defects Certificate. The
CHAPTER 4
ity
Supervisor’s activities may have financial consequences, but the Supervisor is not directly
rs
involved in financial matters.

ve
ni
The Supervisor can only give the Contractor an instruction to search for a Defect. If, for
U
example, the Supervisor considers that the Scope is wrong and should be changed they must
n
rely upon the Project Manager to issue the necessary instructions

to
As
The actions of the Project Manager and Supervisor are independent of each other. There is
by
no appeal from the Supervisor to the Project Manager where the actions of the Supervisor
CHAPTER 5
se
are questioned by the Contractor. If the Contractor is dissatisfied with an action of either the
ru
Project Manager or the Supervisor, its appeal is to the Adjudicator.

Fo
However, it is usual on simpler projects for the same person to act in the roles of Project
Manager and Supervisor. That is perfectly sensible but the person should make it clear as to
what role they are performing in their discussions and communications with the Contractor.
14.1 Clause 14.1 is very important for the Contractor to appreciate the effect of the Project
Manager’s or the Supervisor’s acceptance of various submissions under the contract. Where,
for example, the Scope states the Contractor is to design all the works, and the design is
CHAPTER 6
accepted by the Project Manager (under clause 21.1) but found later to be not in accordance
with the applicable law, then this will still be for the Contractor to put right. It is no excuse
that the Project Manager might have done this or could or should have done that, the
Contractor is the designer. This is reflected in the alternative definitions of a Defect set out in
clause 11.2(6).
The ECC therefore could be used in a turnkey type project where there is no submission
of design required – the Contractor designs, builds and then hands over to the Client, with
potentially minimal actions of the Project Manager.
APPENDICES

MANAGE
14.2 On major contracts, it is normal for both the Project Manager and Supervisor to have staff to
help them carry out their duties. This clause enables them to delegate specific authorities and
duties under the contract to members of staff or other people. Before delegation is effective,
CHAPTER 1
the Contractor must first be notified. Notification to the Contractor should include details of
the actions delegated and the person to whom they are delegated.
An example of such delegation on our project is found in Project Manager’s notification

PMN/2 shown later.
Delegation does not prevent the person who delegates from also acting themselves. In such
circumstances, however, care needs to be taken to ensure contradictory communications
are not given to the Contractor. The Project Manager would normally advise the Client and
CHAPTER 2
the Supervisor, as well as the Contractor, of any delegation of the Project Manager’s actions,
but this is entirely a matter for arrangement between these parties. In the same way the
Supervisor would normally inform the Project Manager and the Client of any delegation
of the Supervisor’s actions. A Project Manager could delegate actions to the Supervisor, or
.
ly
the other way around. However, in very small contracts, where for example the Supervisor
on
is absent for unavoidable reasons, it may be convenient for the Supervisor to delegate the
s
Supervisor’s actions to the Project Manager.
se
po
It is essential to ensure that there are properly briefed delegates of the Project Manager and
CHAPTER 3
r
pu
the Supervisor in place to manage the situations when the people in those roles are away
from work for time to time for holiday and illness absences. Some of the obligations of the
g
in
Project Manager and Supervisor must be carried out quickly, and they cannot wait until the
in
named people return.

tra
14.3 The authority to change the Scope belongs exclusively to the Project Manager and any
r
Fo
person to whom the Project Manager delegates this authority. Neither the Client nor the
Supervisor can change the Scope.
.
ly
on
The ECC does not limit the ordinary meaning of the word ‘change’ in relation to a change
CHAPTER 4
ity
to the Scope or a Key Date. Consequently, for changes to the Scope, it includes additions
rs
to and deletions from this document, as well as alterations to it. However, it is important to
ve
understand that such changes cannot go outside the definition of the works identified in the
ni
Contract Data.
U
n
For changes to the Key Date, it only includes moving the Key Date itself backwards or
to
As
forwards; the Condition cannot be changed. The Project Manager should discuss such
changes with the Contractor to ensure that they are practicable. Any such changes will be
by
compensation event as set out in clause 60.1(4).

CHAPTER 5
se
ru
If, for example, the Project Manager issues new information which the Project Manager
Fo
intends merely to clarify a previously issued drawing or specification wording this is as much
a change to the Scope as the issue of a new drawing which adds to the work which the
Contractor must do. Consequently, all such changes are potentially compensation events as
set out in clause 60.1(1).
Early warning 15 Clause 15 deals with early warnings and is designed to be a reciprocal but simple risk
management tool. It deals with all risks and not just confined to those that the Client is
CHAPTER 6
responsible for. If the Contractor or the Project Manager becomes aware of any of the
matters stated in clause 15.1 they are obliged to notify the other of an early warning.
‘‘The Contractor and the Project Manager give an early warning by notifying
the other as soon as either becomes aware of any matter which could ... ’’
The early warning process is entirely separate from the compensation event process.
Sometimes matters which start out as early warnings may become compensation events, but
others will not. When a compensation event arises, the Project Manager and Contractor are
APPENDICES
left only to deal with cost and time matters arising due to the event. When an early warning
matter arises, the Project Manager and Contractor set about making and considering
proposals for how the effects of each matter in the Early Warning Register can be avoided or
reduced, amongst other obligations, at early warning meetings.

MANAGE
Neither the Project Manager nor the Contractor should look at this process as just a
precursor to a “claim” for a compensation event. It is important for both of them to
understand that this imparts obligations on them both. The Project Manager should be just
CHAPTER 1
as active as the Contractor in notifying early warnings that fall within the definitions in clause
15.1. That will ensure that these matters can be dealt with before they cause problems,
rather than afterwards.
There is little point and no obligation to notify an early warning of a matter which has
happened and has no future consequence. The process is about seeking solutions to
problems to do with the future, not the past. If an event has happened it may well be a
compensation event or perhaps a Defect, but is not something that requires an early warning
to be notified.
CHAPTER 2
This process continues throughout the contract period, early warnings are notified, captured
on the Early Warning Register, early warning meetings are held and hopefully most problems
are solved bringing advantage to all those who will be affected. The Early Warning Register is
.
kept up-to-date through the early warning meetings and the Parties can keep the risks in the
ly
on
numbered order in which they occurred, or whether they have been avoided or passed, or
by a most sophisticated likelihood/severity method, if they want to. There is no prescriptive
s
se
requirement for such in the ECC, the Parties can decide what is best for them.
rpo
CHAPTER 3
Note that while there is an obligation to notify the early warning as soon as possible, there is
pu
no requirement to hold the Early Warning Meeting as soon as possible. The meeting is held
g
at a time which reflects the seriousness of the potential threat or opportunity identified.
in
in
15.1 The purpose of this clause is to make binding the obligation to warn as soon as possible of
tra
anything which may affect the cost, timing of Completion or a Key Date, or the quality of
r
Fo
the works. The sanction for failure by the Contractor to give early warning is to reduce the
payment due for a related compensation event (clause 61.5 and 63.7). Another sanction
.
ly
is that payment might be reduced as a Disallowed Cost arises (for Options C to E, clause
on
11.2(26), and for Option F (clause 11.2(27)).
CHAPTER 4
ity
Examples of such problems could be

rs
ve
• discovery of unexpected ground conditions,

ni
U
• potential delay in the supply of crucial Plant and Materials,

n
to
As
• potential delay caused by the work of public utilities or other contractors,

by
• effects of bad weather,
CHAPTER 5
se
ru
• failure by a Subcontractor to perform, and

Fo
• design problems.
The Project Manager is motivated to give early warning to maximise the time available to
consider the problem with the Contractor and thereby to increase the likelihood of finding
the best solution to meet the Client’s interests.
If an early warning is given by either the Project Manager or the Contractor, the Project
CHAPTER 6
Manager is required to make an addition to the Early Warning Register to cover the matter.
Getting parties to think about both threats and opportunities in a collaborative way can only
be good for the project and the people and organisations working on it.
15.2 The Early Warning Register is defined in clause 11.2(8) and is a live document which will
change during the progress of the works. Initially it will contain those risks identified by the
Client and the Contractor in parts one and two respectively of the Contract Data. Risks are
then added to the Early Warning Register as part of the early warning process described in
APPENDICES
clause 15, or removed because of actions taken by the Parties to avoid them or because they
did not happen.

MANAGE
Immediately following contract award, the first Early Warning Register is compiled and issued
by the Project Manager. At that stage, it may do no more than list those matters set out
in Contract Data parts one and two. The Project Manager must also set up the first early
CHAPTER 1
warning meeting with the Contractor. At the same time the Project Manager and Contractor
should arrange for future early warning meetings to be set up for the rest of the duration of
the project at the intervals stated in the Contract Data.
The Project Manager or Contractor can and should instruct the other to attend any additional
early warning meetings they think are necessary. These are often needed because matters
crop up which need urgent actions. An early warning should make clear whether the matter
can be dealt with in the next routine early warning meeting or is urgent and needs to be
dealt with in its own early warning meeting.
CHAPTER 2
The contract specifically allows for Subcontractors to attend early warning meetings if they
can help solve the problem. In addition, the Contractor and Project Manager may agree that
other people should attend according to the particular circumstances. For example, suppliers,
.
ly
public utilities, local authority representatives or the Client itself may attend, if it is thought
on
that their attendance can help manage any of the matters on the early warning register.
s
se
15.3 The intention of the requirement for the Contractor and Project Manager (and any other
po
people attending the meeting) to co-operate is to ensure, as far as possible, that actions
CHAPTER 3
r
are taken and decisions made which avoid or reduce the effects of identified risks on cost,
pu
quality and time.
g
in
Note that the intention of the meeting is to solve the problem (the ‘threat’) or exploit the
in
tra
opportunity. It is not to decide responsibility, or who will pay for actions taken; the relevant
provisions of the contract will cover these aspects quite adequately.
r
Fo
There is a collective responsibility of those attending to do all of the things stated in clause
.
ly
15.3; it is not left to just the Project Manager or Contractor to do this. Those attending
on
should be at their creative best in seeking solutions to solving threats and exploiting
CHAPTER 4
ity
opportunities; again, a good outcome of a collaborative contract.

rs
ve
It is also important, especially at regular early warning meetings, to review the progress and
ni
effectiveness of the various actions recorded in the Early Warning Register and decide if any
U
need changing. At the same time matters which have passed can be agreed to be deleted
n
from the Early Warning Register.

to
As
15.4 A required outcome is for the Project Manager to update the Early Warning Register to
by
record any decisions about actions to be taken, stating not only who will take them but also
CHAPTER 5
when action will be taken, and to issue the updated register within one week of each early
se
warning meeting.
ru
Fo
Contractor’s 16
proposals 16.1 This clause allows the Contractor to propose that the Scope provided by the Client is
and changed. This change would only be proposed where the amount the Client pays to the
16.2 Contractor for Providing the Works is reduced. This clause does not cover the situation where
the Contractor proposes the Scope provided by the Contractor is changed.
The sorts of proposals a Contractor might suggest here might be those that historically were
CHAPTER 6
called value engineering ideas – suggestions for using different types of Plant and Materials
to those stated in the Scope; or changing the design life of a part of an asset; or changing a
Client design to allow for simpler and safer construction methods.
The Project Manager, most likely in close consultation with the Client, would need to
understand the impact such a change might have on operating costs of the asset, before
deciding on the best way forward.
APPENDICES

MANAGE
Within four weeks of the Contractor making the proposal, one of three routes might be
taken by the Project Manager. It might be the proposal has been considered in the past and
is of no interest to the Client. So, it would not be accepted. Or that it is of interest but the
CHAPTER 1
Client would like to know the effects on the Prices and the Completion Date so the Project
Manager instructs the Contractor through the proposed instruction route (see clause 65).
Finally, that the proposal is required and the Project Manager issues an instruction to change
the Scope straight away. This then follows the normal compensation event process for
valuing (see clauses 60 to 64 and 66). This would include the value engineering percentage
assessment in clause 63.12 for Options A and B, and the Prices (the target) remaining the
same in Options C and D through clause 63.13 to allow the Parties to potentially share in the
Contractor’s share (see clause 54).
CHAPTER 2
16.3 The Site is defined as the area within the boundaries of the site stated in the Contract Data.
This area will comprise locations provided by the Client for the works.
However, contractors often make use of other areas, sometimes adjacent to the Site, for a
.
variety of purposes, such as batching plant, temporary workshops and steel bending yards.
ly
on
On some contracts the Contractor may establish depots which are distant from the Site. It
can be an advantage to include them in the contract areas.
s
se
po
To achieve this, the concept of Working Areas is introduced. The Working Areas include the
CHAPTER 3
Site and other areas. The Contractor should have listed the specific areas by location in the
pu
Contract Data part two. Note that it is expected that these areas are specific to the contract
and closely associated with Site activity. g
in
in
tra
Sometimes the precise area may not be known at tender or it may be anticipated that
the area could change during the contract (for example, where the location of an off-site
r
Fo
batching plant will be moved during the construction of a road or where the Contractor is
responsible for locating borrow pits). In these cases, a generic description of the purpose or
.
ly
type of area should be listed.

on
CHAPTER 4
ity
The ‘original’ working areas are defined in Contract Data part two. As its plans develop,
rs
the Contractor may find that it needs to add further areas as Working Areas, for example
ve
an additional borrow pit, a compound for the temporary offices or additional land to store
ni
Plant and Materials on. This clause gives the Project Manager discretion to refuse acceptance,
U
in that there are two reasons for not accepting the Contractor’s proposal, but the Project
n
to
Manager is not obliged to refuse. The procedure for this is set out this clause.
As
Requirements for 17
by
instructions 17.1 This clause is intended to ensure that action is taken as soon as possible to deal with
CHAPTER 5
se
ambiguities and inconsistencies which are noticed in or between the contract documents.
ru
There is no stated precedence of documents in the ECC though one can be interpreted for
Fo
certain of these documents. For example, clause 20.1 states that “The Contractor Provides
the Works in accordance with the Scope” and, assuming Option A is used, clause 55.1
states that “Information in the Activity Schedule is not Scope or Site Information”. So in
determining what the Contractor is to do (the Scope), it cannot reply upon what the Activity
Schedule does or does not say.
The Project Manager has the responsibility of trying to resolve an ambiguity or an inconsistency
CHAPTER 6
in or between documents. However, in doing so, it must be recognised that the Project
Manager has the power to unilaterally change only some parts of the contract to resolve an
ambiguity or inconsistency, i.e. the Scope and Key Dates (clause 14.3) and, in Options B and D,
the Bill of Quantities (clause 60.6). If the Project Manager does not have the power to resolve
the ambiguity or inconsistency all the Project Manager can do is inform the Parties how the
contract should be changed. Such a change can however, only be made with the agreement
of both Parties (see clause 12.3) and if the Parties cannot reach agreement they and the Project
Manager will have to live with the ambiguity or inconsistency as best they can.
APPENDICES
An instruction to change the Scope to resolve an ambiguity or inconsistency is a compensation

event. Assessment is based on the rule stated in clause 63.10. However, if an inconsistency
becomes apparent between the Scope provided by the Client and a design which is part of
the Scope provided by the Contractor in the Contract Data part two, the instruction would
normally be to require the design to comply with the Client’s Scope. Such a change would not
be a compensation event, because clause 60.1(1) second bullet states as much.

MANAGE
17.2 A change to the Scope to resolve illegal or impossible requirements in the Scope is made
under clause 14.3 and is a compensation event (see clause 60.1(1)).
CHAPTER 1
Corrupt Acts 18 A Corrupt Act is defined in clause 11.2(5). The Contractor does not do a Corrupt Act and
takes positive action in respect of Subcontractors and suppliers to stop such acts. Equivalent
provisions must be contained in certain subcontracts and if not, might constitute a reason for
not accepting any such proposed subcontract documents. Finally, the Client can terminate
for any Corrupt Act (clause 91.8), so the Contractor needs a thorough management plan to
address the issue.
Prevention 19
19.1 Clause 19 deals with what are commonly called ‘force majeure’ situations. These are
CHAPTER 2
significant, unexpected events causing major problems to a project that prevent it from being
completed on time, or at all.
No specific notification of such an event is required; it will likely have been notified (as an
.
ly
early warning) under clause 15, and it will be because of the consequent Early Warning
on
Meeting that the event is recognised as falling under the provisions of this clause 19. Once it
is so recognised, the Project Manager has authority to manage the consequences in the best
s
se
interests of the Client, and the event is a compensation event (clause 60.1(19)). The event is
po
therefore at the Client’s risk for both time and cost. For this reason, clause 91.7 allows the
CHAPTER 3
r
pu
Client to terminate the Contractor’s obligations to Provide the Works.
g
An example might be when a bolt of lightning sets fire to a building shortly before
in
in
Completion. Although the repair work may be covered by insurance, the consequences of
tra
delayed Completion are not. Without relief under the contract, the Contractor could have to
r
pay delay damages for late Completion of the works if Option X7 is incorporated.
Fo
Provision is made for two cases. The first is when the event prevents the whole of the works
.
ly
being completed. The second case is when the event prevents the whole of the works being
on
CHAPTER 4
completed by the date for planned Completion shown on the Accepted Programme: this
ity
is a strict test – it is not simply a matter of delay. The dates must be impossible to meet no
rs
matter what resources are used to try to catch up the time.

ve
ni
In both cases, the event must be defined in a way which excludes the normal risks one would
U
expect on a project. In addition, the drafting considers essential that the Project Manager
n
to
controls the situation and makes decisions on how to deal with the event. Clause 19 defines
As
the prevention event by two further tests.

by
The first test is that the event must be one which neither Party could prevent. This is a
CHAPTER 5
se
strict test; there is nothing that could reasonably have been done to prevent the event.
ru
For example, in the case of a Subcontractor becoming insolvent, this could have been
Fo
prevented if the Contractor had not subcontracted the work, or checked more carefully the
Subcontractor’s solvency before placing the order.
The second test is that it would have been unreasonable for an experienced contractor to
have allowed for the event. The wording provides a similar foreseeability test to that used for
physical conditions. This makes it clear that the matter is a risk issue. Again, it is doubtful that
a Subcontractor’s insolvency would pass this test given that such insolvency is a known risk.
CHAPTER 6
An example of a genuine prevention event might be when a ship carrying a transformer

to a power station site sinks and a replacement cannot be obtained in time to meet the
date for planned Completion shown on the Accepted Programme. The risk of the loss of
the transformer is very small, and it would have been unrealistic to expect an experienced
contractor to take – or the Client to pay for – the necessary mitigation measures for the risk.
It would have been unreasonable to expect an experienced contractor to have purchased and
separately shipped a spare transformer.
APPENDICES
If a genuine prevention event has occurred, then the Project Manager must first discuss the
problems with the Client and can give any instruction that the contract allows. That will
usually be changing the Scope in some way. Equally the Project Manager could decide to
accept the delay. Finally, the Client can terminate the Contractor’s obligations if the forecast
delay is more than thirteen weeks, see clause 91.7.

MANAGE
Whatever action the Project Manager takes the event is a compensation event. Any change
to the Scope instructed by the Project Manager could be treated either as a part of this
compensation event, or as a separate compensation event.
CHAPTER 1
Illustrated On our project, the Project Manager advised the Contractor that the Project Manager
use of NEC4 intended to delegate most of the Project Manager’s duties, and would notify the details
communication to the Contractor immediately following the start-up meeting. This was notified on a
forms notification form numbered PMN/1 following discussions with the Client as to the desired
extent of delegation responsibilities.
Notification
CHAPTER 2
To: Mr B Builder, Woodstone Address: Woodstone House,
Construction Ltd Collingbourne Bellinger,
Wincanton AB3 7TT
.
ly
on
From: Mr K Williams Address: County Hall, Greater
s
se
Binding, Greenwheatshire
po
GN7 3BB
CHAPTER 3
pu
Project Name: Much Binding Bypass Project ID: 1234
g
in
in
Notification No: PMN/1 Date: 10th October 2017

rtra
Fo
Under clause 14.2 I notify you:

.
ly
That Mary Miles is delegated all actions of the Project Manager in the contract except for
on
clauses 51, 90–93. Mary’s contact details are XYZ.
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
Copy to: Site team
Signed:
CHAPTER 6
APPENDICES

MANAGE
On our project, the Contractor met the Supervisor in the car park. The Supervisor had just
returned from a manufacturer’s yard and said that the off-site testing of the free-issue bridge
beams had probably failed. The Contractor considered this was a matter that the Contractor
CHAPTER 1
was obliged to notify an early warning to the Project Manager. The communication is a
notification and comes from the Contractor so the ‘Notification’ form is used, as shown
below.
Notification
To: Mr K Williams Address: County Hall, Greater

CHAPTER 2
GN7 3BB
From: Mr B Builder, Woodstone Address: Woodstone House,
.
ly
on
Wincanton AB3 7TT
s
se
po
CHAPTER 3
r
pu
Notification No: CN/1 Date: 7th October 2017
g
in
in
tra
that we were advised today by Mr H Paddick that there had been a problem with the
r
Fo
testing of the free-issue bridge beams which may lead to late delivery of the beams and a
delay to Completion.
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
Copy to: Site Team, Head Office
Signed:
CHAPTER 6
APPENDICES

MANAGE
There is no Early Warning Register form produced by NEC. Many organisations have their
own procedures and forms in place for early warnings. This is fine but the Parties need to
ensure that the requirements of the contract are followed. The Project Manager included
CHAPTER 1
the two things the contract demands, but also added some additional columns to suit the
contract. This is good management – regard the contract as a set of minimum obligations,
there is nothing stopping the Parties doing more than the minimum required if they feel it is
in the interests of the project.
The Project Manager issued the Early Warning Register to the Contractor and instructed the
Contractor to attend an early warning meeting to take place the next day.
Early Warning Register
CHAPTER 2
.
Wincanton AB3 7TT
ly
on
s
se
po
GN7 3BB
CHAPTER 3
pu
g
in
in
Notification No: EWR/1

tra
Date: 7th October 2017

r
Fo
ID Source Description of the matter The way in which the effects

of the matter are to be
.
ly
avoided or reduced
on
CHAPTER 4
ity
1 CD1 The level of the River Binding

rs
exceeds 2.6m as measured at

ve
the weir at Little Binding

ni
U
2 CD2 Contamination material is found

n
to
within the boundaries of the site

As
by
CHAPTER 5
se
ru
Fo
Copy to: Site Team

CHAPTER 6
Signed:
APPENDICES

MANAGE
Clause 15.3 requires five basic requirements to work through in any early warning meeting.
The meeting could last 5 minutes or 5 hours, there could be 2 people or 10, it could be in
person, by teleconference or videoconference; the who, how, where, when aspects of the
CHAPTER 1
meeting are left to the Project Manager and Contractor to apply judgement in deciding what
is best in the circumstances.
On our project, the attendees made their decision on CN/1. The Client’s designer said that
the tests were not conclusive; the failure was within design tolerances but that the tests
would be repeated this week. This would be reported back as soon as the results were
available but the scheduled free-issue date was not in doubt currently.
Early Warning Register

CHAPTER 2

.
Wincanton AB3 7TT
ly
on
s
se
po
GN7 3BB
CHAPTER 3
r
pu
g
in
in
Notification No: EWR/1

tra
Date: 8th October 2017

r
Fo
ID Source Description of the matter The way in which the effects

of the matter are to be
.
ly
avoided or reduced
on
CHAPTER 4
ity
1 CD1 The level of the River Binding

rs
exceeds 2.6m as measured at

ve
the weir at Little Binding

ni
U
2 CD2 Contamination material is found

n
to
within the boundaries of the site

As
3 CN/1 Possible late delivery of Re-test to be carried out

by
free-issue beams due to off-site before 12/10/17

CHAPTER 5
se
testing failure
ru
Fo
CHAPTER 6
Copy to: Site Team
Signed:
During the meeting, they did not take the opportunity to address any of the other matters
listed on the Early Warning Register. Any meeting could address one such risk or a series
of them. These decisions were recorded; the Early Warning Register was revised and
APPENDICES
immediately issued to the Contractor.

MANAGE
2. THE CONTRACTOR’S MAIN RESPONSIBILITIES
Providing the 20
CHAPTER 1
Works 20.1 This clause states the Contractor’s basic obligation, to “Provide the Works in accordance with
the Scope”. ‘Provide the Works’ is defined in clause 11.2(15) and has quite a wide-ranging
meaning. The Scope is defined in clause 11.2(16) and should have stated everything the
Contractor is to do, including design work and constraints.
The Project Manager is the only person able to change the Scope by an instruction, and each
instruction will generally lead to a compensation event arising under clause 60.1(1).
Option F In a management contract, the core clauses and this clause state how the Contractor is to
20.2 Provide the Works by identifying what it is to do itself and what it is to subcontract.
CHAPTER 2
Option C In cost based contracts, the Project Manager has a greater interest (on behalf the Client) on
to F 20.3 the practical implications of the design of the works and on subcontracting arrangements,
which this clause provides for.
.
ly
Option C This clause provides for periodic forecasts of the total Defined Cost for the whole of the
on
to F 20.4 works to be prepared by the Contractor in consultation with the Project Manager. These are
s
submitted to the Project Manager, together with an explanation of the changes made since
se
the previous forecast is submitted.
rpo
CHAPTER 3
pu
No reply to this is needed (by the Project Manager) and it is not submitted for acceptance.
g
There are also no repercussions if the forecasts turn out to be inaccurate. This sort of
in
forecasting has been carried out by contractors for many years and it is only right in a cost
in
reimbursable type contract to make this available to the Client for management purposes.
r tra
Fo
The Contractor should note that a sensible amount of time is needed for this deliverable; the
Project Manager and Client should accept that the forecasts are only that, and will not be
.
ly
perfect.
on
CHAPTER 4
The 21
ity
Contractor’s 21.1 Those parts of the works which the Contractor is required to design should have been
rs
ve
design stated in the Scope provided by the Client and the interfaces with those parts of the works
ni
designed by the Client identified. This may have been done by stating ‘everything except the
U
following’ or ‘the following’.

n
to
Where the Contractor is required to design a part of the works, the Client should have stated
As
in the Scope the criteria to which it requires designs to conform. This may include details of
by
the form, geometry and dimensions of the works, specifications, codes of practice, standards
CHAPTER 5
se
and environmental criteria.

ru
Where the Contractor is to carry out most of the design, similar criteria should have been
Fo
stated in the form of a performance specification. This will describe the characteristics,
nature and performance of the finished work and should have included any limitations which
the Client wishes to impose upon appearance, durability, operating and maintenance cost,
etc.
On contracts where the Contractor has responsibility for considerable design, Option X15 will
CHAPTER 6
usually have been chosen, which sets out further obligations.
Any change to the allocation of design responsibility or change or addition to the design
criteria in the Scope can be achieved using a Project Manager’s instruction under clause 14.3.
Again, this change to the Scope results in a compensation event arising under clause 60.1(1).
A change to the allocation of design responsibility can impose significant additional risks on
the Contractor, particularly if Option X15 has not been incorporated in the contract. Either
these risks must be properly accounted for in the assessment of the compensation event, as
APPENDICES
in clause 63.8, or the Parties should agree to incorporate X15 in their contract, using clause
12.3.

MANAGE
21.2 Just because the Scope states the parts of the works which the Contractor is to design, it
does not mean that the Contractor is to submit any or all that design to the Project Manager
for acceptance. This is completely dependent on a requirement to that effect being stated in
CHAPTER 1
the Scope. This allows the Client to be selective on what design is required to comply with
the design acceptance process. Once this is determined, the Contractor must submit such
design in time for the (generally) iterative design acceptance process to happen in time for
the works to be constructed. This should consider the period for reply in the Contract Data.
The procedures for submission by the Contractor of design particulars and acceptance by the
Project Manager are set out in this clause. The time limits are those stated in clause 13. They
are intended to encourage prompt action by the Parties so that delay can be avoided and the
whole process properly managed.
CHAPTER 2
Two reasons that the Project Manager has for not accepting the Contractor’s design are stated.
The Project Manager is not obliged to refuse acceptance of the Contractor’s design which does
not comply with the Scope but, if the Project Manager does accept such design, the Project
.
Manager should change the Scope accordingly. As stated in clause 60.1(1), such a change to
ly
on
the Scope may or may not be a compensation event (see explanatory notes on clause 60.1(1)).
s
se
Sometimes the Project Manager will see in the design submitted by the Contractor
po
characteristics which, if they had been foreseen, the Project Manager would earlier have
CHAPTER 3
r
stated to have been unacceptable by including an appropriate constraint in the Scope.
pu
In this situation, the Project Manager should add the constraint to the Scope to justify
g
the withholding of acceptance of the Contractor’s design. This change to the Scope is a
in
in
compensation event. This clause in the ECC ensures that the Contractor is protected from
tra
the risk of additional constraints on its design being introduced after its commitment to the
Prices for the work has been made.
r
Fo
Clause 14.1 makes clear that, when the Project Manager accepts the Contractor’s design,
.
ly
there is no change of liability for the design. The Client is thus placing reliance on the design
on
skill of the Contractor.

CHAPTER 4
ity
rs
The final sentence is an important hold point in the contract and is intended to prevent
ve
abortive work which would result if the Contractor began to manufacture or construct to a
ni
design which had not been accepted.

U
n
It is important to understand that the design issued for acceptance by the Contractor does
to
As
not form part of the Scope. That means the Contractor can change the design later, but must
submit the new design to the Project Manager for acceptance before it can proceed with the
by
work. Once the design is accepted, the Contractor must construct the works in accordance
CHAPTER 5
se
with it, otherwise it will be a Defect (see clause 11.2(6)).

ru
21.3 It is important that submissions by the Contractor are in packages which are capable of being
Fo
properly assessed. Independent design pieces may be fine when looked at in isolation, but
may not work when all assembled together.
Design of 23
Equipment 23.1 This clause allows the Project Manager to accept the Contractor’s design of Equipment
without affecting the Contractor’s responsibilities (clause 14.1). The Contractor is still liable if,
CHAPTER 6
after having made the Equipment to details which have been accepted, it fails because it did
not comply with the Scope. The clause gives three criteria for not accepting the design of the
Equipment. Failure to comply gives the Project Manager the right, but not the obligation, to
decline to accept the design.
Unlike clause 21.2, which provides that the Contractor should not proceed until the Project
Manager has accepted the Contractor’s design of the works, there is no restraint on the
Contractor proceeding even if the design of an item of Equipment has not been accepted.
APPENDICES
The Contractor can proceed even though it has not obtained acceptance of its design of
Equipment, which includes temporary works. The Project Manager should seek details of
temporary works well in advance of when the work is going to be done (prompted by what
the Project Manager sees on the Contractor’s programme) so that the Project Manager
can register any dissatisfaction with the proposals in good time. However, responsibility for
designing and producing Equipment generally (including temporary works) that permits the
works themselves to be completed properly lies with the Contractor.

MANAGE
People 24
24.1 This clause gives reasons for not accepting a proposed replacement for a key person. The key
persons are stated in the Contract Data part two. These should not be confused with the
CHAPTER 1
Option X23 Stage One key persons, if this Option is used. The clause does not preclude the
Project Manager accepting a person with qualifications or experience which are inferior to
the listed person, if the Project Manager is satisfied that such a person will be suitable for the
position.
It may be sensible for the Project Manager to meet with a proposed replacement, if the
Parties consider this might be beneficial.
24.2 Clause 24.2 provides the authority for the Project Manager, on behalf of the Client, to have
CHAPTER 2
any person removed from work on the contract.
Possible reasons for asserting this authority include
• security,
.
ly
on
• health and safety issues, such as communicable diseases, and
s
se
• disorderly behaviour prejudicing the Client’s or Contractor’s operations.
rpo
CHAPTER 3
However, the Project Manager may do it for any reason, provided the Project Manager states
pu
what it is.
g
in
Working with 25
in
tra
the Client and 25.1 On many projects, there are several contractors and other organisations that may be
Others involved. The Contractor’s obligation is only to co-operate with these including in providing
r
Fo
and receiving information that they may need. The exchange of information on health and
safety matters is particularly important in order to comply with any law of the country in
.
ly
which the Site is located as well as with the contract, see notes on clause 27.4.
on
CHAPTER 4
ity
However, the Contractor only need share the Working Areas, which includes the Site, with
rs
these Others to the extent set out in the Scope.

ve
ni
The Contractor is not responsible for the failure of Others to carry out their work in
U
accordance with the Scope unless the failure is caused by the Contractor not co-operating.
n
to
As
If the Scope requires that Others carry out their works at the same time as the Contractor or
provide information to the Contractor, dates for those works or information should be shown
by
on programmes issued for acceptance (see clause 31.2). If dates or timescales for these works
CHAPTER 5
se
or information have been provided in the Scope, the programme activities should comply
ru
with them. If Others fail to carry out their works or provide information in accordance with
Fo
the Accepted Programme, it will usually be a compensation event (see clause 60.1(6)).
25.2 Failure by the Client to provide the services and other things stated in the Scope is a
compensation event under clause 60.1(3). Failure by the Contractor to provide the services
and other things stated in the Scope results in it having to pay any cost incurred by the Client
under clause 25.2.
‘Providing services and other things’ is not to be confused with the Client’s use of the works.
CHAPTER 6
The Scope should have included details of the services and other things which the Client
requires during the construction operations. This particularly applies where the Contractor is
required to work in an area where the Client needs to continue working, or when the Client
requires an existing facility to be maintained. For example, in road construction projects,
traffic must continue to flow, either on temporary diversions or on the partially constructed
works. Details of the programming and how the Contractor provides for this traffic are
usually left to the Contractor. In complex traffic management schemes, it may be necessary
for the Client to prepare full details in advance and have included these in the Scope.
APPENDICES

MANAGE
25.3 The provision in this clause will only apply if and to the extent that key dates are identified in
the Contract Data.
CHAPTER 1
The setting of Key Date(s) (defined in clause 11.2(11) and identified in the Contract
Data) can be used to ensure that the Contractor completes a defined activity or part of
the works (which of itself is not a Section) to a precise programmed timescale and to a
stated Condition, so that other contractors, or the Client, can proceed with their work in
accordance with the overall project programme.
A Key Date is different from a sectional Completion Date (see Option X5) in that it does not
require the Completion of all of the work in a defined area of the Site or the taking over of
that area by the Client once achieved. Further explanation of sectional Completion is given in
CHAPTER 2
the explanatory notes for Option X5.
Throughout the contract, Key Dates are managed in the same way as Completion (or
Sectional Completion if Option X5 is used). They must be shown on all the programmes that
.
ly
the Contractor produces – see clause 31.2. The Project Manager may instruct a change to a
on
Key Date, see clause 14.3, but not the Condition that has to be met by that Key Date. Such
an instruction will be a compensation event (see clause 60.1(4)). If Key Dates are affected
s
se
by a compensation event they may be changed to a later date, see clause 63.5, and the
po
Condition may, in limited circumstances, be changed, see clause 63.11. Key Dates may also
CHAPTER 3
r
pu
be changed following the acceptance of an acceleration quotation (see clause 36).
g
The Project Manager cannot add to or remove Key Dates.
in
in
tra
Clause 25.3 establishes a procedure for the Client to recover from the Contractor any
additional cost it incurs due to the Contractor failing to meet the Condition required by the
r
Fo
Key Date. This cost is limited to the ‘additional cost’ that the Client incurs either in “carrying
out work” or “by paying an additional amount to Others in carrying out work”. The cost
.
ly
must be incurred on the same project, and not be consequential losses or additional costs on
on
CHAPTER 4
other projects that arise.

ity
rs
It falls to the Project Manager to assess such additional cost but this must be done within
ve
four weeks after the Condition for the Key Date is finally met.
ni
U
Subcontracting 26
n
to
26.1 and These clauses provide that the Contractor may subcontract parts of the works, provided the
As
26.2 Project Manager accepts the proposed Subcontractors, and, in certain circumstances, their
proposed subcontract conditions. In the case of proposals for subcontracts for small amounts
by
of technically simple work, acceptance by the Project Manager may be a formality.

CHAPTER 5
se
ru
It is important to identify those organisations which fall within the definition of a

Fo
Subcontractor as stated in clause 11.2(19). It does not include a supplier of Plant and
Materials, unless it also carries out work in the Working Areas. ‘Labour-only’ subcontractors
and companies hiring Equipment are also not Subcontractors under this definition. A
designer, who is designing all or parts of the works for the Contractor, is a Subcontractor,
except in certain circumstances. Those who have a contract to providing a service in the
Working Areas, such as rodent control, will be a Subcontractor.
CHAPTER 6
No provision is included in the ECC for nomination of Subcontractors. This is because of the
historic legal and practical problems of accountability which frequently ensued. The principle
of the ECC is that the Contractor is fully responsible for every aspect of managing the work
it has contracted for (hence clause 26.1). Nominating Subcontractors conflicts with this
principle and causes many practical problems. Alternatives to nominating Subcontractors
whilst achieving similar objectives are
• making the Contractor responsible for all work; it may then subcontract parts and the
Project Manager retains some control over the identity of the Subcontractors provided
APPENDICES
any withholding of acceptance is for the reason stated,
• providing for separate contracts, with the Project Manager managing the time and
physical interfaces between them or
• including lists of acceptable Subcontractors for tasks in the Scope.

MANAGE
Where national or international law requires, the Scope should include a statement of award
criteria for subcontracts.
CHAPTER 1
The Contractor must not appoint a Subcontractor until the Project Manager has accepted
both the Subcontractor in principle, and the proposed subcontract documents. In the
extreme, the Client may terminate for the Contractor appointing a Subcontractor to carry
out substantial work without acceptance (clause 91.2, reason 13). The Project Manager
must recognise that acceptance of a Subcontractor cannot be withdrawn later, providing its
appointment complies with these clauses.
The Project Manager should think very carefully before not accepting a proposed
Subcontractor, as it is not something that should be taken lightly. The only reason in the
CHAPTER 2
contract for not accepting it is that the appointment will not allow the Contractor to Provide
the Works. That would apply, if, for example, the Scope requires that the subcontracted work
is to be carried out by organisations or people holding certain licences, and the proposed
Subcontractor did not hold that licence. It can rarely, if ever, apply to the situation where the
.
ly
past performance of the Subcontractor is in question. Of course, the Project Manager can
on
still not accept it for the good of the project, but that will probably lead to a compensation
s
event.
se
po
If the Project Manager is unsure they should discuss such concerns with the Contractor. This
CHAPTER 3
pu
can be done, for example, by the Project Manager giving the Contractor an early warning
that appointing the proposed Subcontractor could have one or more of the effects listed
g
in
in clause 15.1. The ensuing discussions could include the likely consequences if the Project
in
Manager does decide not to accept them for a reason not in the contract.
tra
26.3 This clause removes the requirement for the Contractor to submit the subcontract conditions
r
Fo
if an NEC subcontract is proposed. This encourages the use of the NEC contracts down the
supply chain. However, this is a limited concession – the proposed NEC contract should be
.
ly
unamended or only amended in line with the amendments in the head contract. This is to
on
ensure a flow down of liabilities and obligations.
CHAPTER 4
ity
rs
The Contractor can use a variety of the contracts available within the NEC family. The
ve
NEC4 Engineering and Construction Subcontract would be suitable for use for significant
ni
subcontract work packages. The NEC4 Engineering and Construction Short Subcontract
U
is also available for straightforward, low risk work subcontracts. Similarly if the Contractor
n
to
wishes to subcontract the design of all or part of the works the NEC4 Professional Services
As
Contract or the NEC4 Professional Services Short Contract can be used.

by
The Contractor does not have to use NEC4 contracts to appoint Subcontractors, and there
CHAPTER 5
se
may be good reasons not to, for example where the requirements of an industry means that
ru
a particular subcontract must be used. However, in this case, the Contractor must provide
Fo
details of the subcontract to the Project Manager for acceptance. Again, the reasons for not
accepting these in the contract are limited.
The Project Manager also can decide that there is no need to see the contract conditions at
all – this might be appropriate for small subcontracts, or where the Contractor has agreed to
use a generic set of subcontract forms for all Subcontractors.
CHAPTER 6
Option C This clause gives the Project Manager the ability to see more information concerning the
to F 26.4 subcontract conditions than is available under Options A and B. This is because the Project
Manager is entitled to know what the Contractor will pay Subcontractors. However, this is
not issued for acceptance and it does not permit the Project Manager to directly control or
influence the prices. However, if the Project Manager is concerned about the subcontract
prices they should discuss this with the Contractor because it may lead to them not being
fully reimbursed if the Project Manager considers the prices are not at open market or
competitively tendered prices (see clause 52.1).
APPENDICES

MANAGE
Other 27
responsibilities 27.1 This clause requires the Contractor to obtain the requisite approvals for its design from
Others (such as planning authorities or the nuclear inspectorates) who may have the duty
CHAPTER 1
or authority to approve its design. The contract is silent about the Contractor obtaining
approval from outside bodies to other aspects of its work such as road closures or access for
major items of Equipment.
Note the contract uses the word ‘approval’ as opposed to ‘acceptance’ found in clauses
involving the Project Manager or Supervisor. ‘Approval’ is a word more commonly used in
other organisations, and in these circumstances, has the meaning that such organisations
give to it.
CHAPTER 2
27.2 It is important that the Project Manager, the Supervisor and Others named by the Project
Manager have the right to visit places where work is being carried out and to Plant and
Materials being stored for the contract. It may not have been possible to determine all of
the Others before the starting date where, for example, the Contractor is designing part or
.
all of the works. Different designs might well lead to different Others being involved. This
ly
on
also includes right of access to suppliers’ and Subcontractors’ premises to permit the Project
Manager, the Supervisor and Others to inspect and test work as necessary and to check
s
se
progress.
po
27.3 Various clauses in the contract give the Project Manager and the Supervisor authority to issue
CHAPTER 3
r
pu
instructions to the Contractor. It is important that these instructions are given within the
limits and for the reasons expressly stated. If, for any reason, the Contractor disagrees with
g
in
an instruction within the powers of the Project Manager, its remedy is not to refuse to obey
in
the instruction, but to follow the dispute procedure chosen for the contract.
tra
27.4 In many countries, there are laws which place considerable responsibilities upon employers,
r
Fo
employees and others in relation to health and safety. There may also be legislation
relating to health and safety on construction sites. This legislation is regularly increased.
.
ly
on
Generally, the sanctions for non-compliance are criminal in nature as opposed to civil. It
CHAPTER 4
is not appropriate or necessary to reproduce or to summarise this legislation in contract

ity
documents. The various parties each have their obligations under statute and the general
rs
law.
ve
ni
It may be that a Client requires their Contractors to comply with their health and safety
U
requirements applicable to their site. It is for this case that this clause provides. Failing to
n
to
comply may lead to termination under clause 91.2 (Reason 11).

As
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
3. TIME
Starting, 30 The period within which the Contractor is required to Provide the Works is not stated.
CHAPTER 1
Completion Instead, the starting date and the completion date are given in the Contract Data.
and Key Dates
The starting date is the date when the Contractor can start work, but that will not necessarily
be the date that work can start on Site (see clause 30.1). The starting date is also used to
initiate the fixing of some dates and intervals throughout a contract, for example payment
assessment dates (clause 50.1) and the interval for revised programmes (clause 32.2).
30.1 The Contractor cannot start work on Site until the first access date. The access dates are
stated in the Contract Data.
CHAPTER 2
Completion (defined in clause 11.2(2)) should generally have been stated in the Scope to give
the Parties the basis of an objective test to decide if Completion has been achieved. Note
that Completion is a state, not a date; some people confuse the two. Completion may occur
before, on or after the Completion Date.
.
ly
on
The completion date stated in the Contract Data may be changed in various ways, for
s
example because of a compensation event or of an agreement to accelerate.
se
po
If the Contractor does not achieve Completion before the Completion Date then delay
CHAPTER 3
pu
damages may apply, if Option X7 is chosen. Without Option X7 the Contractor will still be in
breach of clause 30.1 if Completion is not achieved until after the Completion Date, but the
g
in
law of the contract will decide what remedies the Client has in that situation.
in
tra
30.2 Completion is one of the most important points in a project and several things occur upon
Completion of the whole of the works including:
r
Fo
• Delay damages can be calculated, if X7 is used.

.
ly
on
• The bonus for early Completion can be calculated, if X6 is used.
CHAPTER 4
ity
• A preliminary assessment of the Contractor’s share is made, if Option C or D is used.

rs
ve
• The defects date is now known.

ni
U
• The Contractor stops preparing forecasts of the total Defined Cost for the whole of the
n
to
works (Options C to F, clause 20.4).

As
• The date for retention of documents and until when insurance must be maintained is
by
now known, if Option X15 is used.
CHAPTER 5
se
ru
• The Contractor stops preparing forecasts of the Project Cost, if Option X22 is used.
Fo
• A preliminary assessment of the budget incentive is made, if Option X22 is used.
• Disallowed Cost now arises for those Defects corrected from now on (clause 11.2(26)), if
Option C to F is used.
• Half of the retention is released (if Option X16 is used).

CHAPTER 6
• The end of liability date can be determined, if Option X18 is used.
• Early warnings for the second bullet of clause 15.1 are now not relevant.
• The regular early warning meetings under clause 15.2 cease.
• The second bullet of clause 19.1 (prevention) is no longer relevant.
• The regular submission of revised programmes under clause 32.2 ceases.

APPENDICES
• The Client must take over the works no later than two weeks after Completion, unless
Completion is before the Completion Date and the Client has stated that take over is not
to be done early (see clause 35.1).

MANAGE
• After take over, the Client’s liability is things like loss of or wear or damage to the parts
of the works taken over by the Client (with some exceptions) (clause 80.1).
CHAPTER 1
The Project Manager is responsible for certifying Completion, as defined in clause 11.2(2),
within one week of it being achieved. Normally, the Contractor will ask for the certificate as
soon as it considers it is entitled to it, but such a request is not necessary.
The programme 31 Good programming is at the heart of good project management, and the preparation and
agreement of regularly updated programmes is a vital part of the ECC. It is essential that the
Contractor and Project Manager work together to produce and regularly update programmes
that they can both agree. If they do not do so it is very likely that they will get into disputes
about the time taken to carry out the works.
CHAPTER 2
All programmes have a very short useful life, because events occur that mean that they
regularly become out of date. That is why clauses 31 and 32 mandate the regular updating
of the programme and getting it quickly agreed. It is in both Parties’ best interests to have an
.
ly
up to date Accepted Programme.
on
The Contractor should drive the production of revised programmes, at no longer intervals
s
se
than stated in the contract. It is good practice before it formally submits a programme for
po
acceptance for the Contractor to discuss it with the Project Manager and explain why and
CHAPTER 3
r
where it has changed.
pu
g
There are considerable consequences if the Contractor does not produce programmes
in
in
when it should, or if the Project Manager does not accept a programme for a reason
tra
stated in the contract. In those circumstances the Project Manager is required to assess
all compensation events and to use their assessment of what the programme should be
r
Fo
to do so, see clauses 64.1 and 64.2. This means that the Contractor loses control of the
compensation event assessment.
.
ly
on
Clauses 31 and 32 deal with the Contractor’s programme. Each programme is submitted to
CHAPTER 4
ity
the Project Manager for acceptance. Once accepted, the programme becomes the Accepted
rs
Programme. Clause 11.2(1) states

ve
ni
‘‘The Accepted Programme is the programme identified in the Contract

U
Data or is the latest programme accepted by the Project Manager. The latest
n
to
programme accepted by the Project Manager supersedes previous Accepted

As
Programmes.’’
by
The programme must show all the matters stated in clause 31.2 but there is no prescriptive
CHAPTER 5
se
format that the programme itself takes. Quite commonly this might take the form of a Gantt
ru
chart with supporting documents, but it could be any number of visual and/or description
Fo
documentation. The first programme might be identified in the Contract Data, established
during the tender period, or if not then is submitted by the Contractor within the period
Note that the requirements of clause 31.2 do not actually apply to any tender programme
even if it does become the Accepted Programme. Clause 31.2 refers to programmes
submitted by the Contractor for acceptance.
CHAPTER 6
Within two weeks of the Contractor submitting a programme to the Project Manager for
acceptance, clause 31.3 states the Project Manager either
‘‘notifies the Contractor of the acceptance of the programme or the reasons for
not accepting it.’’
The four reasons for not accepting a programme are stated in clause 31.3. When revised,
programmes are submitted to the Project Manager for acceptance they should show things
like the actual progress achieved on each operation and other changes which the Contractor
APPENDICES
proposes to make. The Project Manager again has then to accept or not accept in accordance
with clause 31.3, knowing that potentially the programme might be treated as being
accepted if there is continuing failure following a Contractor’s notification.

MANAGE
Revised programmes are submitted
• within the period for reply after the Project Manager has instructed the Contractor to,
CHAPTER 1
• when the Contractor chooses to and, in any case,
• at no longer interval than the interval stated in the Contract Data from the starting date
until Completion of the whole of the works (clause 32.2).
The Parties can react to the need to update the programme as they see fit for their project.
Again, regard the contract as a minimum set of requirements – the frequency of revised
programmes can be increased if the Parties feel this would be beneficial along with adding
to the already quite comprehensive details of a programme required in clause 31.2.
CHAPTER 2
In addition to the clauses 31/32 provisions for the programme itself, it is worth noting the
programme features in quite a few ECC processes:
.
ly
• ‘‘If an event occurs which . . . stops the Contractor completing the whole of the works
on
by the date for planned Completion shown on the Accepted Programme ... the Project
s
Manager gives an instruction to the Contractor ... ’’ (clause 19.1).
se
po
• The Client allows access to and use of each part of the Site to the Contractor which is
CHAPTER 3
pu
necessary for the work included in the contract. Access and use is allowed on or before
the later of its access date and the date for access shown on the Accepted Programme
g
in
(clause 33.1).
in
tra
• A quotation for an acceleration comprises ... a revised programme ... ’’ (clause 36.2).
r
Fo
• When a quotation for an acceleration is accepted, the Project Manager changes the
Prices, the Completion Date and the Key Dates accordingly and accepts the revised
.
ly
on
programme (clause 36.3).
CHAPTER 4
ity
• When accepting a quotation for a Defect that does not need to be corrected, the Project
rs
Manager changes the Scope, Prices, the Completion Date and the Key Dates accordingly
ve
and accepts the revised programme (clause 45.2)

ni
U
• If no programme is identified in the Contract Data, one quarter of the Price for Work
n
Done to Date is retained in assessments of the amount due until the Contractor has
to
As
submitted a first programme to the Project Manager for acceptance showing the
information which the contract requires (clause 50.5).
by
CHAPTER 5
se
• A compensation event is where “The Client does not allow access to and use of each
ru
part of the Site by the later of its access date and the date for access shown on the
Accepted Programme” (clause 60.1(2)).
Fo
• Further compensation events are where:
–– “The Client does not provide something which it is to provide by the date shown on
the Accepted Programme” (clause 60.1(3)).
–– “The Client or Others ... do not work within the times shown on the Accepted
CHAPTER 6
Programme . . .” (clause 60.1(5)).
–– “An event which . . . stops the Contractor completing the whole of the works by
the date for planned Completion shown on the Accepted Programme... ’’ (clause
60.1(19)).
• In any quotation for a compensation event, if ‘‘the programme for remaining work
is altered by the compensation event, the Contractor includes the alterations to the
Accepted Programme in the quotation’’ (clause 62.2).
APPENDICES
• “A delay to the Completion Date is assessed as the length of time that, due to the
compensation event, planned Completion is later than planned Completion as shown on
the Accepted Programme current at the dividing date” (clause 63.5).

MANAGE
• “A delay to a Key Date is assessed as the length of time that, due to the compensation
event, the planned date when the Condition stated for a Key Date will be met is later
than the date shown on the Accepted Programme current at the dividing date” (clause
CHAPTER 1
63.5).
• One of the instances the Project Manager assesses a compensation event is ‘‘. . . if, when
the Contractor submits quotations for the compensation event, it has not submitted a
programme or alterations to a programme which the contract requires it to submit.’’
(clause 64.1).
• Another of the instances is ‘‘. . . if, when the Contractor submits quotations for the
compensation event, the Project Manager has not accepted the Contractor’s latest
CHAPTER 2
programme for one of the reasons stated in the contract’’ (clause 64.1).
• “The Project Manager assesses the programme for the remaining work and uses it in
the assessment of a compensation event using its assessment of the programme for
.
ly
the remaining work if…. there is no Accepted Programme …..the Contractor has not
on
submitted a programme or alterations to a programme for acceptance as required by the
contract or…..the Project Manager has not accepted the Contractor’s latest programme
s
se
for one of the reasons stated in the contract (clause 64.2).
po
CHAPTER 3
r
• “The Client may terminate if an event occurs which . . . stops the Contractor completing
pu
the whole of the works by the date for planned Completion shown on the Accepted
Programme ... ’’ (clause 91.7). g
in
in
tra
• “The Contractor provides information which shows how each activity on the Activity
Schedule relates to the operations on each programme which submitted for acceptance’’
r
Fo
(clause 31.4, Option A).

.
ly
• “If the Contractor …. changes a planned method of working at its discretion so that
on
the activities on the Activity Schedule do not relate to the operations on the Accepted
CHAPTER 4
ity
Programme …. the Contractor submits a revision of the Activity Schedule to the Project
rs
Manager for acceptance” (clause 55.2, Option A). A reason for not accepting a revision
ve
of the Activity Schedule is that ‘‘. . . it does not relate to the operations on the Accepted
ni
Programme ... ’’ (clause 55.3, Option A).

U
n
to
• “The Contractor changes its programme if it is necessary to do so in order to comply

As
with the revised timetable” (clause X12.3(7)).

by
• “If the Project Manager is prepared to consider the change, the Contractor submits
CHAPTER 5
se
a quotation which comprises … a revised programme showing any changes to the

ru
Completion Date and Key Dates” (X21.2). “When a quotation to reduce the costs of
Fo
operating and maintaining an asset is accepted the Project Manager changes the Scope,
the Prices, the Completion Date and the Key Dates accordingly and accepts the revised
programme” (X21.5).
• “The submission includes the Contractor’s forecast of the effect of the design proposal
on the Project Cost and the Accepted Programme” (X22.3(2)).
CHAPTER 6
• “The Contractor submits revised programmes at intervals no longer than . . . “ (Contract

Data part one).
• “The period after the Contract Date within which the Contractor is to submit a first
programme for acceptance is . . . ’’ (Contract Data part one).
• The programme identified in the Contract Data is . . .’’ (Contract Data part two).
31.1 Provision is made in the Contract Data for a programme either to be identified in the
Contract Data part two at the Contract Date or to be submitted by the Contractor within a
APPENDICES
period stated in the Contract Data part one.
The programme is an important document for administering the contract. It enables the
Project Manager and Contractor to monitor progress and to assess the time effects of
compensation events, including changes to the Completion Date.

MANAGE
Acceptance of a programme, unlike acceptance of the Contractor’s design, is not a

condition precedent to the Contractor proceeding with the work. Failure to accept a revised
programme does not require the Contractor to stop work.
CHAPTER 1
31.2 This clause lists the information which the Contractor is required to show on each
programme submitted for acceptance. The following notes are broadly in the same order as
the bullets in the clause.
• The dates stated in the Contract Data or changed in accordance with the contract (see
explanatory notes on clauses 11.2(3), 11.2(11), 30 and 33).
• The Contractor’s updated planned Completion (and sectional Completion if Option X5 is

used) as the work progresses. This date may well fluctuate with each revised programme
CHAPTER 2
depending on factors such as progress, acceleration, accepting Defects, delays and
compensation events.
• The order and timing of the Contractor’s own work which will be continually updated
.
ly
(see clause 32.1).
on
s
• The work of the Client and Others. The reference to ‘last agreed’ allows for changes to
se
be made to the interfaces, in accordance with the contract.
rpo
CHAPTER 3
pu
• The dates when the Contractor plans to complete work for which Key Dates apply and
work needed to allow the Client and Others to do their work.
g
in
in
• Separate references to ‘float’ and to ‘time risk allowances’ are included in clause 31.2. It
tra
is important that they are each clearly identifiable on the programme.

r
Fo
The Contractor’s time risk allowances are to be shown on its programme as allowances
attached to the duration of each activity or to the duration of parts of the works. These
.
ly
allowances are owned by the Contractor as part of its realistic planning to cover its risks.
on
CHAPTER 4
They should be either clearly identified as such in the programme or included in the
ity
time periods allocated to specific activities. It follows that they should be retained in the
rs
assessment of any delay to planned Completion because of a compensation event.

ve
ni
Float is any spare time within the programme after the time risk allowances have been
U
included. It is normally available to accommodate the time effects of a compensation event

n
to
to mitigate or avoid any delay to planned Completion. However, in accordance with clause
As
63.5, float attached to the whole programme (i.e. any float between planned Completion
by
and the Completion Date) is not available. Any delay to planned Completion due to a
CHAPTER 5
compensation event therefore results in the same delay to the Completion Date. (See further
se
explanatory notes on clause 63.5.)

ru
Fo
It is important that the time risk allowances included by the Contractor in a programme
submitted for acceptance are realistic. If they are not, the Project Manager may refer to the
third bullet of clause 31.3 and refuse acceptance.
The provision for health and safety matters should allow for any statutory procedures, as well
as those specifically mentioned in the Scope.
CHAPTER 6
The programme is to show the dates when the Contractor will need access and other things
to be provided by the Client and information from Others.
The penultimate bullet of clause 31.2 covers the general information about resources
the Contractor plans to use for each operation. In the early stages of the contract the
Contractor’s statement will probably lack detail and reflect the methods and Equipment
proposed in its tender. As the work progresses, the statement may be revised to show more
detail and any changes it proposes for acceptance by the Project Manager (see explanatory
notes on clause 32). It is helpful if the Client restricts the amount of information required
APPENDICES
by stating in the Scope the operations for which it requires detailed statements. This
requirement should be limited to operations where the method of construction and the
design of the Equipment to be used are crucial if the design of the works is not to be put at
undue risk. Where there is a large amount of Contractor design, it may be appropriate for
the Scope to require an increasing amount of detail to be shown on the programme as the
design is developed.

MANAGE
31.3 This clause lists reasons why a Project Manager may decide not to accept a programme or a
revised programme. Any failure by the Project Manager to accept a programme for reasons
other than those noted is a compensation event (clause 60.1(9)). The Project Manager is
CHAPTER 1
required to respond within two weeks, but if the reply is non-acceptance the Contractor is
required to re-submit, within the period for reply.
The last paragraph of clause 31.3 introduces the possibility of having deemed acceptance of
programmes submitted for acceptance. Three things must happen for this to occur.
• The Project Manager does not notify acceptance or non-acceptance within the two
weeks allowed.
CHAPTER 2
• The Contractor must notify the Project Manager of that failure.
• The failure (by the Project Manager) must continue for a further one week after the
Contractor’s notification.
.
ly
Note the Contractor does not have to initiate the deemed acceptance process; it is a
on
discretionary option for the Contractor to take up because of the word ‘may’. It does
s
se
however enable the Contractor to have an Accepted Programme in place when the Project
po
Manager has not followed the acceptance procedures.
CHAPTER 3
r
pu
In the meantime, a compensation event has arisen due to the Project Manager not replying
g
in time (see clause 60.1(6)). This does not really help the Contractor though, or even the
in
Project Manager. What the Parties need is an Accepted Programme in place. The emphasis
in
tra
must be on the Project Manager and Contractor working together collaboratively to achieve
the goal of having a high quality Accepted Programme in place at all times.
r
Fo
Option A The activities on the Activity Schedule and the operations on the programme should be
.
31.4 compatible to make financial forecasting easier. However, the programme may contain more
ly
on
operations than the Activity Schedule has activities.

CHAPTER 4
ity
It is also possible that the Activity Schedule contains more activities than the number of
rs
operations in the programme. There should always be correlation between the programme
ve
and the Activity Schedule, whether the Accepted Programme is via the Contract Data or
ni
U
prepared after the Contract Date. This correlation should be kept up to date as the job
n
proceeds. Correlation is best achieved by adding to each relevant programme operation the
to
activity reference or references from the Activity Schedule.

As
by
Revising the 32
CHAPTER 5
programme 32.1 This clause lists the matters which are to be shown on a revised programme. It should record
se
the actual progress achieved on each operation and the reprogramming of future operations.
ru
The revised programme should also show proposals for correcting notified Defects and any
Fo
other changes the Contractor wishes to make.
If the Project Manager is concerned that delay which has already occurred may result in
the Completion Date not being achieved, the Project Manager may instruct the Contractor
to produce a revised programme under clause 32.1 showing how it intends to recover the
time it has lost. Better still would be for the Project Manager to notify an early warning and
CHAPTER 6
discuss it further in an early warning meeting. Even with revising the programme, it may be
that the Contractor cannot meet the Completion Date and shows planned Completion after
the Completion Date i.e. the Contractor anticipates finishing late. The reasons in the contract
that the Project Manager can give for not accepting a programme do not include planned
Completion being shown later than the Completion Date.
32.2 The Project Manager should note, in reviewing a submitted revised programme, any changes
to the dates by which the Client is required to provide information and things (clause 31.2).
The Project Manager should be prepared to accept a programme with earlier dates if this is
acceptable to the Client. After acceptance, any subsequent failure by the Client to meet these
APPENDICES
earlier dates will be a compensation event.

MANAGE
Access to and 33
use of the Site 33.1 The dates on which the Contractor may have access to the various parts of the Site are stated
in the Contract Data. In many cases, it may be possible to give access to the whole Site on
CHAPTER 1
the starting date. In other cases, particularly where there are several contractors on the Site,
this may not be possible. The Contractor must then programme its activities according to the
dates when it can have access.
The Contractor may not require access on the dates stated in the Contract Data, in which
case it should show on its programme the later dates. These then supersede those in the
Contract Data and become obligatory on the Client. However, the Client should be aware
that any date can be moved back to an earlier date in subsequent programmes if it suits the
Contractor, as long as it is no earlier than the original access date.
CHAPTER 2
The Contractor should not programme access on dates earlier than those in the Contract
Data. This is because access is to be provided later than the access date and the date shown
on the programme, and therefore the Client does not have to comply with this earlier date.
.
ly
on
Instructions to 34
stop or not to 34.1 This clause gives the Project Manager authority to control the stopping and re-starting
s
se
start work of work for any reason, for example where there is risk of injury to people or damage to
po
property, or where the Project Manager is considering removing some work from the Scope.
CHAPTER 3
pu
An instruction given constitutes a compensation event (clause 60.1(4)), but if it arises from a
fault of the Contractor, the Prices, Completion Date and Key Dates are not changed (clauses
g
in
61.1 and 61.4).
in
tra
It is important to understand that this clause cannot be used to permanently remove work
r
from the contract. The Project Manager will eventually have to give an instruction either to
Fo
start or re-start the work, or change the Scope to remove the work.
.
ly
In certain circumstances, if the Project Manager fails to instruct the re-start or start of work
on
CHAPTER 4
or does not remove the work from the Scope within thirteen weeks of instructing work to
ity
stop or not to start work, either Party may be entitled to terminate under clause 91.6.
rs
ve
Take over 35
ni
35.1 Take over and Completion are different things. Completion is about what the state the works
U
are in, see the explanatory note on clause 30.1; take over is about who is using or occupying
n
to
the works. Take over can occur before, at or after Completion.

As
The Client may have good reasons for not wishing to take over the works before the
by
Completion Date. If so, this would have been stated in the Contract Data. Otherwise, the
CHAPTER 5
se
Client must take over the works not later than two weeks after Completion.
ru
Fo
If Option X5 is included in the contract and the works are divided into sections, Completion
of a section results in the Client having to take over the section within two weeks of its
Completion.
35.2 Under this clause, if the Client uses part of the works before Completion has been certified,
it takes over that part on the date that it uses it. A compensation event occurs unless the
take over is
CHAPTER 6
• for a reason stated in the Scope or to suit the Contractor’s method of working (this
clause) or
• after the Completion Date (see explanatory notes on clause 60.1(15)).
From that point, the Client is then responsible for providing access so that the Contractor can
correct Defects (clause 44.4) and assumes liability for any part of the works taken over, see
clause 80.1.
APPENDICES
Acceleration 36 Acceleration means bringing the Completion Date forward. In doing this it may be that there
are necessary changes to make to any Key Dates. This differs from usage in many contracts
where ‘acceleration’ means speeding up the work to ensure that the Completion Date is
achieved.

MANAGE
36.1 and Either the Contractor or the Project Manager may propose to the other an acceleration. If
36.2 both are prepared to consider it, the Project Manager instructs the Contractor to provide a
quotation for the acceleration. The Contractor should provide a quotation in sufficient detail
CHAPTER 1
for the Project Manager to consider. A recurring theme of collaboration threads throughout
many of the ECC processes and the Contractor jointly working with the Project Manager
during the quotation stage is much more likely to succeed than otherwise.
Acceleration cannot be imposed on the Contractor without its agreement. Acceleration is

not a compensation event, it is a stand-alone process, and the Parties are free to agree the
changes to the Prices on whatever basis they decide.
36.3 This clause states the effects of an acceleration being accepted by the Project Manager, so
CHAPTER 2
there is no need for any further action in terms of instructions, acceptances and so on.
Illustrated For the first and revised programmes, the communication is a submission and comes from
use of NEC4 the Contractor so the ‘Submission’ form is used, as shown below.
communication
.
ly
forms
on
s
se
po
Submission
CHAPTER 3
r
pu
g Binding, Greenwheatshire
in
in
GN7 3BB
r tra

Fo

.
Wincanton AB3 7TT

ly
on
CHAPTER 4
ity

rs
ve
Submission No: 1 Date: 11th October 2017

ni
U
We submit the following under clause 31.1:

n
to
As
Our first programme for acceptance (ref programme/1), as attached.

by
CHAPTER 5
se
ru
Fo
CHAPTER 6
Signed:
APPENDICES

MANAGE
Clause 31.3 states
‘‘Within two weeks of the Contractor submitting a programme for acceptance,
CHAPTER 1
the Project Manager notifies the Contractor of the acceptance of the
programme or the reasons for not accepting it.’’
On our project, the Project Manager was satisfied that all of the clause 31.2 requirements
had been properly included in the programme, and then issued the following notification. If
the Project Manager did not accept the programme, then the Project Manager would notify
the reason for not accepting – four reasons are given to the Project Manager in clause 31.3
for this. The Project Manager can give other reasons for not accepting, but that will be a
compensation event.
CHAPTER 2
The communication is an acceptance and comes from the Project Manager so the
‘Acceptance’ form is used, as shown below.
.
ly
Acceptance
on
s
se
po
Wincanton AB3 7TT
CHAPTER 3
pu
From: Mr K Williams g Address: County Hall, Greater
in
in
tra
GN7 3BB
r
Fo

.
ly
on
Acceptance No: 1 Date: 18th October 2017
CHAPTER 4
ity
rs
Under clause 31.3 I accept:

ve
ni
Your programme ref programme/1 dated 11th October 2017.

U
n
to
As
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
Signed:
APPENDICES

MANAGE
4. QUALITY MANAGEMENT
The Contractor’s responsibility for quality is part of its duty to Provide the Works (clause 20.1)
CHAPTER 1
as defined in clause 11.2(15).
The quality standards to be achieved by the Contractor should have been specified in the
Scope. These standards provide the basis on which the existence of a Defect is judged (clause
11.2(6)). The Supervisor acts on the Client’s behalf to check the Contractor’s attainment of
the specified standards.
Quality 40
management 40.1 to Many organisations operate quality management systems and the Contractor is obliged to
CHAPTER 2
system 40.3 operate one if stated in the Scope. Even if it is not stated, the likelihood is that the Contractor
would still operate one to keep its accreditation in place and provide a consistent level of
service to all clients in a standard way with which its employees are familiar.
.
The Contractor must provide the Project Manager with a quality policy statement and quality
ly
on
plan for acceptance, regardless of whether the Scope requires any particular form of quality
management system. These can be changed or updated by the Contractor from time to time.
s
se
The update may be, for example, to represent new levels of corporate accreditation. Where
po
there is a failure to comply with the quality plan the Project Manager has the right to instruct
CHAPTER 3
r
the Contractor to correct such a failure, but this will not be a compensation event.
pu
g
A Contractor’s corporate quality plan will probably not be contract specific but if it complies
in
in
with the requirements stated in the Scope then it will be compliant. With this though, the
tra
Parties should realise its terminology may well not reflect the language of the ECC even
though it is considering the same process. For example, the Defect notification process may
r
Fo
refer to “non-conformances”.
.
ly
Tests and 41
on
CHAPTER 4
inspections 41.1 Note that clause 41 does not apply to tests and inspections done by the Contractor at its
ity
own discretion and for its own purposes.

rs
ve
41.2 Tests and inspections should have been specified in the Scope along with clarity as to who is
ni
carrying them out and who is providing what materials, facilities and samples for such tests
U
and inspections.
n
to
Additional tests may be instructed by the Project Manager by changing the Scope. This will
As
be a compensation event under clause 60.1(1).

by
CHAPTER 5
In addition, the Supervisor may instruct the Contractor to search for a Defect, and that
se
instruction may include the requirement for additional tests. This instruction will be a
ru
compensation event if no Defect is found, except in certain circumstances, see clause

Fo
60.1(10) and explanatory note on clause 41.3.

Significant stages for when tests are to be done include the following:
• Before payment for or marking of Equipment or Plant and Materials (clause 71.1), if
stated in the Scope.
CHAPTER 6
• Before delivery to the Working Areas (clause 42.1), if stated in the Scope.
• Before Completion. The Scope should have stated which tests must be passed before
Completion.
• Before Key Dates or dates shown on the Accepted Programme for the start of work by
the Client or Others. The Scope should have stated the tests to be passed before these
dates.
APPENDICES

MANAGE
• After take over but before the defects date. Tests required during this period will usually
be part of the Client’s commissioning and the details will need to be specified in the
Scope. In the case of process plants, they may involve production materials which the
CHAPTER 1
Client may need to have under its direct control. Such tests may be carried out by the
Supervisor on the Client’s behalf or by the Contractor, depending upon which the Scope
specifies. It is possible that the completed parts of the works may be put into operation
by the Client before completing its own tests. A ‘sunset’ clause (41.5) is included to avoid
the possibility of payments conditional on the successful completion of a Supervisor’s
test being withheld if the test has not been carried out by the defects date. This
provision does not apply to tests which must be repeated due to discovery of a Defect.
Failure by the Supervisor to carry out its tests promptly is a compensation event (clause
CHAPTER 2
60.1(11)) if it causes unnecessary delay to the Contractor.
41.3 This clause deals with four matters
• the procedure for informing when testing and inspecting is to be done,
.
ly
on
• the requirement to inform of test and inspection results,
s
se
• the timing of informing the Supervisor of testing or inspection, and
rpo
CHAPTER 3
pu
• the right of the Supervisor to observe the Contractor’s tests.
g
The Contractor and Supervisor are each required to give the other notice of tests and
in
in
inspections which each is to carry out. This enables both to be fully informed and to take
tra
any action they wish to take. If, for example, testing reveals that some work does not comply
r
with the Scope, early discussion of the consequences is likely to be required.

Fo
Notification of tests and inspections together with their results is required before further
.
ly
testing or inspection is rendered impossible or impracticable. For example, the results of

on
CHAPTER 4
a drain test should be notified before the drain is covered up, or the result of a test of
ity
reinforcing steel should be notified before concrete is placed around the reinforcement.
rs
ve
Failure by the Contractor to notify the Supervisor of a test or inspection may deprive the
ni
Contractor of compensation for a search, even if no Defect is found (clause 60.1(10)).

U
n
41.4 A Defect is defined in clause 11.2(6). Any repeat test or inspection of work after a Defect has
to
been corrected is not a compensation event. A Defect may make it impossible to reconstruct
As
the work affected in accordance with the Scope. For example, piles which have been
by
installed outside the specified tolerances may have disturbed the original ground such that
CHAPTER 5
se
the construction of the foundation as shown on the drawings has become impossible. The
ru
early warning procedure (clause 15) requires early discussion of the matter. Possible solutions
Fo
include changing the Scope after re-design or accepting the Defect (clause 45).
41.5 Under this clause, the Supervisor is required to carry out tests and inspections for which
they are responsible so that unnecessary delay to the work is avoided. If unnecessary delay
occurs a compensation event results (clause 60.1(11)). Some payments to the Contractor may
be conditional upon doing tests to show that the work has been carried out satisfactorily. If
the Supervisor causes unnecessary delay, the Contractor will be entitled to interest on any
CHAPTER 6
payment that is delayed, see clause 51.3. In any event, such payments may become due after
the defects date whether the tests are carried out or not.
41.6 If a test has to be repeated following the discovery of a Defect, the Contractor pays the
Project Manager’s assessment of the cost incurred by the Client.
Options In this clause, the Project Manager’s assessment of the Client’s additional costs under clause
C to E 41.6 does not include any cost the Contractor incurs for the repeat test.
41.7
APPENDICES

MANAGE
Testing and 42
inspection 42.1 The purpose of this clause is to avoid expense in having to transport Plant and Materials back
before delivery to the place of manufacture if testing and inspection reveal Defects.
CHAPTER 1
Searching for 43
and notifying 43.1 The Contractor is responsible for correcting a Defect as defined in clause 11.2(6). A fault in a
Defects design provided by the Client is not a Defect.
If a search is instructed and a problem is found which is due to a fault in the Client’s design
(i.e. no Defect as defined is found), the instruction to search is a compensation event (clause
60.1(10)) and responsibility for further action belongs to the Project Manager. The Project
Manager may decide to change the design and instruct the Contractor accordingly. This
CHAPTER 2
would constitute a change to the Scope, which would be a compensation event (clause
60.1(1)).
If the problem is due to non-compliance with the Scope, it is a Defect and does not result in
.
ly
a compensation event. It is then the Contractor’s responsibility to correct the Defect so that
on
the work complies with the Scope.
s
se
The clause also includes extra tests and inspections not specified in the Scope within the
po
meaning of ‘searching’. Whether such tests are compensation events is determined using
CHAPTER 3
r
clause 60.1(10).
pu
43.2 The intention of this clause is to enable Defects to be identified as soon as possible so that
g
in
they can be dealt with promptly. There is an obligation on both the Supervisor and the
in
Contractor to notify each other of Defects as soon as they become aware of them.
r tra
Defects may be notified at any time before the defects date. The defects date is the
Fo
earliest date when the Contractor ceases to be liable under the contract for the correction
.
ly
of Defects. However, the Contractor’s liability to correct Defects under the contract may
on
continue after the defects date for the defect correction period if a Defect is notified just
CHAPTER 4
before the defects date.

ity
rs
The Supervisor or Client may inform the Contractor of Defects after the defects date but the
ve
Contractor’s responsibility for them may be limited according to the law governing the
ni
U
contract or by the operation of Option X18, if used.

n
to
Correcting 44
As
Defects 44.1 The Contractor is responsible for correcting all Defects, whether notified or not.
by
CHAPTER 5
Before Completion, the Contractor must correct all Defects which would prevent the Client
se
from using the works or Others from carrying out their work, clause 11.2(2). In addition, the
ru
Scope may specify other Defects that will need to be corrected before Completion, again
Fo
clause 11.2(2).
The Contractor may therefore need to correct Defects in time to avoid delaying
• Completion, as defined in clause 11.2(2),
• if Option X5 is used, the Completion of any section of the works,

CHAPTER 6
• the achievement of the stated conditions by their Key Dates (clause 11.2(11)) and
• dates for the Client or Others to do their work (clause 25.1).
In effect, the Contractor has a degree of latitude to decide when it should correct Defects to
avoid delaying these dates.
44.2 After Completion, the Contractor is required to correct any remaining notified Defects, which
would not have delayed Completion, before the end of the defect correction period relevant
APPENDICES
to that Defect. The defect correction period, stated in part one of the Contract Data, only
affects the timing of correcting Defects after Completion. Provision is made in the Contract
Data format for different lengths of defect correction period appropriate for different types
of Defect. The length of the defect correction period for each type of Defect to be given in
the Contract Data depends on

MANAGE
• the kind of Defects likely to be outstanding after Completion and the time needed for
their correction,
CHAPTER 1
• the urgency of the Client’s need for their correction and
• the ease with which access can be given to correct them.
An example of a high degree of urgency for a Defect to be corrected would be one found
after Completion which prevents the Client from using the works. The defect correction
period for such a Defect should be stated in the Contract Data part one to be short. If the
Contractor is then unable to comply, the Client is allowed to have the Defect corrected by
other people and recover the incurred cost from the Contractor (see explanatory notes on
CHAPTER 2
clause 46.1).
44.3 At the defects date if there are no notified Defects, or otherwise at the earlier of the end of
the last defect correction period and the date when all notified Defects have been corrected,
the Supervisor issues a Defects Certificate. This will be used by the Project Manager in
.
ly
assessing the final amount due to the Contractor (clause 50.1).
on
s
The certificate is defined in clause 11.2(7). The purpose of the last sentence in clause 44.3
se
is to preserve the legal liability of the Contractor for undiscovered work that has not been
po
carried out in accordance with the contract.
CHAPTER 3
pu
The issue of the Defects Certificate signifies the end of most of the obligations of the Parties.
g
in
Uncorrected Defects listed in the Defects Certificate are dealt with using the procedure set
in
out in clause 46.

tra
44.4 The Client is required to allow access to the Contractor after take over to correct notified
r
Fo
Defects. The Client cannot charge the costs of such access to the Contractor.
.
ly
The procedure in this clause allows the Contractor access to correct other Defects after
on
the Client has taken over the works. Normally, this work can only be done at the Client’s
CHAPTER 4
ity
convenience as, after Completion, the Client has usually taken over the works. The clause
rs
also states that the defect correction period does not start until access and use have been
ve
provided.
ni
U
Accepting 45
n
Defects 45.1 Although a Defect may be minor, its correction may be costly to the Contractor and may
to
As
delay Completion by a considerable time. Its correction may also cause inconvenience to the
Client out of all proportion to the benefits gained. This clause gives a procedure within the
by
contract for accepting a Defect in these circumstances. Either the Contractor or the Project
CHAPTER 5
se
Manager may propose a change to the Scope solely to avoid the need to correct a Defect.
ru
The other is not obliged to accept the proposal.

Fo
45.2 The Contractor’s quotation for the proposed change will show a reduction in either time or
price or both. In some cases the reduction may be nominal. For example, a nominal price
reduction may be acceptable if the effect of the change to the Scope is not detrimental and
if the alternative of correcting the Defect will reduce the likelihood of prompt Completion.
If the quotation is not acceptable, the Contractor has to correct the Defect. If the quotation
CHAPTER 6
is accepted by the Project Manager, this changes the Scope, the Prices, the Completion Date
and the Key Dates accordingly and accepts the revised programme. Such a change to the
Scope is not a compensation event (see first bullet of clause 60.1(1)).
It is important to remember that the quotation for accepting Defects is not required to follow
the clauses for compensation event assessment, although the Client should not hold the
Contractor to ransom. Genuine estimates as to the costs and losses relating to leaving the
Defect in situ should be considered, e.g. reduced design life and any enhanced maintenance
requirements.
APPENDICES
In terms of liability, the consequences are the same as for other changes to the Scope. In
other words, when the Project Manager accepts a Defect and the reduced Prices and earlier
Completion Date are agreed, the Contractor cannot continue to be held liable for the specific
Defect, as if the Defect had still to be corrected under clause 44.1.

MANAGE
Uncorrected 46
Defects 46.1 This clause states the procedure if the Contractor fails to correct a Defect having been given
the necessary access.
CHAPTER 1
Again, and for clause 46.2, the Scope is treated as having been changed to accept the Defect
to prevent the Contractor continuing to be held liable.
46.2 This clause states the procedure if the Defect has not been corrected due to the lack
of access. The criteria the Project Manager uses to assess the amount to be paid is an
assessment of the Contractor’s cost for carrying out the correction. This may be lower than
that assessed in clause 46.1. It will rarely, if ever, be higher, given that the Contractor could
also employ Others to correct the Defect in 46.1.
CHAPTER 2
Illustrated On our project, the Supervisor wanted to carry out some tests on some of the imported fill
use of NEC4 and informs this to the Contractor.
communication
forms
.
ly
on
s
se
Inform
po
CHAPTER 3
r
pu
g Wincanton AB3 7TT
in
in
tra
From: Mr H Paddick Address: County Hall, Greater

r
Fo
GN7 3BB
.
ly
on

CHAPTER 4
ity
rs
Inform No: 1 Date: 31st January 2018

ve
ni
Under clause 41.3 I inform you:

U
n
to
that I will be carrying out some tests in accordance with Scope part 3.4 on the imported
As
fill stockpiled at location XYZ. This will take place in the afternoon of Monday 3rd February
by
2018, weather permitting.

CHAPTER 5
se
ru
Fo
CHAPTER 6
Copy to: Site Team
Signed:
APPENDICES

MANAGE
The only power the Supervisor has to instruct under the contract is to instruct the Contractor
to search for a Defect (clause 43.1). This clause goes on to state that reasons for the search
should be given and what searching may include.
CHAPTER 1
On our project, the Supervisor was concerned that there appeared to be settlement arising at
a part of the works, so instructed the following search (assume the sketch was attached with
clear details:
Instruction
CHAPTER 2
Wincanton AB3 7TT
From: Mr H Paddick Address: County Hall, Greater
.
ly
on
GN7 3BB
s
se
rpo
CHAPTER 3
pu
Instruction No: SI/1 Date: 4th March 2018
g
in
Under clause 43.1 I instruct you to:
in
tra
Uncover the drain run MH1-MH2 as the attached sketch XYZ to allow inspection/testing by
r
Fo
me. The reason for the search is that local settlement appears to be taking place.
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Copy to: Site Team

Fo
Signed: CHAPTER 6
APPENDICES

MANAGE
On our project, the Contractor notified the Supervisor of the following Defect:
Notification
CHAPTER 1
To: Mr H Paddick Address: County Hall, Greater

GN7 3BB

Wincanton AB3 7TT
CHAPTER 2
Notification No: CN/2 Date: 15th January 2018
.
ly
on
s
se
po
that we have tested drain run A-B and found what appears to be a collapse. This is a
CHAPTER 3
r
Defect and we intend to correct this shortly.
pu
g
in
in
tra
r
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n

to
As
Signed:
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
On our project, the Contractor was notifying a Defect before Completion had occurred.
The provisions of clause 44.2 therefore would not yet apply but in any case, the Contractor
confirmed its intentions to correct very soon.
CHAPTER 1
Assuming on our project that the Project Manager decides that the state of Completion
stated in the Scope has been achieved, then clause 30.2 states that:
‘‘The Project Manager certifies it within one week of the date.’’
The Completion certificate is shown below.
Completion Certificate
CHAPTER 2
To: The Major Address: County Hall, Greater
GN7 3BB
.
ly
on
s
se
GN7 3BB
rpo
CHAPTER 3
pu
g
in
in
Completion 1 Date: 15th October 2018
tra
certificate No:
r
Fo
Under clause 30.2:

.
ly
on
The date of Completion of the whole of the works is 15th October 2018
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
Copy to: Mr B Builder, Woodstone Construction Ltd
Signed:
CHAPTER 6
APPENDICES

MANAGE
Take over is dealt with in clause 35. If stated in the Contract Data, the Client need not take
over the works before the Completion Date if it is not willing to do so. Otherwise, the Client
takes over the works not later than two weeks after Completion. With the sort of project,
CHAPTER 1
we have as our example, it is most likely the Client would wish to take over the works at the
earliest opportunity to put this into beneficial use.
It is for the Project Manager to certify:
“the date upon which the Client takes over any part of the works and its extent
within one week of the date”
which is what the Project Manager does here.

CHAPTER 2
Take Over Certificate
.
ly
on
GN7 3BB
s
se
po
CHAPTER 3
r
pu
GN7 3BB
g
in
in
r tra
Take over certificate 1 Date: 15th October 2018

Fo
No:
.
ly
on
Under clause 35.3:

CHAPTER 4
ity
rs
The Client took over all of the works on 15th October 2018
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo

CHAPTER 6
Signed:
APPENDICES

MANAGE
The Supervisor issues the Defects Certificate as stated in clause 44.3 which draws an end to
the Contractor’s responsibility to correct Defects under the terms of the contract. Any other
rights of the Client in respect of a Defect which the Supervisor has not found or notified are
CHAPTER 1
not affected by the issue of the Defects Certificate (clause 44.3).
The Defects Certificate was issued as follows by the Supervisor, leading to an assessment
date occurring (see clause 50.1):
Defects Certificate
To: K. Williams, Address: County Hall, Greater
CHAPTER 2
Binding, Greenwheatshire,
GN7 3BB
From: Mr H. Paddick Address: County Hall, Greater
.
ly
on
GN7 3BB
s
se
rpo
CHAPTER 3
pu
Defects Certificate 1 Date: 15th October 2019
No:
g
in
in
tra
Under clause 44.3/11.2(7):

r
Fo
There are no Defects.

.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Copy to: The Major, Greenwheatshire County Council, Mr B Builder, Woodstone

Fo
Construction Ltd
Signed:
CHAPTER 6
APPENDICES

MANAGE
5. PAYMENT
Payment The different payment mechanisms for the six main Options are based on the use of three
CHAPTER 1
mechanisms key defined terms

for the main
Options • the Prices (plus, in Option D, an additional term ‘Total of the Prices’),
• the Price for Work Done to Date (PWDD), and
• Defined Cost.
These terms are defined in the main Option clauses and when used in conjunction with the
core clauses in Section 5 they establish how the payment for each main Option is calculated.
CHAPTER 2
The PWDD is the main component of the amount due to the Contractor (see explanatory
notes on clause 50). The use made of the Prices varies between the main Options.
.
Identified and 11
ly
on
defined terms Option A The PWDD is the Activity Schedule prices for those activities or groups of activities which
11.2(29) have been completed according to the criteria stated in clause 11.2(29). The Activity Schedule
s
se
is defined in clause 11.2(21).
po
(32) The Prices are the basis of the PWDD. It is important that the Contractor, when compiling
CHAPTER 3
r
pu
the activity schedule, defines activities and groups of activities, completion of which can be
recognised without controversy.
g
in
in
(23) The only use of Defined Cost in Option A is as the basis of the assessment of compensation
tra
events. Defined Cost is the cost of the components listed in the Short Schedule of Cost
Components.
r
Fo
Option B The PWDD is calculated using the Bill of Quantities rates and lump sums and the total re-
.
ly
11.2(30) measured quantity of work completed according to the definition and criteria stated in this
on
clause. The Bill of Quantities is defined in clause 11.2(22), which provides for later changes to
CHAPTER 4
ity
it under the contract.

rs
(23) The only use of Defined Cost in Option B is as the basis of the assessment of compensation
ve
events. Defined Cost is the cost of the components listed in the Short Schedule of Cost
ni
Components.
U
n
Options Payments made in these Options are based upon the Contractor’s costs, rather than what
to
C to F work it has carried out. Therefore, the PWDD is the total Defined Cost which the Project
As
11.2(31) Manager forecasts will have been paid by the Contractor before the next assessment date. To
by
this is added the Fee.

CHAPTER 5
se
Option C The Prices in the Activity Schedule (clause 11.2(21)) are not used to determine the PWDD but
ru
11.2(32) the total of the Prices is used as the target in determining (at Completion of the whole of the
Fo
works and in the final assessment) the Contractor’s share (see clause 54.1 to 54.4). At the
times when the Contractor’s share is calculated, the Activity Schedule total will have taken
account of any compensation events and other changes under the contract and will therefore
be a fair target. No re-measurement is involved.
Option D The Prices, using the Bill of Quantities (clause 11.2(22)), are not used to determine the PWDD.
11.2(33)
CHAPTER 6
The target to be used in the calculation of the Contractor’s share (at Completion of
the whole of the works and in the final assessment) needs to take account of not only
compensation events and other changes under the contract, but also any re-measurement of
work done. In order to ensure a fair target, another defined term ‘Total of the Prices’ (clause
11.2(35)) is therefore used in the calculation of the Contractor’s share (see explanatory notes
on clauses 54.5 to 54.8). The Prices continue to be the basis of the target and the term is
used in other clauses of an Option D contract.
Options The basis of the definition of Defined Cost in these Options is the cost of the components in
APPENDICES
C, D and the Schedule of Cost Components less Disallowed Cost.

E 11.2(24)
Defined Cost is used in calculating the PWDD and in assessing compensation events. It
excludes Disallowed Cost as defined separately in clause 11.2(26) (see below).

MANAGE
(26) The first bullet lines up with normal accounting practice. If there is a note on a file suggesting
an item of Defined Cost but this is not justified by any account or record, then it would be a
Disallowed Cost. That it is disallowed perhaps in the current assessment does not preclude it
CHAPTER 1
being a part of Defined Cost in the next assessment, once such accounts and records are in
place.
The fourth bullet deals with where there is an acceptance or procurement procedure stated
in the Scope. The Contractor should of course follow this. If it does not, then Disallowed Cost
arises but only the cost which was incurred because of the failure. This might be difficult to
calculate in practice but the Parties should have regard to the open market or competitively
tendered prices requirement of clause 52.1.
CHAPTER 2
The seventh and eighth bullets deal with situations where the Contractor corrects Defects.
The first situation is straightforward and should provide an incentive for the Contractor to
correct any Defects before Completion. The second situation could occur before Completion
but is only intended to be a Disallowed Cost if the Defect is caused by the Contractor not
.
ly
complying with a constraint on how it is to do the work, for example a prescribed method
on
of working or a constraint on timing of work. It is the ‘how’ that is the important word here,
s
generally the Scope is written based on ‘what’ the Contractor provides, not ‘how’ this should
se
be provided. If the ‘how’ is important to the Client and written this way in the Scope, then
po
that is what the Contractor must do otherwise face Disallowed Cost arising for the cost of
CHAPTER 3
pu
correcting such a Defect.
g
in
The eleventh bullet covers the tribunal between the Parties, not the equivalent between the
in
Contractor and its Subcontractors or suppliers (see though the notification requirements of
tra
the sixth bullet here).

r
Fo
Option F Defined Cost comprises the payments due to Subcontractors for work which is subcontracted
11.2(25) (with some exclusions) and the prices stated in the Contract Data part two for work done
.
ly
by the Contractor. It is used to calculate the PWDD and in assessing compensation events. It
on
excludes Disallowed Cost as defined separately in clause 11.2(27).
CHAPTER 4
ity
rs
Assessing the 50
ve
amount due 50.1 This clause defines ‘assessment dates’, from which the dates of both certification and
ni
payment are calculated. The first assessment date is determined by the Project Manager,
U
after discussion with the Client and the Contractor, with a view to satisfying the internal
n
to
procedures of both Parties. Thereafter, assessment dates occur at the end of each assessment
As
interval. This goes on until four weeks after the Supervisor issues the Defects Certificate or
the Project Manager issues a termination certificate.
by
CHAPTER 5
se
50.2 Although assessments of the amount due are the responsibility of the Project Manager
ru
(clause 50.1), the Contractor is required to make an application before each assessment date
of what it thinks the amount due should be. If it fails to do so then the amount due will be
Fo
the same, or lower than, the previous assessment, and the Contractor will not get any further
payment (see clause 50.4).
The Project Manager is required to consider an application for payment the Contractor has
submitted before the assessment date.
CHAPTER 6
The Contractor’s application must have an appropriate level of detail, it cannot be just a
single figure, and it needs to follow the form stated in the Scope, if it is so stated.
50.3 This clause provides for how the amount due is determined where the Contractor applies for
payment before the assessment date.
The core of the amount due to the Contractor is the PWDD. The amount due also includes
all other payments to be made to or from the Contractor under the terms of the contract
such as provided in clause 46, secondary Options X12, X14 or X20, for example. The content
of PWDD varies according to which main Option is used (see earlier explanatory notes on
APPENDICES
payment mechanisms).

MANAGE
50.4 This clause means that if the Contractor does not make an application before the assessment
date the amount due will not change from that in the previous assessment and the
Contractor will therefore not be paid any further amount for the period in question. It is
CHAPTER 1
therefore important that the Contractor makes an application before each assessment date,
otherwise their cash flow will suffer.
In addition, if the amount due, calculated by reference to clause 50.3, has decreased in the
period, because, for example, the amount of delay damages levied for the period (if Option
X7 is used) is greater than the increase in the PWDD, the Project Manager can assess the
lower amount due and certify it. The Contractor will then be required to pay that amount
to the Client in accordance with clause 51.1. This is to discourage the Contractor from
deliberately not making an application at all in these circumstances.
CHAPTER 2
50.5 This clause is designed to provide a powerful motivation on the Contractor to submit a
programme which contains the information required by the contract. The clause imposes a
test to determine whether a quarter of the PWDD should be retained.
.
ly
If a programme was identified in the Contract Data part two, an Accepted Programme
on
already exists and no amount can be retained under this clause.
s
se
If a programme was not identified in the Contract Data, it is of vital importance to the
po
management of a contract that a programme complying with clause 31 is submitted within
CHAPTER 3
r
pu
the period stated in the Contract Data. If a programme is not submitted showing the
g
information the contract requires, the stated retention amount must be withheld.
in
in
The test for withholding this retention is one of submission of a programme by the
tra
Contractor showing the information the contract requires, not acceptance by the Project
r
Fo
Manager. This avoids retention being imposed because of a delay by the Project Manager in
deciding whether to accept the programme.
.
ly
on
Clause 50.5 does not apply to any subsequent revision of an Accepted Programme. A
CHAPTER 4
different incentive exists on the Contractor to keep the Accepted Programme up to date (see
ity
rs
clause 64.2).
ve
50.6 With such corrections, may come a payment for interest, see clause 51.3.
ni
U
Option The Contractor is reimbursed by the Client in the same currency as the payments made by
n
C and D it. Nevertheless, the Fee and the Contractor’s share are paid in the currency of the contract.
to
50.7 Calculations use the exchange rates identified in the Contract Data part one.
As
Option The Contractor is reimbursed by the Client in the same currency as the payments made by it.
by
E and F Nevertheless, the Fee is paid in the currency of the contract. Calculations use the exchange
CHAPTER 5
se
50.8 rates identified in the Contract Data part one.

ru
Option C This clause is designed to bring about finalisation of Defined Cost and not leave the
Fo
to F 50.9 Contractor’s books of account open for so long. It forces the Parties to proactively deal with
Defined Cost in a timely manner.
The process starts through a notification from the Contractor and there is then a time limit
on how long each element of Defined Cost remains open for correcting.
CHAPTER 6
If the Project Manager does not respond within the time period stated it will result in such
Defined Cost being treated as correct. This provision demands appropriate cost assurance
processes by both the Contractor (in keeping such records) and the Project Manager (in
auditing these).
Payment 51
51.1 The latest dates by which the Project Manager certifies payments are fixed throughout a
contract as each is related to an assessment date. In the majority of cases, certification will
be of a payment by the Client to the Contractor but the clauses are written to allow for
APPENDICES
payments the other way around.
The Project Manager should certify payment as early as possible within the week after the
assessment.

MANAGE
51.2 This clause sets out when certified payments are made in relation to each assessment date.
The time period for payment may have been altered from the default period in the Contract
Data part one.
CHAPTER 1
Interest is due to the receiving Party, either Client or Contractor, if a certified payment is not
made within the stated period after the assessment date or if a payment is late because the
Project Manager has not certified it as the Project Manager should. The principle that interest
is due from the latest date that payment should have been made is applied throughout the
contract.
The contract does not require the Contractor to produce an invoice before payment. The
Client may request one from the Contractor, but it is not obliged to provide one and payment
CHAPTER 2
must still be made.
If Option Y(UK)2 is included in the contract it will impose on both Parties additional
obligations with regards to payment.
.
ly
51.3 The same principles on interest due apply to later corrections in certificates in relation to the
on
three bulleted instances. The last sentence of this clause refers to interest being calculated on
s
the correcting amount from the date when the changed amount should have been certified.
se
po
51.4 Simple interest at the interest rate applies for periods less than one year. The interest rate to
CHAPTER 3
be used in calculating the interest due is stated in the Contract Data part one. This interest
pu
rate should be a reliable annual base rate applicable to the territory in which the work is to
g
be done plus a percentage to represent the current commercial rates. Currently in the United
in
in
Kingdom, the additional percentage should be substantial to comply with the Late Payment
tra
of Commercial Debts (Interest) Act 1998.

r
Fo
51.5 Tax will need to be included in determining the amount due. Advice may well be needed to
be taken here.
.
ly
on
Defined Cost 52
CHAPTER 4
52.1 This clause gives some rules on Defined Cost. It clarifies that any of the Contractor’s costs not
ity
rs
included in Defined Cost are treated as being included in the Fee. These costs will include the
ve
major elements of head office overheads and profit.

ni
U
The clause also states that the Project Manager and Contractor must use the rates and
n
percentages stated in the Contract Data to evaluate Defined Cost. This covers things like the
to
fee percentage and any special Equipment rates. These may or may not be open market or
As
competitively tendered prices, but they are fixed for the duration of the contract.
by
CHAPTER 5
se
Finally, any other Defined Cost must be at open market or competitively tendered prices
ru
which should include any discounts which can be recovered. This captures costs of
Subcontractors and Plant and Materials, as well as those people and Equipment costs which
Fo
are not covered by rates and percentages in the Contract Data. The amount above the levels
of open market or competitively tendered prices with the stated deductions would not form
part of Defined Cost and would be treated as being included in the Fee.
Option C This clause lists the accounts and records which the Contractor is required to keep and which
to E 52.2, are essential for calculating the Defined Cost. If any further records are required, this will
Option F have been stated in the Scope.
CHAPTER 6
52.3
Option C The Project Manager has a right to inspect the accounts and records the Contractor is
to F 52.4 required to keep (clause 52.2 Option C to E and clause 52.3 Option F) and this must be done
within certain timescales (see clause 50.9).
Final 53
assessment 53.1 This clause brings about assessment of the final amount due under the contract. The Parties
should of course have been building up to this point and very little should need to be done
APPENDICES
to close the account.

MANAGE
53.2 Clause 53.2 deals with what happens if the Project Manager does not make this assessment
within the time allowed, which in 53.1 is no later than four weeks after the Supervisor issues
the Defects Certificate or thirteen weeks after the Project Manager issues a termination
CHAPTER 1
certificate. In that case the Contractor may (but does not have to) make its own assessment
of the final amount due and issue it to the Client.
The Project Manager therefore needs to act as required in clause 53.1 to avoid this
happening.
53.3 This clause confirms the status of the final amount due, determined through either 53.1 or
53.2. It determines that the Parties agree this assessment is conclusive evidence of the final
amount due unless one or both refers a dispute on this to the relevant dispute resolution
CHAPTER 2
procedures set out in the contract.

53.4 This clause deals with possible changes in the assessment of the final amount due, for
example where there has been a decision of the Adjudicator which has not been referred to
the tribunal within four weeks of that decision.
.
ly
on
The 54
Contractor’s Option C The purpose of the Contractor’s share is to encourage effective management control of
s
se
share 54.1 and the final PWDD (total Defined Cost (clause 11.2 (24)) plus the Fee) relative to the target (in
po
54.2 Option C, the total of the Prices (clause 11.2(32)) and in Option D the Total of the Prices (see
CHAPTER 3
r
pu
Option D explanatory notes on clause 11.2(35))). The Contractor receives a share of any saving or pays
54.5 and a share of excess when the final PWDD is compared to the target (adjusted for compensation
g
in
54.6 events under clause 63 and for Option D, also for re-measurement).
in
tra
The Client will normally have varied the size of the Contractor’s share depending on the
r
extent of the saving below or the excess above the target. The mechanism for calculating the
Fo
Contractor’s share is provided by the Client in the Contract Data part one.
.
ly
Each range is defined by levels of the ratio PWDD/Prices expressed as a percentage. The
on
CHAPTER 4
Client will have decided the Contractor’s share percentage for each range to give the
ity
appropriate motivation to suit the objectives of the contract.

rs
ve
Option C Payment of the target share is made in two stages. Firstly, in the assessment following
ni
54.3 and Completion of the whole of the works, and secondly, in the final amount due.
U
54.4
n
Option D Interim payments of the Contractor’s share are not provided for. The Prices tendered by
to
a Contractor have the main purpose of establishing the target. It is not intended that
As
54.7 and
54.8 their build-up should provide a realistic forecast of cash flow and they are unlikely to be
by
comparable with the PWDD at any interim stage. Any delays in assessing compensation
CHAPTER 5
se
events would further distort the calculation.

ru
The Activity 55
Fo
Schedule Option A The Activity Schedule is defined in clause 11.2(21). A contract which uses Option A is a lump
sum contract with the activity schedule showing a breakdown of the total lump sum at the
Contract Date.
The total of the Prices of the items in the activity schedule is the Contractor’s offer for
Providing the Works. The cost of any items the Contractor may have omitted is deemed to be
CHAPTER 6
included in the Prices for the other items. There is provision in the conditions of contract for
adjusting the Activity Schedule for instances such as:
• Implementing compensation events (clauses 63.14).
• Changes in a planned method of working or correcting the Activity Schedule so that the
activities on the Activity Schedule relate to the Scope (clause 55.3).
• If the Project Manager accepts a quotation for acceleration (clause 36.3).

APPENDICES
The Activity Schedule should have included activities such as design tasks and providing
Equipment, including temporary works.

MANAGE
There is no automatic provision for payment for Plant and Materials within the Working
Areas before they are incorporated into the works, i.e. equivalent to ‘materials on site’. The
Contractor may wish to receive earlier payment to improve its cash flow. The required effect
CHAPTER 1
can be obtained under Option A if appropriate items were included in the Activity Schedule.
The special circumstances under which payment might be made for Equipment or Plant and
Materials which are outside the Working Areas are covered in Section 7.
If no grouping of activities is included, the Contractor is paid for each activity when it is
completed (see clause 11.2(29)).
Milestone If a group of activities is defined in the activity schedule, the Contractor is paid for the
payments activities included in it when the whole group is completed. This is how the ECC provides for
CHAPTER 2
using milestone or stage payments. At each payment assessment date the state of completion of
Option A each group of activities is assessed.
Only the prices of completed groups are included in the amount due.
.
Option A
ly
This clause emphasises that the Activity Schedule is only a payment document. It cannot
on
55.1 be used to determine what the Contractor is to design or build; it is only used to determine
payments to the Contractor for what it designs or builds. It also creates an obligation on the
s
se
Contractor to correct the Activity Schedule if it no longer relates to the Scope.
po
Option C This clause emphasises that the Activity Schedule is only a payment document. It cannot be
CHAPTER 3
pu
55.2 used to determine what the Contractor is to do.
Option A g
An Activity Schedule which contains items that do not represent the Contractor’s proposed
in
in
55.3 activities and methods of working will create difficulties in determining payments due. It is
tra
important that the Activity Schedule should relate directly to the programme and always be
r
compatible with it (see explanatory notes on clause 31.4).

Fo
This clause allows the Contractor to revise the Activity Schedule to reflect the Scope. If the
.
ly
Activity Schedule includes items which the Contractor realises during the contract are not
on
CHAPTER 4
required the Activity Schedule may be revised to remove them, without changing the total of
ity
the Prices. The tendered total of the Prices is therefore the total lump sum value agreed for
rs
the work, subject to any changes permitted by the contract such as compensation events.
ve
ni
It is important to appreciate this clause relies upon the Contractor revising the Activity
U
Schedule for a change to the planned method of working or to reflect the Scope, not just to
n
to
try to re-distribute monies because the existing Activity Schedule results in a poor cash flow.
As
Option A This clause states the criteria by which changes to the Activity Schedule under clause 55.3 are
by
55.4 to be judged. For instance, the changed Prices are not reasonably distributed between the
CHAPTER 5
se
activities on the revised Activity Schedule and are instead loaded against certain activities; or
ru
the total of the Prices is changed; or the Activity Schedule does not relate to the operations
Fo
on the Accepted Programme. The criteria do not attempt to restrict changes to cash flow
resulting from revisions to the Activity Schedule.
The Bill of 56
Quantities Option This clause emphasises that the Bill of Quantities is only a payment document. It cannot be
B and D used to determine what the Contractor is to design or build; it is only used to determine
56.1 payment to the Contractor for what it designs or builds.
CHAPTER 6
Illustrated The Project Manager is obliged to assess the amount due at each assessment date, as stated
use of NEC4 in clause 50.1. How the amount due is calculated is stated in clause 50.3 if the Project
communication Manager considers the application for payment from the Contractor before the assessment
forms date or clause 50.4 if not. The Project Manager certifies payment within one week of each
assessment date.
There is nothing to stop the Project Manager and Contractor working together to agree
jointly the amount due in accordance with the contract. On our project the Parties did just
APPENDICES
that and the Project Manager issued the following payment certificate, with the Client paying
it by the latest date the contract stipulates. The Contractor confirmed to the Project Manager
that the payment for all work carried out to date was subject to VAT at 20%. In accordance
with 51.5, therefore, the Project Manager added 20% to the amount the Client was required
to pay.

MANAGE
Payment Certificate
CHAPTER 1

GN7 3BB

GN7 3BB

CHAPTER 2
Payment certificate 1 Date: 1st November 2017

No:
.
ly
on
Under clause 51.1:
s
se
Price for Work Done to Date £ 130,000
po
CHAPTER 3
r
pu
Plus other amounts to be paid to the Contractor £ 0
g
in
Sub-total £ 130,000
in
tra
Less amounts to be paid by or retained from £ 0

r
Fo
the Contractor
.
ly
on
Amount due £ 130,000

CHAPTER 4
ity
Less amount due in the last payment certificate £ 0

rs
ve
ni
Sub-total £ 130,000
U
n
to
Tax which the law requires the Client to pay to £ 26,000

As
the Contractor
by
CHAPTER 5
Change in the amount due since the last £ 156,000

se
payment certificate which is certified for

ru
payment
Fo
Signed:
CHAPTER 6
APPENDICES

MANAGE
On our project, there were no other amounts to be paid to the Contractor, such as X20 Key
Performance Indicators. There were also no amounts to be paid by or retained from the
Contractor, for example uncorrected Defects. At the first assessment date, it is therefore
CHAPTER 1
about how many items on the Activity Schedule have been completed. These were as
follows:
ACTIVITY SCHEDULE (EXTRACT)
Activity description Price (£)
Mobilise site set up 100,000
Maintain site set up, weeks:
CHAPTER 2
1–4 30,000
Price for Work Done to Date 130,000
.
ly
on
s
se
rpo
CHAPTER 3
pu
g
in
in
r tra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
6. COMPENSATION EVENTS
Compensation events are events which, if they occur and do not arise from the
CHAPTER 1
Contractor’s fault, entitle the Contractor to be compensated for any effect the
event may have on the Prices, the Completion Date and any affected Key Dates. A
compensation event will often result in additional payment to the Contractor but may
result in reduced payment.
The compensation event process consists of seven main clauses.
• Clause 60 defines (most of the) compensation events.

CHAPTER 2
• Clause 61 deals with notification, by either the Project Manager or the

Contractor, that a compensation event has occurred, and its acceptance or not.
• Clause 62 covers the submission of quotations for compensation events.
.
ly
• Clause 63 sets out the rules for assessing the effects of a compensation event
on
(time and money).
s
se
• Clause 64 covers assessments made by the Project Manager.
po
CHAPTER 3
r
pu
• Clause 65 deals with proposed instructions.
• g
Clause 66 explains how any changed prices or dates are finalised and
in
in
incorporated into the contract.
tra
Compensation events are listed in the core clauses, the Options and the Contract
r
Fo
Data. The main list is in the core clause 60.1, which includes compensation events (1)
to (21). Events applicable to main Options B and D are stated in clauses 60.4, 60.5
.
ly
and 60.6. Other compensation events are stated in secondary Option clauses X2.1,
on
CHAPTER 4
X12.3(6) and (7), X14.2, X15.2, X21.3, Y2.5 and any additional ones stated in the
ity
Contract Data part one by the Client (clause 60.1(21)).

rs
ve
Changing the Changes to the works (‘variations’ in other standard contracts) are made by a
ni
Scope 60.1(1) Project Manager’s instruction to change the Scope. The authority given to the
U
Project Manager for this purpose is in clause 14.3. A change may comprise deletion
n
or addition of work or alteration to work. It may include changes to the Client’s or

to
As
Contractor’s design in the Scope, to design criteria or to performance requirements

for the Contractor’s design.
by
CHAPTER 5
se
There may be many reasons for changing the Scope. They include:
ru
• Changes made to eliminate an illegality or impossibility (clause 17.2) or to resolve

Fo
an ambiguity or inconsistency (clause 17.1).
• Issue of new or revised drawings or specifications to comply with changes

required by the Client.
• Changes made to any constraints because of new Client procedures.

CHAPTER 6
The clause states two exceptions to a change to the Scope being a compensation
event.
• a change made to accept a Defect may arise due to agreement (in clause 45) or
because a Defect remains uncorrected (in clause 46). The cost effects of either is
dealt with in one of those clauses so this cannot then result in a compensation
event arising, otherwise the Client would be taking such monies twice.
• A change to the Scope provided by the Contractor for its design made at the
APPENDICES
Contractor’s own request or to comply with the Scope provided by the Client is
not a compensation event. The clause effectively gives precedence to the Scope
in part one of the Contract Data over the Scope in part two of the Contract Data.
Thus, the Contractor should ensure that the Scope it prepares and submits with
its tender as part two of the Contract Data complies with the requirements of
the Scope in part one of the Contract Data.

MANAGE
Access to use The Client’s obligations to give the Contractor access to and use of each part of the
of each part of Site are stated in clause 33.
the Site (2)
CHAPTER 1
Provision by the The Scope should give details of anything, such as Plant and Materials, which the
Client (3) Client is to provide and of any restrictions on when this is to be provided. The
Contractor is required to include this information on the programme under clause
31.2.
Instruction to Clause 34.1 gives the Project Manager the authority to instruct the Contractor to stop
stop or not to or not to start work. There are several reasons why the Project Manager may give
start any work, such an instruction.
or to change a
CHAPTER 2
Key Date (4) The Project Manager may also change a Key Date (clause 14.3), but not its Condition,
for example to suit actual progress on other works related to the contract.
Work of the The Scope should have given details of the work to be done by the Client or Others,
Client or Others including timing and conditions. The Contractor is required to include this information
.
ly
(5) on the programme under clause 31.2.
on
Reply to a Various periods are given in clauses for reply by the Project Manager and Supervisor
s
se
communication and general periods for reply are given in the Contract Data. The obligation to reply
po
(6) within the relevant period is stated in clause 13.3.
CHAPTER 3
pu
Objects of The procedure for dealing with objects of value or of historical or other interest found
value (7) g
within the Site is stated in clause 73.1.
in
in
Changing a The Project Manager and Supervisor are able to change decisions made under the
tra
decision (8) authority given to them in the contract, in the same way as they made their original
r
decisions, unless the contract says otherwise.

Fo
Withholding an Various clauses state reasons why the Project Manager is entitled to withhold
.
ly
acceptance (9) acceptance of a submission or proposal from the Contractor. If the Project Manager
on
withholds acceptance for any other reason, as the Project Manager is entitled to do
CHAPTER 4
ity
under clause 13.8, it is a compensation event.

rs
Searching for a The Supervisor can instruct the Contractor to search for a Defect under clause 43.1.
ve
Defect (10) Usually searches are instigated where faulty design, construction or manufacture is
ni
U
suspected.
n
Delayed tests Tests and inspection work to be carried out by the Supervisor are stated in the
to
As
and inspections Scope. Under clause 41.5, the Supervisor is required to do this work without causing
(11) unnecessary delay.
by
CHAPTER 5
se
Wherever possible the Scope should have included estimates of the time that the
ru
Supervisor needs for any of its tests. This will avoid arguments about what constitutes
Fo
‘unnecessary delays’ and make this clause more objective in its application.
Physical This compensation event is limited to those physical conditions which are encountered
conditions (12), within the Site and not any other parts of the Working Areas.
60.2 and 60.3
A good way to help decide whether an event is a 60.1(12) physical conditions
compensation event is to turn the clause back into a series of questions (and you can
do this for other compensation events). These must be answered positively for it to be
CHAPTER 6
a compensation event.
• Has the Contractor encountered a physical condition?
• Is the physical condition
–– within the Site?
–– and not a weather condition?

APPENDICES
• Would an experienced contractor (not necessarily the Contractor) have judged

at the Contract Date that the physical condition encountered had such a small
chance of occurring that it would have been unreasonable to have allowed for it?

MANAGE
The last paragraph of clause 60.1(12) clarifies the position about the basis of an
assessment of any valid ‘physical conditions’ compensation event. The Contractor is
only entitled to the effects of the difference between what was found and what it
CHAPTER 1
would have been reasonable to expect.
Note that under some circumstances an event which arises as a result of unforeseen
ground conditions could also qualify as a ‘clause 19 event’, in which case the Project
Manager assumes responsibility for managing the consequences.
The information which the Contractor is assumed to have taken account of in 60.1(12)
is listed in clause 60.2.
CHAPTER 2
Clause 60.3 states the rule regarding an ambiguity or inconsistency within the Site
Information. This does not cover ambiguities or inconsistencies between what is
encountered within the Site compared to what might have been expected to be
encountered (as shown in the Site Information).
.
ly
Adverse Rather than rely on the subjective generalisations about ‘exceptionally inclement
on
weather (13) weather’ or the like sometimes included in standard forms of contract, the ECC
s
includes a more objective and measurable approach. The idea is to make available
se
weather data, which is referred to in the Contract Data, and which is normally
po
compiled by an independent authority, which establishing the levels of selected
CHAPTER 3
r
pu
relevant weather conditions for the Site for each calendar month which have had a
g
period of return of more than ten years. If weather conditions more adverse than
in
these levels occur, it is a compensation event. Weather which the weather data show
in
tra
is likely to occur within a ten-year period will not result in a compensation event
arising and the Contractor should have made due allowance for such at tender stage.
r
Fo
The time of occurrence of all compensation events is when the underlying event
.
ly
described in clause 60.1 takes place. In the case of weather the test is the comparison
on
of the weather measurements with the weather data. The compensation event can
CHAPTER 4
ity
then be notified under clause 61.3 and its effect can be assessed at the end of the
rs
month when the extent of the weather exceeding the ten-year return weather data is
ve
known. The process starts again at the beginning of each month.

ni
U
If the weather measurements are recorded at an independent weather station and

n
not on Site, the figures will not normally be available until a few days after the end
to
As
of each month. In this case the Contractor must make sure that it obtains these in
sufficient time to comply with the notification period stated in clause 61.3.
by
CHAPTER 5
se
There may be a charge for providing the weather data and the weather
ru
measurements. The contract makes no recommendations about who should pay; it is

Fo
suggested that the Client should obtain the weather data and the Contractor obtain
the weather measurements.
The final sentence of the clause makes it clear that only the ‘extra’ adverse weather
is to be considered in assessing the effects of the compensation event. For example,
if the number of days with rainfall more than 5 mm in February is stated in the
weather data to be 6, and the weather measurements record a total of 8, any effect
CHAPTER 6
is assessed based on the 2 ‘extra’ days. Additionally, the effects of the compensation
event may also not be directly proportional. For example, if the 6 days of 5mm rain
floods the site, the extra 2 days may not have much further impact.
Client’s liability The Client’s liabilities are stated in clause 80.1, and include additional liabilities stated
events (14) in the Contract Data part one.
Note that under some circumstances an event which is a Client’s liability event
could qualify as a ‘clause 19 event’, in which case the Project Manager assumes
APPENDICES
responsibility for managing the consequences.

Client’s use of The Client may use a part of the works before Completion and, unless the use is for
the works (15) the reasons stated in clause 35.2, it takes over the part. If take over occurs before the
Completion Date, it is a compensation event.

MANAGE
There are exceptions to this. For example, if the Scope states that the Client requires
access across parts of the works for its own purposes. Alternatively, the Contractor
may request the Client to use part of the works to suit the Contractor’s method
CHAPTER 1
of working. Under clause 35.2, take-over would not occur in either of these
circumstances and there would be no compensation event.
Materials, Under clause 41.2, the Client is required to provide materials, facilities and samples for
facilities, tests as stated in the Scope.
and samples
for tests and
inspections (16)
Assumptions Under clause 61.6 (see later notes), the Project Manager may state assumptions to be
CHAPTER 2
about used in the assessment of a compensation event. If the Project Manager later notifies
compensation corrections to such assumptions, the notification is a separate compensation event.
events (17)
These Project Manager’s assumptions should not be confused with any forecast or
.
ly
estimates made by the Contractor in its assessment of a compensation event. If the
on
Contractor’s forecast in an accepted quotation is later shown to have been wrong,
s
neither the Contractor nor the Project Manager can change it (see clause 66.2). The
se
only exception to this is in Options B and D, where the quotations for a compensation
po
event may consist of forecast quantities and rates (see clause 63.15), in which case the
CHAPTER 3
pu
total of the Prices will change if the quantity of work carried out changes.
Client’s breach g
This is an ‘umbrella’ clause to include all other breaches of contract by the Client
in
in
of contract (18) within the compensation event procedure. Without this clause, in most jurisdictions
tra
the Contractor’s only remedy for a breach of contract by the Client would be
under the law. However, because of the effects of this clause and clause 63.6, the
r
Fo
Contractor’s only remedy is under the contract.

.
ly
Prevention (19) This is a type of “force majeure” event. NEC contracts are unusual in that they
on
provide for both time and cost effects to be dealt with, whilst other contracts simply
CHAPTER 4
ity
protect the Contractor against delay damages. Following the standard NEC approach
rs
for assessing compensation events, the Project Manager decides on the balance
ve
between time and cost when instructing the Contractor how the event is to be dealt
ni
with under clause 19.1. In many cases the cost may be covered by insurance which
U
the contract required the Contractor to take out, in which case it would be excluded
n
to
from assessment of the compensation event, see item 8 in the Schedules of Cost
As
Components.
by
Compensation only arises if the event is not covered by one of the other
CHAPTER 5
se
compensation events.
ru
An example of an event which fails the clause 60.1(19) test for prevention is the
Fo
insolvency of a key Subcontractor, for the following reasons.
• A Subcontractor’s insolvency is unlikely to prevent completion absolutely and,

only in extreme cases such as final late finishing trades, could it cause a delay
which could not be overcome.
CHAPTER 6
• Appointing a Subcontractor which did not have solvency problems (or not
subcontracting it at all) could have prevented the event.
• There is clearly always a risk of Subcontractor insolvency and an experienced

contractor should allow for it. The Contractor would also include the risk of
insolvency stopping work to be included in the Early Warning Register. One
would expect to see management techniques (risk-reduction actions) operated to
avoid the likelihood of a delay to a project.
Proposed This clause deals with the instances where the Project Manager does not accept a
APPENDICES
instruction is proposed instruction. Sometimes, particularly in a design and build situation, the
not accepted Contractor can incur considerable Defined Cost when providing a quotation for a
(20) proposed instruction.

MANAGE
Additional Further compensation events may have been added in by the Client to the Contract
compensation Data part one.
events (21)
CHAPTER 1
Option B and D A change in quantity is not a compensation event. A compensation event is triggered
60.4 only by the changed quantity satisfying all three tests stated in the clause.
This clause only applies to changes in quantities which do not result from changes to
the Scope. Subject to the exceptions in clause 60.1(1), a change to the Scope is always
a compensation event, regardless of the effect on quantities.
Option B and D A difference between original and final quantities in a Bill of Quantities is not a
60.5 compensation event. The amount due to the Contractor includes the PWDD, which
CHAPTER 2
is based on the actual quantities of work done. However, any difference of quantities
which causes Completion to be delayed or delays the meeting of the Condition stated
for a Key Date is a compensation event.
Option B and D There may be mistakes in the Bill of Quantities because it does not comply with the
.
ly
60.6 method of measurement or because of ambiguities or inconsistencies. This may
on
occur where an item has been omitted from the Bill of Quantities or an item in
s
se
the Bill of Quantities should be deleted or amended to comply with the method of
po
measurement. Such mistakes are at the risk of the Client in Options B and D.
CHAPTER 3
r
pu
The Project Manager is required to give an instruction to correct these mistakes and
g
that instruction will lead to a compensation event.
in
in
Option B and D This clause states which document the Contractor is assumed to have considered
tra
60.7 when assessing certain compensation events.

r
Fo
Notifying 61
compensation 61.1 This procedure would normally apply to compensation events 1, 4, 7, 8, 10, 15, 17, 20
.
ly
events and clause 60.6 in Options B and D, each of which is due to a communication from
on
CHAPTER 4
the Project Manager or Supervisor. This list may be extended via clause 60.1(21) or by
ity
additional compensation events in the chosen secondary Options.

rs
ve
When the event occurs, the Project Manager notifies the Contractor of the
ni
compensation event at the time of that communication. It is important that the

U
Project Manager notifies such compensation events, without waiting for the
n
to
Contractor to do so. If nothing else this is just good management on behalf of the
As
Client. All of them know there is an ‘extra’ so get on and agree the time and cost
by
implications.
CHAPTER 5
se
If the Project Manager does not notify the compensation event, the Project Manager
ru
may leave the Client open to late compensation event notifications from the
Fo
Contractor, because the time-bar in clause 61.3 does not apply to these types of
events.
61.2 In the notification of a compensation event, the Project Manager includes
an instruction to the Contractor to submit quotations. However, where the
compensation event results from the Contractor’s fault or the event has no effect
upon Defined Cost, Completion or meeting a Key Date, quotations are not instructed.
CHAPTER 6
To avoid doubt in such cases, it is suggested that when the Project Manager notifies
the compensation event, the Project Manager should give the reason for not
instructing quotations.
61.3 This procedure would normally apply to the compensation events not covered by
those in clause 61.1, but they can apply to those events if the Project Manager has
failed to notify them. These are events which arise from
• a failure by the Client, Project Manager, Supervisor or Others to fulfil their

APPENDICES
obligations (compensation events 2, 3, 5, 6, 11, 16 and 18),
• the Project Manager withholding an acceptance for a reason not stated in the
contract (compensation event 9), or
• a happening not caused by any party (compensation events 12, 13, 14 and 19).

MANAGE
This list may be extended via clause 60.1(21).
It would also apply to an event which the Project Manager should have notified under
CHAPTER 1
clause 61.1, but did not do so. In such cases, the Contractor initiates the procedure by
notifying the Project Manager.
To avoid having to deal with a compensation event long after it has occurred there
is a time limit on notification by the Contractor. Failure to comply with this time limit
‘time-bars’ the Contractor from any compensation for the event unless the event is
one which the Project Manager should have notified under clause 61.1. Note that this
time limit starts when the Contractor is aware that the underlying event occurs, not
when the Contractor becomes aware that it is a compensation event.
CHAPTER 2
61.4 This clause lists the five tests which the Project Manager applies to an event notified
by the Contractor to decide whether or not to instruct the Contractor to submit
quotations for its effect. If the Project Manager decides that the event fails any one of
the tests the Project Manager notifies the Contractor and no further action is required
.
ly
unless the Contractor disagrees with the decision and refers it as a dispute.
on
s
Otherwise the Project Manager is required to notify agreement to this being a
se
compensation event, and instruct the Contractor to provide a quotation for it.
rpo
CHAPTER 3
pu
In many circumstances, the Project Manager will be able to give its decision within a
week of the Contractor’s notification. With more complicated events, a longer period
g
in
will be desirable to ensure adequate time for a properly considered decision. Provision
in
is made for such longer periods subject to the Contractor’s agreement.

r tra
Remember with all such extensions of time for communications that the agreement
Fo
must be sought before the time has expired. The contract does not give the ability to
.
ly
extend the time after it has expired; it becomes a compensation event if the failure is
on
by the Project Manager or Supervisor.
CHAPTER 4
ity
The final paragraph of this clause protects the Contractor against a delay by the
rs
Project Manager in responding to the Contractor’s notification. The deemed

ve
acceptance provision does not happen automatically, it requires the Contractor to

ni
U
notify the Project Manager of the Project Manager’s failure to reply within the time
n
allowed, and then for the Project Manager to continue with that failure for another
to
two weeks.
As
61.5 The Project Manager should include in an instruction to submit quotations its decision
by
that the Contractor failed to give an early warning which an experienced contractor
CHAPTER 5
se
could have given. This influences the assessment of the event (see clause 63.7).
ru
61.6 In some cases, the nature of the compensation event may be such that it is impossible
Fo
to prepare a sufficiently accurate quotation. One example of this is where unexpected

physical conditions are encountered (compensation event 12) but their extent is
unknown.
However, good management requires that, in these circumstances, the possible effect
of the event needs to be established as quickly as possible, even if it means making
CHAPTER 6
some assumptions as to the event or its consequences.
In these cases, quotations are submitted based on assumptions stated by the

Project Manager in its instruction to the Contractor. If the assumptions later prove
to be wrong, the Project Manager’s notification of their correction is a separate
compensation event (clause 60.1(17)).
Apart from this situation, the assessment of compensation events cannot be revised
(clause 66.3). Since each quotation will include due allowance for risk (clause
63.8) and the early warning procedure should minimise the effects of unexpected
APPENDICES
problems, the need for later review is minimal, and the benefits to both Parties of
fixed time and cost effects far outweigh any such need.

MANAGE
Quotations for 62
compensation 62.1 There may be several ways of adjusting plans for the work to deal with a
events compensation event and its consequences. The procedure in this clause enables the
CHAPTER 1
Project Manager to consider different options. For instance, it may be more beneficial
to the Client to achieve earlier Completion at a greater cost than an alternative of
later Completion at a lower cost. The clause also provides for the Contractor to
submit quotations using methods other than those assumed in the Project Manager’s
instruction. For instance, the Contractor may be able to use a specialised item of
Equipment, which the Project Manager did not realise was available. It is likely that
the Project Manager will need to discuss these alternative ways with the Client to find
out their preferences.
CHAPTER 2
The Project Manager is required to discuss possible ways of dealing with the event
with the Contractor before instructing the Contractor to submit quotations. This is
intended to avoid wasting the Contractor’s resources in preparing quotations for
methods which are not practicable.
.
ly
on
62.2 Quotations comprise a ‘package’ of time and money as, in most situations, it is
impossible to consider either in isolation. The use of the term ‘quotation’ is not the
s
se
same as the normal use in commerce, i.e. the free submission of an offer. Quotations
po
are based on an assessment of forecast or recorded Defined Cost (clause 63.1) and
CHAPTER 3
r
time (clause 63.5) arising from the compensation event. A build-up of each quotation
pu
is required to be submitted by the Contractor.
g
in
in
An example of a quotation is shown in Appendix 5.
tra
The Contractor should carefully think about how the assessment is presented as, if
r
Fo
accepted by the Project Manager, this is the wording/form it will take on the Activity
Schedule (Options A and C) or the Bill of Quantities (Option B or D).
.
ly
on
For Option A, these considerations are particularly important because the effect
CHAPTER 4
ity
of a compensation event may be to extend the duration of an activity (or group of

rs
activities) so that its completion is delayed. The delay may result in a delay to payment
ve
if the activity completion occurs after the assessment date by which the activity
ni
was originally expected to have been completed. Where the delay would otherwise
U
cause a seriously adverse effect on the Contractor’s cash flow, the Project Manager
n
to
may agree to splitting the activity into two so that payment can be made for the
As
completed work.
by
For significant compensation events, the Contractor is advised to think carefully

CHAPTER 5
se
about presenting them on its quotation perhaps in the form they would have done
ru
had these been tendered originally. This will ensure a sensible cash flow results on
Fo
payments for compensation events as well as for the original work.
If several compensation events occur within a short time it may be sensible for the
Project Manager and Contractor to agree to package them together so that their
effects on Defined Cost and time can be considered together. This is especially so
when these compensation events affect the same or linked activities.
CHAPTER 6
62.3 The time limits are intended to promote efficient management of the contract
procedures. The time limits for submission and for the Project Manager’s reply may,
however, be extended under certain conditions, as stated in clause 62.5. An example
of the need for this flexibility is when a weather compensation event (clause 60.1(13))
occurs very early in a calendar month. The effect of the event cannot be assessed
until the end of the month when the extent of the weather exceeding the ten-year
return weather data becomes known. If the event is notified by both the Contractor
and the Project Manager immediately, the time remaining to the end of the month
may be more than the three weeks allowed for the Contractor to quote. An extension
APPENDICES
of the time to quote would then be necessary.
The three possible categories of reply by the Project Manager are listed and the two-
week period should be viewed as a maximum period.

MANAGE
Sensibly, the Contractor and Project Manager should have regular dialogue for all
compensation events across all of the stages. They could for example consider jointly
prepared quotations, which the Contractor then submits and the Project Manager
CHAPTER 1
immediately accepts. They could also use clause 63.2 (agreeing rates or lumps sums to
be used in lieu of first principles Defined Cost) wherever possible, especially for more
simple compensation events. Assessment of compensation events needs to happen,
but does not need to become the centrepiece of a project.
62.4 This procedure permits revision of quotations. In practice, this will usually follow
discussion between the Project Manager and the Contractor on the details of the
submitted quotations. When instructing a revised quotation, the Project Manager
may alter or add to the assumptions made under clause 61.6. Again, time limits for
CHAPTER 2
submission of the revised quotation are stated.
62.5 This clause provides for the extension of the time limits stated in clause 62.3 which
may be necessary with larger or far-reaching events. The Project Manager and the
Contractor must agree to the extension before the expiry of the times stated.
.
ly
on
62.6 It is important that the Project Manager does not delay the assessment of
compensation events, by, for example, waiting until the changed work is complete
s
se
before deciding whether to accept the Contractor’s quotation. This clause protects
po
the Contractor from such delays by the Project Manager. Once the quotation is
CHAPTER 3
treated as accepted, the compensation event is implemented (third bullet of clause
pu
66.1). The only remedy the Client then has if it does not agree with the quotation is
g
in
to invoke the dispute resolution procedures in the contract.
in
tra
Assessing 63
compensation 63.1 Assessment of compensation events as they affect Prices is based on their effect on
r
Fo
events Defined Cost plus the Fee. This is different from some standard forms of contract
where ‘variations’ are valued using the rates and prices in the contract as a basis.
.
ly
on
The reason for this policy is that no compensation event for which a quotation is
CHAPTER 4
required is due to the fault of the Contractor or relates to a matter which is at its risk
ity
under the contract. It is therefore appropriate to reimburse the Contractor its forecast
rs
additional costs (or actual additional costs in certain circumstances) arising from the
ve
compensation event. Disputes about the applicability of contract rates are therefore
ni
U
avoided.
n
to
Ideally, the assessment will be the forecast of Defined Cost of work which is yet to be
As
done, but it may, on occasions, include an element of incurred Defined Cost for work
by
which has been done (e.g. for a weather compensation event).
CHAPTER 5
se
If the compensation event increases the Contractor’s time related costs, for example
ru
because planned Completion is delayed, or additional supervisory staff are needed,

Fo
the increase in Defined Cost is included within the value of the compensation event.
There is no such thing as a retrospective and separate “delay and disruption claim” in
the contract.
Where the work to be done is changed, it is important that the assessment is based
upon the change in forecast or recorded Defined Cost. The clause gives no authority
for the price for the originally specified work to be deleted or for the forecast Defined
CHAPTER 6
Cost of all work now required to be used as the basis for a new price.
If the Scope originally included a piece of work (a) which is now to be replaced by
a piece of work (b), the compensation event is assessed as the difference between
the forecast Defined Cost of (b) and the forecast Defined Cost of (a). The Fee is then
added to this difference and the resulting total amount is used to change the Prices,
by either adding them to, or subtracting them from, the original price in in pricing
document.
APPENDICES
Similarly, if the effect of a compensation event is only to delete future work, the
assessment is based on the forecast Defined Cost of that work plus the Fee, not
simply a deletion of the price for the deleted work. There is, of course, no obstruction
to the Project Manager and the Contractor agreeing, under clause 63.2, to delete
the price if both are satisfied that it adequately represents the reduction in forecast
Defined Cost plus the Fee.

MANAGE
On the rare occasions when some or all the work arising from a compensation event
has already been done, Defined Cost should be readily assessable from records.
Forecasting future Defined Cost is less straightforward. Estimates of resources are
CHAPTER 1
required as well as productivity rates for Equipment and labour. For Options C, D
and E, pricing of the various components of Defined Cost is normally based on
the Schedule of Cost Components with the associated percentages tendered in
the Contract Data part two. The Short Schedule of Cost Components is used with
Options A and B. The Fee is calculated in accordance with clause 11.2(10).
Clause 63.1 pinpoints the date when there is a switch from recorded costs to forecast
costs included in a quotation. This is called the ‘dividing date’. This prevents the
practice of a Project Manager making a retrospective and selective choice between
CHAPTER 2
a quotation and the final recorded costs of dealing with a compensation event.
This practice was never intended to be allowed because it clearly disadvantages the
Contractor and, if adopted, will inevitably lead to adversarialism and game playing.
.
The dividing date has been set in clause 63.1:
ly
on
“For compensation events that arise from the Project Manager or the
s
se
Supervisor giving an instruction or notification, issuing a certificate
po
or changing an earlier decision, the dividing date is the date of that
CHAPTER 3
r
communication.
pu
g
For other compensation events, the dividing date is the date of the
in
notification of the compensation event.”
in
tra
This supports the intention of the NEC that assessments will usually be forecasts of
r
Fo
the cost of work yet to be done. Where work has had to start before the quotation
has been submitted or even before the instruction to submit was given it is inevitable
.
ly
that the forecast component of quotation will be influenced by the cost already
on
incurred. Nevertheless, for most cases, the inclusion in the clause of a dividing date
CHAPTER 4
ity
set early in the assessment process reinforces the point that compensation events are
rs
not cost-reimbursable but are assessed on forecasts with the Contractor taking some
ve
risk.
ni
U
63.2 There is provision through this clause for rates or lump sums to be used in the
n
assessment instead of Defined Cost, if the Project Manager and the Contractor agree.
to
This should be a ‘go to’ clause for minor compensation events, but it is important
As
to understand that the Contractor and Project Manager must agree to both the
by
principle of using rates, and the rates themselves. If the Parties are not careful, they
CHAPTER 5
se
can spend as much in professional fees and costs evaluating the Defined Cost as the
ru
compensation event is worth, which is plainly not sensible.

Fo
Clause 52.1 requires Defined Cost to be at open market or competitively tendered

prices, the Project Manager and Contractor need to have this in mind when agreeing
rates or lump sums.
63.3 Only certain compensation events can reduce the Prices. These are listed in core
clause 63.4 and in the main Options as follows:
CHAPTER 6
• Option A: 63.12
• Option B: 60.4, 60.6 and 63.12
• Option C: none
• Option D: 60.4 and 60.6
• Options E and F: none

APPENDICES
In addition, the Prices can be reduced by the application of secondary Options.
All other compensation events listed in clause 60.1 cannot lead to reduced Prices,
even if their effect is to reduce the Defined Cost.

MANAGE
63.5 The contract provides that there should always be a currently valid programme.
Provision is made for the initial submission and for regular updates of the Accepted
Programme and the Project Manager can instruct the Contractor to provide a
CHAPTER 1
revised programme, or the Contractor can choose to issue a revised programme
for acceptance, if progress is sufficiently different from that shown on the current
programme so as to make an update necessary. In addition, if a compensation event
affects the programme for remaining work, the Contractor is required to provide
alterations to the Accepted Programme to deal with the effects of the compensation
event in its quotation (clause 62.2).
Thus, the Contractor and the Project Manager both have a programme available to
use in assessing the cost and time impact of a compensation event. The programme
CHAPTER 2
will doubtless have some differences between what is shown as having been planned
to be completed and what has been completed, but these should not be significant
over the lifetime of an Accepted Programme.
.
ly
When assessing the time impact of a compensation event on the Completion Date,
on
the Project Manager and Contractor assess any delay to the planned Completion date
s
shown on the Accepted Programme current at the dividing date. The starting point is
se
to identify the correct Accepted Programme to use for the assessment. Once this has
po
been identified the assessment is made taking into account
CHAPTER 3
pu
• any delay caused by the compensation event already in the Accepted Programme
g
in
and
in
tra
• events which have happened between the date of the Accepted Programme and
r
the dividing date.

Fo
In some cases the effect of a compensation event may have already impacted on the
.
ly
Accepted Programme for example where an event was raised as early warning (clause
on
CHAPTER 4
15.1) and then later identified as a prevention event under clause 19. In such cases any
ity
delay already reflected in the Accepted Programme needs to be taken into account
rs
when assessing the impact of the compensation event on planned Completion.

ve
ni
In terms of events that may be taken into account between the date of the Accepted
U
Programme and the dividing date these could be other compensation events that
n
to
have occurred prior to the dividing date and any delays resulting from events which
As
are not compensation events.

by
In practical terms, the parties need to decide which activities on the Accepted
CHAPTER 5
se
Programme each compensation event affects, and what the delay is to each activity.
ru
The durations of activities which are not completed at the dividing date are changed
Fo
where appropriate to recognise the effect of the compensation event. Activities

which have been completed may have been affected by the compensation event, and
if so the time impact must be recognised. However, the actual timing of completed
work is not further adjusted.
In assessing the effect, risk allowances and mitigation measures should be included
on the basis that the Contractor reacts competently and promptly to the event.
CHAPTER 6
The intention is that the logic in the Accepted Programme is used as the basis for
determining the effect of the compensation event upon planned Completion, subject
only to changes required as a direct result of the compensation event assessment.
It may be helpful to produce a version of the programme specifically for the

purpose of the compensation event assessment. This can be used to support and
explain the assessment. However, it is important to understand this programme
is not a programme submitted for acceptance, but is used only for assessing the
compensation event.
APPENDICES

MANAGE
The Contractor provides its assessment as part of the quotation for the compensation
event. The Project Manager considers this and decides whether or not it correctly
assesses the time effect of the event. If not, the Project Manager must either ask
CHAPTER 1
the Contractor to submit a revised quotation, after explaining to the Contractor the
reasons for doing so, or make its own assessment and notify the Contractor of that,
complete with details. The Project Manager must make the assessment in the same
way as the Contractor is required to do; alterations to the Accepted Programme are
prepared, not a new alternative programme.
Having decided any delay to planned Completion and the Completion Date for
a compensation event, any further compensation event quotations must, when
considering the effect of delay, take this into account.
CHAPTER 2
No compensation event can result in a reduction in the time for carrying out the
works, i.e. an earlier Completion Date. Only where the contract specifically provides
for this, such as an acceleration as agreed under clause 36 or the acceptance of a
.
ly
Defect under clause 45, can an earlier Completion Date be achieved.
on
If both parties are doing what they should do, then compensation events should be
s
se
assessed by reference to the effect it has upon the Accepted Programme. However,
po
that will not always be the case. If the Contractor fails to provide a programme
CHAPTER 3
r
pu
for acceptance when they should, or if the Project Manager does not accept a
programme for a reason stated in the contract, the Project Manager is required to
g
in
make its own assessment of the effects of the compensation event, rather than use
in
the Contractor’s in accordance with clause 64.1. In that case the Project Manager’s
tra
assessment uses its own assessment of what the programme for the remaining work
r
Fo
should be (clause 64.2).

.
This is to ensure that assessments of compensation events are always made using
ly
on
an up to date programme. If the Contractor does not keep it up to date, the Project
CHAPTER 4
Manager can and should do so. This is another reason for the Contractor to make
ity
sure that it follows the processes in clauses 31, 32 and 62.2.

rs
ve
The contract makes it clear that any terminal float between planned Completion
ni
U
and the Completion Date is not available to use to mitigate the time effect of a
n
compensation event (see explanatory notes on clause 31.2).

to
As
By taking this approach, if planned Completion is delayed the Completion Date is

by
delayed by the same period. If planned Completion is not delayed the Completion
CHAPTER 5
Date is unchanged.
se
ru
The same principle applies to the planned achievement of the Condition required by a
Fo
Key Date, if Key Dates are used, and to any sectional Completion Dates if X5 applies.
By this method, the delay to the Completion Date can be determined. However, it
should be noted that this process is very different to the processes in other, more
traditional, contracts, which require the subjective judgment of being “fair” and
“reasonable”, and which is applied much later with hindsight. It deliberately sacrifices
the accuracy that hindsight may bring to reduce arguments about such subjective
CHAPTER 6
terms and ensure that both Parties are aware as soon as possible as to the time and
monetary costs of compensation events.
63.6 If any of the compensation events occurs, the Parties’ sole remedy is to use the
compensation event procedure. Therefore, if the Client breaches the contract the
Contractor must use this route (see clause 60.1(18)), rather than pursuing damages.
This prevents either party from trying to circumvent the time limits and processes in
the contract.
APPENDICES
63.7 The Contractor’s duty to give an early warning is stated in clause 15.1. The sanction if
the Contractor fails to give early warning is stated in this clause, but it will only apply
if the Project Manager has complied with clause 61.5. It is possible that early warning
could have allowed actions to be taken which would have reduced costs and saved
time.

MANAGE
It is therefore important that the Project Manager notifies the Contractor of its decision
that early warning should have been given (clause 61.5) so that the Contractor knows
the correct basis for its assessment and the nature of the early warning.
CHAPTER 1
63.8 Allowances for risk must be included in forecasts of Defined Cost and Completion
in the same way that the Contractor should allow for risks when pricing its tender.
The value of the allowance is greater when the work is uncertain and there is a high
chance of a Contractor’s risk happening. It is least when the uncertainties are small
and when the work is to be done by resources already on Site whose output rates can
be predicted relatively accurately.
If there is considerable uncertainty over the effects of a compensation event the
CHAPTER 2
Project Manager can decide, in consultation with Contractor where appropriate,
to limit this uncertainty by stating the assumptions the Contractor is to base its
quotation on (clause 61.6). In effect the Project Manager is limiting the Contractor’s
risk, but not necessarily removing it. Risk allowances for cost and time are still
.
permitted in the assessment.
ly
on
63.9 This clause protects the Client against inefficiency on the part of the Contractor.
s
se
63.10 This clause interprets a clause containing an ambiguity or inconsistency in favour of
po
the Party that did not draft the document in which it occurs.
CHAPTER 3
pu
63.11 Sometimes an instruction by the Project Manager under clause 14.3 to change the
Scope might impact on the description of the Condition for a Key Date. If that is the
g
in
case, then the Project Manager corrects the description.
in
tra
The clause goes on to say that the change is considered in the compensation event
r
for changing the Scope. It does not create its own compensation event.
Fo
Option A and B This clause is designed to motivate the Contractor to offer up value engineering type
.
ly
63.12 ideas. A few things must happen to affect this clause:

on
CHAPTER 4
• The change must be to the Scope provided by the Client.
ity
rs
• The change must have been proposed by the Contractor and accepted by the
ve
Project Manager. This will usually happen through the application of clause 16.
ni
U
n
• The effect of this compensation event must be to reduce the total Defined Cost.
to
As
If all of these are in place, then the Prices (clause 11.2(32)) are reduced by an amount
by
calculated by multiplying the assessed effect of the compensation event by the value
CHAPTER 5
engineering percentage. For example, if the assessed effect of the compensation
se
event is £1,000 and the value engineering percentage is 50%, the Prices are reduced
ru
by £500. This to take the form of changes to the Activity Schedule (see clause 63.14
Fo
for Option A) and to the Bill of Quantities (see clause 63.15 for Option B).
Option C and D This clause is designed to motivate the Contractor to offer up value engineering type
63.13 ideas. However, the same provisos apply to it as are stated for clause 63.12 in Options
A and B.
The clause preserves the Prices (the ‘target’) if the Contractor proposes a change to
CHAPTER 6
the Scope provided by the Client which has the effect of reducing the total Defined
Cost and is accepted by the Project Manager. The Parties therefore share the financial
benefits of this through the Contractor’s share mechanism in these main Options.
Option A and C The actual form that compensation events take are by changes to the Activity
63.14 Schedule (see clause 11.2(21)). The form (how they look) could include an additional
or replacement activity, or deletion or amendments to an existing activity.
Option B and D The Bill of Quantities will require amendment in the form of deletion, addition
63.15 or revision of quantities or items or rates and lump sums. The changes to the Bill
APPENDICES
of Quantities should be clearly referenced. The changed Bill of Quantities (clause

11.2(21)), which takes account of the effect of the compensation event, is used for
subsequent assessments of the PWDD.
If quantities and rates are used to change the Bill of Quantities, the Client will remain
at risk for the accuracy of quantities.

MANAGE
Option A and B Within the Contract Data there are some stated People Rates to be used if applicable
63.16 when assessing compensation events using the Short Schedule of Cost Components.
This clause deals with agreeing new rates for a category of person not included or
CHAPTER 1
determines that the Project Manager sets these rates, by reference to the existing
People Rates, where they cannot agree a rate with the Contractor.
These new rates are then available for subsequent compensation events.
The Project 64
Manager’s 64.1 and 64.2 The four circumstances in which the Project Manager assesses a compensation event
assessments are stated. They are all derived from some failure of the Contractor. The second results
from the Contractor not assessing the compensation event correctly in accordance
CHAPTER 2
with the contract. This means that the changes to the Prices have not been correctly
assessed in accordance with clause 63.1 and/or the change to the Completion Date or
a Key Date has not been correctly assessed in accordance with clause 63.5.
.
ly
The third and fourth circumstances are derived from the need to base an assessment
on
on an Accepted Programme which has been revised as required by clause 32.
s
se
If the Accepted Programme is non-existent, has not been revised as required in clause
po
32 or no alterations have been submitted as required in clause 62.2, the Project
CHAPTER 3
r
Manager is required to carry out its own assessment of the programme for the
pu
remaining work. This is a major incentive on the Contractor to keep its programme up
g
to date (and on the Project Manager to work with the Contractor to achieve this).
in
in
tra
The Project Manager will be motivated to make a fair and reasonable assessment in
the knowledge that the Contractor may formally dispute the matter.
r
Fo
64.3 This clause provides for the Project Manager to have the same time to make its
.
ly
assessment as the Contractor was allowed for its.

on
64.4 This clause (like clause 62.6) protects the Contractor against delay by the Project
CHAPTER 4
ity
Manager in finalising and implementing quotations for compensation events. Once

rs
the quotation is treated as accepted it is implemented (clause 66.1). The only remedy
ve
the Client then has if it does not agree with the quotation is formally to dispute this.
ni
Again, the deemed acceptance is not automatic, there needs to be a notification from
U
the Contractor once the Project Manager has failed to assess the compensation event
n
to
within the time allowed, and then for the Project Manager to continue with that
As
failure for another two weeks.

by
Proposed 65
CHAPTER 5
se
instructions 65.1 This clause deals with the situation where the Project Manager is considering issuing
ru
an instruction but first requires to know what effect this would have on cost and
Fo
time, for example when the Project Manager is considering a change to the Scope
(clause 60.1(1)), or considering a proposal from the Contractor (clause 16.2). The
Project Manager has the authority to instruct the Contractor to submit quotations as
a first step.
The likely timescales of when the proposed instruction may be given should be stated
and the Contractor must not put any of the proposed instruction into effect.
CHAPTER 6
65.2 There are three possible replies for the Project Manager to make. The first is the
requirement for a revised quotation, the second is basically acceptance of the
quotation and the third may result from the Project Manager deciding not to proceed
with a proposed change to the Scope. This is likely to happen when the cost of
the change is too high or the delay too great. The Project Manager has absolute
discretion in such a case on whether to proceed.
There is also a default non-acceptance if the Project Manager does not reply to the
APPENDICES
quotation within the time allowed.

65.3 If the Project Manager decides the instruction is to be given but does not accept
the quotation, this clause puts the process back to the quotation stage of the
compensation event process. The Contractor does though need to put the instruction
into effect (clause 14.3 and 27.3).

MANAGE
Implementing 66 The final stage in the compensation event process is the implementation of the
compensation compensation event. This is not about implementing perhaps some additional works
events instructed, it is instead concerned with the closure of the compensation event itself
CHAPTER 1
and how this changes, for example, the Activity Schedule in Option A and C.
66.1 Implementation happens when one of the three bulleted events occurs; the
most likely of which will be when the Project Manager notifies acceptance of the
Contractor’s quotation.
Implementing compensation events in Option A and Option B contracts is particularly

important for cash flow purposes. Once the event is on the Activity Schedule (Option A)
or Bill of Quantities (Option B), then it can be assessed as part of the PWDD provisions.
CHAPTER 2
66.2 Once a compensation event is implemented, this clause confirms the effect it has on
the Prices, the Completion Date and the Key Dates. These will change according, for
example, to reflect the accepted Contractor’s quotation. There is no need for any
form of communication to follow.
.
ly
66.3 This clause emphasises the finality of the assessment of compensation events. The
on
circumstances in which an implemented compensation is revised are only those in
s
se
the chosen dispute resolution process.
po
Illustrated In practice, parties will find that most compensation events on contracts will occur
CHAPTER 3
pu
use of NEC4 due to the Project Manager instructing a change to the Scope. On our project, the
communication g
Client had some problems with the requirement in the Scope to provide free-issue
in
forms trees for the landscaping works, due later in the contract. The Client asked the Project
in
tra
Manager to change the responsibility for providing this to the Contractor. The Project
Manager immediately wrote the following instruction:
r
Fo
.
ly
Instruction
on
CHAPTER 4
ity

rs

ve
Wincanton AB3 7TT

ni
U
n

to
As
GN7 3BB
by
CHAPTER 5
se

ru
Fo
Instruction No: PMI/1 Date: 13th November 2017
Under clause 14.3 I instruct you to:
Procure the trees as part 7.3 of the Scope. These will no longer be free-issue by the Client.
CHAPTER 6
APPENDICES
Copy to: Site Team
Signed:

MANAGE
Clause 61.1 requires the Project Manager to notify the Contractor of a compensation event
at the time of giving the instruction. This is quite a novel requirement in standard forms of
contract, most expect the Contractor to identify change; this reflects the good management
CHAPTER 1
standards required in the ECC.
The notification stage on our project occurs when, at the same time of issuing PMI/1, the
Project Manager notified this as a compensation event and instructed a quotation to be
provided. Within this notification, clause 61.2 requires the Project Manager to instruct the
Contractor to submit quotations, unless the event arises from a fault of the Contractor or the
event has no effect upon Defined Cost, Completion or meeting a Key Date.
Notification
CHAPTER 2

.
Wincanton AB3 7TT
ly
on
s
se
po
GN7 3BB
CHAPTER 3
r
pu
g
in
in
Notification No: PMN/2

tra
Date: 13th November 2017

r
Fo

.
ly
That my instruction PMI/1 is a compensation event under clause 60.1(1) and under clause
on
CHAPTER 4
61.2 I instruct you to submit a quotation for this.

ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
Copy to: Site Team
Signed:
CHAPTER 6
APPENDICES

MANAGE
The next stage of the compensation event process is the quotation; this is something for the
Contractor to prepare and this comprises proposed changes to the Prices, the Completion
Date and any Key Dates.
CHAPTER 1
There are several provisions within the ECC that the Contractor and Project Manager need to
be aware of during the preparation of the quotation. These include:
• Alternative quotations may be beneficial (see clause 62.1).
• The Contractor should submit details of the assessment with each quotation (see clause
62.2).
• If the programme for remaining work is altered by the compensation event, the
CHAPTER 2
Contractor includes the alterations to the Accepted Programme in the quotation (see
clause 62.2).
• Whether the compensation event should be assessed in accordance with clause 63.1
.
ly
or the Project Manager and Contractor agree to use rates or lump sums as the basis for
on
assessment as clause 63.2.
s
se
• Whether the Project Manager has stated in the instructions to submit quotations
po
that the Contractor did not give an early warning of the event which an experienced
CHAPTER 3
pu
contractor could have given (see clause 63.7).
• g
Whether the quotation should make any risk allowances for cost and time for matters
in
in
which have a significant chance of occurring and are not compensation events (see
tra
clause 63.8).
r
Fo
• If the compensation event is as a result of an instruction to change the Scope in order to

resolve an ambiguity or inconsistency (see clause 63.10).
.
ly
on
Once these provisions are considered, the Contractor submits the quotation. Clause 62.3
CHAPTER 4
ity
states:
rs
ve
‘‘The Contractor submits quotations within three weeks of being instructed to

ni
do so by the Project Manager.”

U
n
to
As
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
Submission
CHAPTER 1

GN7 3BB

Wincanton AB3 7TT

CHAPTER 2
Submission No: 2 Date: 18th November 2017
.
We submit the following under clause 62.3:
ly
on
s
Our quotation for PMI/1 comprises the proposed change to the Prices of £8,300, the
se
details of our assessment is attached. Our programme for the remaining work is not altered
po
by this compensation event and there is no delay to our planned Completion.
CHAPTER 3
r
pu
g
in
in
r tra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U

n
to
As
Signed:
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
Our project is an Option A contract so clause 63.14 states that
‘‘Assessments for changed Prices for compensation events are in the form of
CHAPTER 1
changes to the Activity Schedule.’’
The changes to the Activity Schedule could result in items being modified, added or deleted.
This compensation event resulted in an item being added to it. The Contractor can append
the proposed changes to the quotation submission along with details of the assessment
and any alterations to the Accepted Programme. As the Activity Schedule is quite small
on this project, it is sensible to submit it showing the changes. If it were multiple pages,
then just stating or showing the proposed changes would be more appropriate. The same
consideration is given to the Accepted Programme, where the contract only requires the
CHAPTER 2
alterations to be shown.
ACTIVITY NUMBER ACTIVITY DESCRIPTION LUMP SUM PRICE (£)
1 Mobilise site set up 100,000
.
ly
on
Maintain site set up, weeks:
s
se
2 1–4 30,000
po
3 5–9 30,000
CHAPTER 3
pu
4 10–13 30,000
g
in
in
5 14–17 30,000
tra
6 18–21 30,000
r
Fo
7 22–25 30,000
.
ly
8 26–29 30,000
on
CHAPTER 4
9 30–33 30,000
ity
rs
10 34–36 30,000
ve
ni
11 Demobilise site set up 70,800

U
n
12 Take delivery of free-issue materials as Scope 3.1 10,000

to
As
13 Carry out drainage works as Scope 2.1 75,000

by
Items 14–150 are not shown in this example 745,000
CHAPTER 5
se
151 Carry out testing requirements as Scope 3.1 50,000

ru
Fo
Compensation events
PMI/1 – additional tree procurement 8,300
Total of the Prices 1,329,100

CHAPTER 6
APPENDICES

MANAGE
Upon receipt of the quotation the Project Manager, in accordance with clause 62.3 (and
62.4), can instruct the Contractor to submit a revised quotation (only after explaining
the reasons for doing so), accept this or notify that the Project Manager will be making
CHAPTER 1
the assessment (which may happen in certain circumstances such as the Contractor not
submitting a quotation and details of its assessment within the time allowed).
On our project, the Project Manager was happy with how the Contractor had assessed
the quotation and accepted this (the details were not included here but assume they were
assessed by the Project Manager).
Notification
CHAPTER 2

Wincanton AB3 7TT
.
ly
on
s
se
GN7 3BB
po
CHAPTER 3
r
pu
g
in
Notification No: PMN/3 Date: 24th November 2017
in
tra

r
Fo
That I accept your quotation of £8,300 for the PMI/1 compensation event.
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
Copy to: Site Team
Signed:
CHAPTER 6
APPENDICES

MANAGE
Upon the Project Manager notifying acceptance of the Contractor’s quotation, the
compensation event is implemented (clause 66.1) and the Prices, Completion Date and Key
Dates are changed accordingly (clause 66.2). In this case, only the Prices are changed along
CHAPTER 1
with the revised Activity Schedule.
The ECC comprises a collection of clauses that need to be read together to make the
whole. The instruction and notifications on our project within the following sequence of
clauses demonstrate how we get from changing the Scope to the payment for this, noting
obligations on the way.
• “The Contractor Provides the Works in accordance with the Scope” (clause 20.1).
• “The Project Manager may give an instruction to the Contractor which changes the
CHAPTER 2
Scope…” (clause 14.3).
• “The Contractor obeys and instruction which is in accordance with the contract and is
given by the Project Manager…” (clause 27.3).
.
ly
on
• “The Project Manager gives an instruction changing the Scope…” is a compensation
s
event, with two stated exceptions (clause 60.1(1)).
se
po
• The compensation event is implemented when one of three instances occur (clause
CHAPTER 3
pu
66.1).
• g
“Assessments for changed Prices for compensation events are in the form of changes to
in
in
the Activity Schedule” (Option A, clause 63.14).
tra
• “When a compensation event is implemented the Prices, the Completion Date and the
r
Fo
Key Dates are changed accordingly” (clause 66.2).

.
ly
• “Information in the Activity Schedule is not Scope or Site Information” (Option A, clause
on
55.1).
CHAPTER 4
ity
rs
• The amount due includes the Price for Work Done to Date (clause 50.2) which in turn is
ve
defined in 11.2(29) as being

ni
U
• “…the total of the Prices for

n
to
–– each group of completed activities and

As
by
–– each completed activity which is not in a group…”.
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
7. TITLE
For large, expensive or important items of Equipment, Plant and Materials which are being
CHAPTER 1
manufactured or stored outside the Working Areas, the Client is advised to secure ownership
as soon as possible. This is especially so in Options C, D and E, where the Client must pay the
Contractor for these when it pays its supplier.
Under clause 71.1, the Supervisor marks such items if the contract identifies them for
payment and the Contractor has prepared them for marking as required by the Scope. In
Options C, D and E the definition of PWDD will require the Client to pay for these when the
Contractor pays its supplier for them. In Options A and B they will only be paid for if there is
a specific item in the pricing document (Activity Schedule of Bill of Quantities) requiring them
CHAPTER 2
to be paid for at this stage.
The Supervisor has the facility to mark Equipment that is outside of the Working Areas if the
Scope requires it. However, title will not pass to the Client for such Equipment by marking
.
ly
alone.
on
The Client’s title to 70
s
se
Plant and Materials 70.1 Upon the marking of the item of Plant and Materials, title passes to the Client if the
po
Contractor itself has title to pass.
CHAPTER 3
r
pu
70.2 Before the Contractor removes any items of Plant and Materials (including surpluses and
g
unusable or defective goods) it must obtain the Project Manager’s permission (in accordance
in
with clause 13.1) to affect such removal. Not to do so means the items may remain in the title
in
of the Client (if the Contractor originally had title itself) and hence could cause considerable
tra
complications for the Contractor, especially if Plant and Materials are returned to suppliers. It
r
Fo
would normally be advisable for the Contractor and the Project Manager to agree a simple
procedure to facilitate normal movement of resources in and out of the Working Areas.
.
ly
on
If the Project Manager gives permission for the removal of Plant and Materials, title in
CHAPTER 4
ity
them reverts to the Contractor (if the Contractor had title in the first place). This may cause
rs
problems if Plant and Materials which have been paid for are removed from the Working
ve
Areas for work to be done on them elsewhere, such as being returned to the manufacturer
ni
for modifications. If the need to remove Plant or Materials happens for an unforeseen reason,
U
the Project Manager should ensure that the Project Manager agrees suitable arrangements
n
to
with the Contractor to safeguard the Client’s position before the Project Manager gives
As
permission for the Plant and Materials to be removed from Site.

by
Marking 71
CHAPTER 5
se
Equipment, Plant 71.1 The conditions of contract do not specify any requirements for marking, unlike other forms
ru
and Materials of contract. The details will be in the Scope and the Supervisor and Contractor must be clear
Fo
outside the what these are. If the Supervisor believes these are inadequate, they can be changed by a
Working Areas Project Manager’s instruction but this may be a compensation event (clause 60.1(1)).
Assuming the procedures necessary prior to marking having been completed as the Scope
requires, the Supervisor has a duty to mark any Equipment, Plant and Materials outside the
Working Areas which are stated in the contract to be paid for before being delivered to
Working Areas.
CHAPTER 6
Removing 72
Equipment 72.1 This clause requires the Contractor to remove Equipment from the Site when it is no
longer needed. It may, however, be permitted to remain on the Site either temporarily or
permanently if the Project Manager allows. Examples are
• Temporary storage of items of Equipment pending transfer to another site.
• Temporary sheet piling or formwork which the Contractor may not wish to recover.
APPENDICES
• ‘Sacrificial’ formwork to be left in place

MANAGE
Items remain as Equipment left in the works and do not become part of the works.
On termination, the Contractor is not automatically entitled to remove the Equipment from
CHAPTER 1
Site if it is still needed to Provide the Works. Under certain circumstances the Client is entitled
on termination to use Equipment owned by the Contractor in order to complete the works
– see clause 92.2 P3. Once this Equipment is no longer needed by the Client to Provide the
Works the Contractor removes it from the Site.
Objects and 73
materials within 73.1 This clause establishes that the Contractor has no title to objects of value or of historical or
the Site other interest within the Site. Title to such objects may belong to the Client or some other
party. Any instructions to deal with such objects issued by the Project Manager, such as
CHAPTER 2
removal to the Client’s store, is a compensation event under clause 60.1(7).
73.2 The Scope should make it clear if the Client wishes to retain title of materials from excavation
or demolition. Otherwise, the Contractor has title for these materials.
.
ly
The Contractor’s 74
on
use of material 74.1 This clause covers the Contractor’s use of material provided by the Client and in turn the
s
Contractor may make this right available to a Subcontractor.
se
po
Anything provided by the Client may only be used to Provide the Works; it cannot be used
CHAPTER 3
pu
on other work the Contractor may be doing.
g
in
in
r tra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
8. LIABILITIES AND INSURANCE
This section does not deal with the risks and contractual liabilities imposed on the Parties by
CHAPTER 1
the other clauses in the contract. Instead this deals with the liabilities for deaths, losses and
damages caused by or in connection the works, both to the Parties and Others.
Client’s liabilities 80
80.1 The Client’s liabilities are stated in clause 80.1. There are nine main categories of Client’s
liabilities.
The first is the Client’s liability relating to its use or occupation of the Site by the works or for
the purpose of the works, and things like interference with any legal right of Others by the
CHAPTER 2
Client.
The second and third category covers matters such as fault of the Client and the Client’s
design. For liabilities which might arise from design faults the Client should either insure the
.
risk by a professional indemnity policy if the design is by its own resources, or ensure that if
ly
on
an external consultant is engaged to do the design work (e.g. under the NEC4 Professional
Service Contract), the liability is adequately covered. This may require a professional
s
se
indemnity policy from the consultant.
po
CHAPTER 3
r
The fourth category, relating to Plant and Materials supplied to the Contractor, is the liability
pu
of the Client up to the point of their receipt and acceptance by the Contractor. Any insurance
g
cover for these should be either under the Client’s own loss or damage policy or the
in
in
insurances of Others (as defined in clause 11.2(12)).
tra
The fifth category of Client’s liability is the loss of or damage to the works, Plant and
r
Fo
Materials caused by outside influences beyond the control of the Parties. This risk is limited to
what can be regarded as the Client’s property.
.
ly
on
The sixth category of Client’s liability is that arising once it has assumed responsibility for (i.e.
CHAPTER 4
ity
taken over under clause 35) completed work. Upon this happening, the Client takes on the
rs
consequences of normal ownership and therefore should insure its asset in the usual way
ve
if the Client so wishes. There are some liabilities which, even after take over, remain with
ni
the Contractor, but these are likely to be small and disappear with the issue of the Defects
U
Certificate.
n
to
As
The seventh category of Client’s liability is that of loss of or damage to the works and any
Equipment, Plant and Materials retained on the Site after termination.
by
CHAPTER 5
se
The eighth category of the Client’s liabilities covers loss of or damage to property owned or
ru
occupied by the Client, other than the works, unless the loss was caused by the Contractor.
Fo
The final category of the Client’s liabilities allows for it to carry additional liabilities but only if
these are stated in the Contract Data.
The Contractor’s 81
liabilities 81.1 The Contractor’s liabilities are defined as the four bulleted liabilities in this clause unless they
are stated as being Client’s liabilities.
CHAPTER 6
Recovery of costs 82
82.1 Under these clauses each Party pays the other for events which are at its liability.
and
82.2 When considering clause 82.2 it is important to remember that there will be a compensation
event if something which the Client is liable for under clause 80.1 occurs (see clause 60.1(14)).
Therefore, the costs of the Contractor and its supply chain are recovered through the
compensation event route, rather than through this part of the conditions of contract. Clause
82.2 is worded to ensure that the Contractor can also recover costs paid to Others, which
APPENDICES
have been incurred because of a matter for which the Client is liable.
82.3 Provision is made for the liability of a Party to be reduced on a proportional basis if an event
or events which are the liability of the other Party contributed to the cost of the liability of
the first Party.

MANAGE
Insurance cover 83
83.1 Should there be any stated insurances for the Client to provide in the Contract Data, these
must be provided. What is submitted, when and what happens if this is not provided is
CHAPTER 1
covered in clause 86.
83.2 These clauses require the Contractor to take out insurance cover. The events and extent of
and cover to be taken out by the Contractor are shown in the Insurance Table and detailed in the
83.3 Contract Data.
The Project Manager and the Contractor must ensure that the policies and certificates are in
the joint names of the Client and the Contractor, except the fourth insurance stated in the
Insurance Table.
CHAPTER 2
It is important to note that the insurances in the Insurance Table only cover events which
are at the Contractor’s liability. Thus, whilst the insurances run until the Defects Certificate
is issued, the Client assumes most of the risks for the works once they are taken over and
therefore the works will not be covered by this insurance.
.
ly
on
It is also important to realise that the limits for insurance stated in the Insurance Table do not
s
limit the Contractor’s liability. The extent of liability is limited, if at all, by the use of Option
se
X18, or by the law of the contract.
rpo
CHAPTER 3
pu
Insurance policies 84
84.1 The Project Manager does not receive copies of the Contractor’s insurance policies. Instead,
g
in
and to make sure that the Client’s interests are adequately protected, the Contractor submits
in
certificates signed by the Contractor’s insurer or insurance broker stating that the insurance
tra
required by the contract is in force. It should be noted that, unlike other acceptances, the
r
Fo
Project Manager must accept if the submission complies with the requirements of clause
84.1.
.
ly
84.2 The purpose of waiver of subrogation rights in a situation where the insurance is in joint
on
CHAPTER 4
names is to prevent insurers acting against the Client or Contractor, or their directors and
ity
employees after having paid money in settlement of a claim.

rs
ve
84.3 The Parties must comply with the terms of the insurance policies as not so to do may make
ni
the insurance partially or fully void and incur the Parties in substantial liability. It is therefore
U
important that the Project Manager is aware of any terms that may affect, or be affected by,
n
the actions of the Client.

to
As
If the Contractor 85
by
does not insure 85.1 This clause enables the Client to take out the relevant insurances if the Contractor fails to do
CHAPTER 5
se
so at the time and for the periods stated in the contract. Appropriate adjustments are then
ru
made to the amounts certified by the Project Manager.

Fo
Insurance by the 86
Client 86.1 As with clause 84.1, certificates (and not policies) are to be submitted by the Project Manager
to the Contractor for its acceptance. The certificates should be signed by the Client’s insurer
or insurance broker stating that the insurance required by the contract is in force. It should
be noted that the Contractor must accept if the submission complies with the requirements
of clause 86.1.
CHAPTER 6
86.3 If the Client does not submit a required certificate, the Contractor may procure additional
insurance to cover this and the Client will then reimburse the Contractor.
APPENDICES

MANAGE
9. TERMINATION
Termination 90
CHAPTER 1
90.1 Both the Client and the Contractor have rights to terminate the Contractor’s obligation to
Provide the Works. The Party wishing to terminate initiates the procedure by notifying the
Project Manager and the other Party, giving its reasons for terminating. If satisfied that the
Party giving notice has provided reasons which are valid under the contract, the Project
Manager issues a termination certificate to both Parties promptly.
It is important to note that these clauses confer rights on to the Parties, but it is not
mandatory that those rights are exercised.
90.2 to The Parties can terminate only for one of the reasons identified in the Termination Table. An
CHAPTER 2
90.5 additional reason for termination by the Client will apply if secondary Option X11 has been
included.
Reasons are given identification references (R1 to R22) for convenience and are fully
.
ly
described in clause 91. The procedures to be followed on termination (in clause 92) and the
on
amount due to be paid (in clause 93) are generally functions of the reasons for terminating,
s
although some are independent of the reasons.
se
po
Note that generally the Client can withhold a previously certified payment which is unpaid
CHAPTER 3
r
pu
at the date of the termination certificate if termination is by the Client for one of the reasons
g
give (simplistically, ones for which the Contractor has “caused”). If the contract includes
in
secondary Option Y(UK)2, however, this right is further restricted.
in
tra
The payment of the amount due after termination is dealt with in the payment of the final
r
Fo
amount due, see clause 53, and, if applicable, Y(UK)2.

.
Reasons for 91
ly
on
termination 91.1 The reasons set out in 91.1 deal with the insolvency of either Party. The terminology of
CHAPTER 4
insolvency law varies from country to country. The terms used in this clause are those current
ity
in English law, but the clause allows for their equivalents in other jurisdictions. Termination
rs
ve
may follow the bankruptcy, etc., of either the Contractor or the Client.
ni
U
The exercise of the right to termination when either Party is faced with the bankruptcy,
n
receivership or administration of the other is not mandatory. For example, it is often in

to
the best interests of the Client when first hearing of the appointment by the Contractor
As
of a receiver, administrator or liquidator to discuss with it the possibility of the Contractor

by
completing the works or being able to novate the contract to a third party such that work
CHAPTER 5
se
can continue with a minimum of disruption.

ru
91.2 The four-week period of grace is provided so that the Contractor has the opportunity to
Fo
correct the default. Notification of the fault should be issued by the Project Manager to the
Contractor and copied to the Client. If after four weeks the Contractor has not corrected
the default, the Project Manager notifies the Contractor and Client of the position so that
the Client can exercise its right to terminate if it wishes. The Contractor may have started to
make amends but not fully corrected the default after the four-week period. In this case, the
Client needs to decide whether it wishes to proceed to termination.
CHAPTER 6
Reason R11 applies only to a substantial breach of the Contractor’s obligations. Minor
breaches are insufficient grounds for the serious step of termination.
Note that in this and other termination clauses “substantial” is not defined. A Client or
Contractor wishing to terminate the Contractor’s obligation to Provide the Works for
substantial failure needs to be very sure that the failure is substantial, or the work being
stopped in clause 91.6 is substantial. Termination for a reason that is subsequently found not
to be a reason under the contract could have severe financial consequences.
APPENDICES
With regards to R12, the bond in Option X13 and the guarantee in Option X4 are both to be
provided within stated times. This clause effectively extends those periods by four weeks. No
time limits are given for providing an advanced payment bond under Option X14. However,
since this bond is provided as security against the advanced payment, delay in providing the
bond merely delays the advanced payment to the Contractor, which is sufficient sanction.

MANAGE
Subcontracting of work before acceptance by the Project Manager (R13) is a breach of clause
26.2. However, the right to termination only arises when substantial work is subcontracted
before acceptance of the Subcontractor.
CHAPTER 1
It is important to note that, whilst the Project Manager should bring to the Client’s attention
a default that the Contractor has not put right within four weeks, it is for the Client to decide
if it wishes to terminate the Contractor’s obligation to Provide the Works because of this
default. For example, in the case of a breach of clause 26.2, the Client may decide, after
consultation with the Project Manager, that the Subcontractor can carry out a part of the
works.
91.3 Much of the guidance for clause 91.2 applies to clause 91.3 as well. Both reasons in 91.3
CHAPTER 2
include the word ‘substantially’ for the reason that minor defaults of this nature would not
be sufficient grounds for termination. The right to termination for a breach of a health or
safety regulation is in addition to any sanctions under the applicable law.
91.4 Late payment entitles the payee to interest under clause 51.2. The right to termination,
.
ly
however, only arises if payment is delayed beyond thirteen weeks after the date when the
on
Contractor should have paid and, under R16, the right belongs only to the Contractor.
s
se
91.5 Rights to terminate under the law (R17) may be a result, in some jurisdictions, of force
po
majeure or frustration.
CHAPTER 3
pu
91.6 These reasons apply to instructions which relate to substantial or all work. Again, judgement
is needed to interpret what constitutes substantial work. Procedures and payment depend on
g
in
which Party was responsible for the default which led to the instruction. R20 provides for an
in
instruction which resulted from the default of neither Party.

tra
91.7 This reason is in effect recognition of a possible effect of force majeure type event, called
r
Fo
‘prevention’ in the ECC. The event will have been notified under clause 15 and, once
recognised as satisfying the criteria set out in clause 19, it will have been managed by the
.
ly
Project Manager. It will also be a compensation event under clause 60.1(19). The Client now
on
has the option to terminate if the event will prevent Completion of the whole of the works or
CHAPTER 4
ity
is forecast to delay it by more than thirteen weeks.

rs
ve
A delay to planned Completion which can (as opposed to will) be recovered by acceleration,
ni
by increased resources, or by adjusting the programme does not stop the Contractor from
U
completing on time. The Contractor must demonstrate that there are no reasonable means
n
to
by which it can complete the works on time for the event to be recognised under the second
As
bullet point.
by
Note that initially the event may have been notified as a compensation event under clause
CHAPTER 5
se
60.1(12), (13) or (14), and only recognised as a ‘force majeure’ event when the Project
ru
Manager and the Contractor considered how to deal with it.

Fo
91.8 The Client may terminate, if it wishes, for any Corrupt Act done by the Contractor. That right
may also be available if the Corrupt Act has been carried out by a supplier or Subcontractor,
depending upon the knowledge and actions of the Contractor.
Procedures on 92
termination 92.1 This clause provides flexibility to the Client on termination to decide how and if the works
CHAPTER 6
are to be completed. It applies irrespective of the terminating party or the reasons for the
termination.
As soon as the termination certificate is issued the Contractor’s obligations to Provide the
Works cease. However, the Contractor will, in certain circumstances, be allowed access to the
Site so as to remove Equipment and Plant and Materials, to the extent allowed in clause 92.2.
92.2 Under procedure P2, the Client’s right to enforce assignment of the benefits of a subcontract
will be subject to the terms of the subcontract. In certain cases, a new contract may be
necessary.
APPENDICES
Procedure P3 is particularly useful to a Client where there is substantial falsework or other

major temporary works. However, it can only apply to Equipment that the Contractor
has title to. Equipment which is being hired by the Contractor or which is owned by a
Subcontractor cannot be dealt with in this way unless the Contractor has obtained title to
it. In that case the Client could use Procedure P2, if available. Otherwise the Client will be
required to negotiate with the Equipment’s owner for its continued use.

MANAGE
Title to any Equipment retained by the Client remains with the Contractor. The Client is only
allowed to use the Equipment to Provide the Works and cannot retain it for other use or to
sell or dispose of it once it no longer needs it. The Contractor is required to remove from Site
CHAPTER 1
any Equipment retained by Client once it is no longer required to complete the works.
Payment on 93
termination 93.1 The amounts listed in this clause (A1) are due whatever the reason for termination.
When paying the Defined Cost for Plant and Materials, care must be taken to ensure that
there is no duplication with any amount that is assessed as being due for normal payments.
Defined Cost that the Contractor has reasonably incurred in expectation of completing the
CHAPTER 2
whole of the works should include costs which the Contractor can show have not been
recovered within the normal amount due. For example, for Option A it would include
amounts for the work done to the date of termination on activities which were not
completed at that time.
.
ly
on
Amounts retained by the Client that should be repaid to the Contractor on termination are
only those amounts that are to be temporarily retained under the contract. They would
s
se
include, for example, retention (if Option X16 is used) or the amount retained under clause
po
50.5 because the Contractor has not submitted its first programme. They do not, however,
CHAPTER 3
r
include amounts that are meant to be permanently paid by the Contractor to the Client, for
pu
example the amount payable under clauses 25.3 or 46.1, which would be deducted as part
g
of the assessment of the amount due for normal payments.
in
in
93.2 The applicability of these amounts (A2 to A4) depend on the grounds of termination (see
tra
Termination Table). Generally, where termination occurs because of the Contractor’s default,
r
Fo
the Contractor is not reimbursed the cost of removing its Equipment. In that situation, the
Contractor must also pay the Client’s additional costs for completing the works, representing
.
ly
at least some of the damages which the Client suffers arising from the Contractor’s breach of
on
contract.
CHAPTER 4
ity
rs
If the termination occurs because of the Client’s fault the Contractor is entitled to recover the
ve
Fee on the value of work that is outstanding at termination (A4), calculated using the total of
ni
the Prices at the Contract Date.

U
Option A This clause breaks down groups into individual activities which can then be assessed in
n
to
93.3 determining the amount due.

As
Option C On termination, the Project Manager assesses the Contractor’s share for the work it has
by
93.4 carried out before termination. For this calculation, there are specific rules defining how to
CHAPTER 5
se
assess the Price for Work Done to Date and the total of the Prices.
ru
Option D On termination, the Project Manager assesses the Contractor’s share for the work it has
Fo
93.5 carried out before termination. This is calculated by comparing the Price for Work Done to
Date with the Total of the Prices for work carried out before termination.
For this calculation, there are specific rules defining how to assess the Price for Work Done to
Date.
Option This clause deals with the payment of the Contractor’s share.
CHAPTER 6
C and D
93.6
APPENDICES

MANAGE
Clauses for resolving and avoiding disputes
CHAPTER 3
Clauses for resolving and avoiding
CHAPTER 1
disputes
Resolving and
CHAPTER 2
avoiding disputes
W1, W2 and W3
The Senior W1 In W1 a dispute arising under or in connection with the contract must be referred to the
Representatives and Senior Representatives in accordance with the Dispute Reference Table. If they cannot resolve
.
ly
W2 the dispute, only then can it be referred to the Adjudicator.
on
s
In W2 a dispute arising under or in connection with the contract may be referred to the Senior
se
Representatives if the Parties agree. If they cannot resolve the dispute, it may be referred to
po
the Adjudicator. However, this process is voluntary and either Party can refer a dispute to the
CHAPTER 3
pu
Adjudicator at any time, whether or not it has first referred it the Senior Representatives.
g
in
The Senior Representatives are provided by the Parties and are evenly matched in numbers.
in
They are named by the Client in Contract Data part one and by the Contractor in Contract
tra
Data part two. They should be people within their respective organisations who have not
r
Fo
been responsible for the day to day management of the project, and are there to look at the
dispute with a fresh pair of eyes.
.
ly
on
The Parties may replace their Senior Representatives at any time by notifying the other Party.
CHAPTER 4
ity
The Party referring a dispute notifies the Senior Representatives, the other Party and the Project
rs
ve
Manager of the nature of the dispute it wishes to resolve. Each Party submits to the other their
ni
brief statement of case (with supporting evidence) within one week of the notification.
U
n
The Senior Representatives attend as many meetings and use any procedure they consider
to
necessary to try to resolve the dispute over a period of no more than three weeks. This could
As
be negotiation, mediation or the like. At the end of this period the Senior Representatives
by
produce a list of the issues agreed and issues not agreed. The Project Manager and the
CHAPTER 5
se
Contractor put into effect the issues agreed.

ru
The Adjudicator W1 The Adjudicator may be named by the Client in part one of the Contract Data and
Fo
and appointed before the starting date. If the Parties wait until they are in dispute to appoint
W2 the Adjudicator, it is less likely that they will agree who to use. In that case the Adjudicator
nominating body will be called upon to choose the Adjudicator, and in that case it may not
have suitable qualifications or experience. Checks should be made for any conflicts of interest
before naming the Adjudicator or proposing a replacement. The Adjudicator should always
be a named person and not an organisation or firm. The Adjudicator takes no part in the
CHAPTER 6
project unless a Party refers a dispute to it.
The Parties appoint the Adjudicator using the NEC4 Dispute Resolution Service Contract,
which is one of the standard forms in the NEC family of contracts. This sets out matters
such as the terms of payment of the Adjudicator for its services and its duties, liabilities, etc.
The contract requires that the Parties share the cost of the Adjudicator’s fees and expenses
equally, unless they agree otherwise. This will apply to W1. However, in W2, the Parties
have specifically agreed to give the Adjudicator the ability to allocate the cost of its fees and
expenses between the Parties.
APPENDICES
If the contract with the Adjudicator is entered into before the starting date, this allows
any dispute to be referred to the Adjudicator quite quickly, without having to go through
the procedure of appointing an Adjudicator. Where the Adjudicator is not named in the
Contract Data or is unable, for whatever reason, to deal with the dispute, the procedure for
appointing a replacement Adjudicator is set out and it can then decide any existing disputes
that its predecessor had not dealt with.

MANAGE
The relevant experience, qualifications and general ability of any prospective adjudicator
must be carefully considered. The qualities of the Adjudicator should, as a minimum, include
CHAPTER 1
• knowledge of the applicable law
• knowledge of the procedures in the ECC,
• a full understanding of the roles of the Project Manager and the Supervisor,
• a full understanding of how construction or engineering costs arise and how they are
affected by changes to plan,
• knowledge of construction or engineering planning and of how plans are affected by

CHAPTER 2
changes,
• the ability to obtain technical assistance when its own technical knowledge does not
cover the matter in dispute and
.
ly
on
• an appreciation of construction or engineering risks and how allowances for them
s
should be set.
se
po
The adjudication W1 Both Options sets out when and how a dispute may be referred to the Adjudicator, and
CHAPTER 3
r
and the period that the Adjudicator must reach a decision. The Adjudicator can only decide the
pu
W2 dispute referred to it. The Adjudicator cannot, without the agreement of the Parties, decide
g
in
other disputes that the Adjudicator may be aware of but which have not yet been referred to
in
the Adjudicator by a Party.
tra
The Adjudicator has wide powers to ensure that it can properly manage the process of
r
Fo
adjudication and resolve the dispute referred to it. The Adjudicator is also free to carry out
whatever investigations are considered necessary to enable it to make the decision. However,
.
ly
on
the Adjudicator should tell the Parties the results of those investigations and invite them to
CHAPTER 4
comment before making the decision.

ity
rs
The Adjudicator has a specified time to reach its decision, but that time can be extended in
ve
certain circumstances. The time to be taken and the circumstances under which it can be
ni
extended vary between W1 and W2.

U
n
to
The Adjudicator may review any action or inaction of the Project Manager or Supervisor,
As
and decide what action should have been taken in accordance with the contract. If the
by
Adjudicator decides in the Contractor’s favour but it is too late for the action or inaction
to be implemented, the Adjudicator may, if it has jurisdiction, deal with the matter by
CHAPTER 5
se
deciding the effect on the Prices, the Key Dates and Completion Date using the same
ru
assessment procedure that is used for compensation events. The Adjudicator may also alter
Fo
any matter which the contract has treated as being accepted or correct.
The decision of the Adjudicator may simply be that the Project Manager or Supervisor should
have acted or should not have acted in the way that it did, but in certain circumstances the
Adjudicator may also decide what action should have been taken. In the cases in which
the Adjudicator decides that the Project Manager or Supervisor acted or did not act in
accordance with the contract or in any other matter which the Adjudicator decides in the
CHAPTER 6
Contractor’s favour, the Adjudicator may assess both financial and time effects, if it has the
jurisdiction to do so.
In other circumstances, it may be appropriate for the Adjudicator to change the disputed
action or inaction. For instance, where the Contractor disputes the existence of a Defect,
which has been notified by the Supervisor, the Adjudicator may decide in the Contractor’s
favour. If so, the Contractor would be relieved of any obligation to correct, if corrective work
has not started. If the alleged Defect has been ‘corrected’, the Adjudicator may decide on the
APPENDICES
financial and time effects. However, as in other instances, should the Project Manager still
require additional or remedial work then the Adjudicator may decide that such work was or
is a change to the Scope. This would be a compensation event, which the Adjudicator may
have the jurisdiction to value.

MANAGE
If the Adjudicator decides that further sums are due to either Party, the Adjudicator can also
award interest on them under clause 51.3. In W1 the Project Manager is required to include
the financial effect of the Adjudicator’s decision in the next assessment. In W2 any sum that
CHAPTER 1
the Adjudicator decides should be paid by one Party to the other becomes due within seven
days of their decision.
If the Adjudicator disagrees with the Project Manager’s assessment of delay to the
Completion Date, the Adjudicator will overrule the Project Manager’s decision and the
Completion Date will be set in accordance with what the Adjudicator decides.
The Adjudicator is required to give the Parties reasons for its decision. However, no details
are given in both Options of how this decision and its associated reasons are to be drafted.
CHAPTER 2
The essential requirement is that the Parties can understand why the Adjudicator has reached
its decision and can implement it immediately. It may also be subject to scrutiny, particularly
by a Party who may be dissatisfied with the decision.
In its decision, the Adjudicator should state the precise nature of the dispute referred to the
.
ly
Adjudicator. The decision might comprise the Adjudicator’s opinion on, for example, what
on
the Project Manager’s decision should have been in accordance with the contract. It might
s
se
include assessment of a compensation event, what money is payable by one Party to the
po
other or what changes to the programme are required.
CHAPTER 3
pu
The latter point may cause difficulty since it is likely that the programme has been revised
g
since the events which gave rise to the dispute took place. For instance, there may have
in
been subsequent delays for all sorts of reasons However, the Adjudicator, like the Parties, is
in
tra
required to use the Accepted Programme at the dividing date to make this assessment, see
clauses 63.5 and 63.1. The Parties will then be able to take account of this decision in further
r
Fo
revisions of the programme.

.
ly
Other matters which, for completeness, may be included in the Adjudicator’s decision are
on
CHAPTER 4
• details of the contract,
ity
rs
• details of the appointment of the Adjudicator,

ve
ni
U
• circumstances leading to the reference,

n
to
• the procedures followed by the Adjudicator and

As
• information upon which the decision is based.

by
CHAPTER 5
se
Submission of a dispute under either of these Options does not entitle any Party to cease
ru
activities. The Adjudicator’s decision is binding and must be implemented. It can only be
Fo
changed by a subsequent decision of the tribunal, or by agreement between the Parties.

Should the Adjudicator’s decision change an action or inaction and the Project Manager
believes it’s or the Supervisor’s original action or inaction remains necessary for the
Completion of the works then, subject to it being limited to a change in the Scope, the
Project Manager is free to further instruct the Contractor. A change in the Scope under these
circumstances is a compensation event, as are all such changes.
CHAPTER 6
Once the Adjudicator has reached its decision the Parties put it into effect. If both are
satisfied with the decision, that is the end of the matter. If either Party is not satisfied with
the Adjudicator’s decision, it has four weeks to notify the other of their dissatisfaction, in
which case the matter can then be dealt with by the tribunal.
If the Adjudicator fails to notify the Parties of its decision by the required time, the Parties
and the Adjudicator may agree to extend that time. However, W1 and W2 have different
provisions if it fails to so agree.
APPENDICES
In W1 either Party may then refer the dispute to the tribunal, as long as it notifies the other
Party of its intention to do so within four weeks of the date by which the Adjudicator should
have informed the Parties of its decision.
In W2 either Party should get another Adjudicator appointed. Only after the new Adjudicator
has made its decision can either Party take a dispute to the tribunal, if it notifies the other
Party of its intention to do within four weeks of the decision being notified.

MANAGE
The Dispute W3 The role of the Dispute Avoidance Board is different to that of the Senior Representatives
Avoidance Board or the Adjudicator in W1 and W2. Its members visit site regularly and their role is to try
to identify any potential areas of dispute as early as possible and help and guide the
CHAPTER 1
Parties towards an early resolution of the issues before positions become entrenched and
considerable sums of money are spent. This resolution can be within or outside the contract.
If it leads the Parties to agree to change the contract, that change should be recorded in
accordance with clause 12.3.
In addition, either Party may refer any potential dispute it has to the Dispute Avoidance
Board. Again, the Dispute Avoidance Board will meet with the Parties and try to get them
to resolve the potential dispute. If they fail to do so the Dispute Avoidance Board provides
the Parties with a recommendation as to how the potential dispute should be resolved. This
CHAPTER 2
could be by suggesting what the answer is, or it could be by merely suggesting a way that
the Parties may use to try to reach agreement. This recommendation is not binding on either
Party.
.
ly
If the Dispute Avoidance Board consists of three members the Parties nominate one member
on
each and agree the name of the third member, who will chair the Dispute Avoidance Board.
s
If they fail to agree, either may ask the Dispute Avoidance Board nominating body to choose
se
the third member.
po
CHAPTER 3
r
pu
The contract sets out how and in what circumstances a member of the Dispute Avoidance
Board may be replaced.
g
in
in
The Dispute Avoidance Board must act impartially and its members are not liable to the
tra
Parties unless bad faith is involved.

r
Fo
Once the Dispute Avoidance Board has made a recommendation, if both Parties are satisfied
with the recommendation, that is the end of the matter. If either Party is not satisfied with
.
ly
the Dispute Avoidance Board’s recommendation, it has four weeks to notify the other of the
on
CHAPTER 4
matter which it disputes and state that it intends to refer it to the tribunal. If this happens,
ity
the matter can be dealt with by the tribunal.

rs
ve
The tribunal W1, The tribunal makes a final and binding decision on the dispute, subject only to any appeals
ni
W2 procedure allowed under the applicable law. In W1 and W2, it is important to note that
U
and a dispute cannot be referred to the tribunal unless it has first been referred to (and in the
n
to
W3 case of Option W2 decided by) the Adjudicator. In W3, it is important to note that a dispute
As
cannot be referred to the tribunal unless it has first been referred to the Dispute Avoidance
by
Board.
CHAPTER 5
se
An important feature of the ECC is that the Client can choose the nature of the tribunal
ru
and hence is required in the Contract Data to insert its choice, e.g. arbitration, expert
Fo
determination, or the courts.
The tribunal has wide powers to decide the dispute finally and is not tied to any decision or
action of the Project Manager or Supervisor. The referral of the dispute to the tribunal should
not be an appeal of the Adjudicator’s original decision. Therefore, either Party may rely upon
new evidence and submissions at the tribunal that were not put before the Adjudicator.
CHAPTER 6
If the tribunal is arbitration, the arbitration procedure is that stated in the Contract Data.
Such procedure generally deals with appointment of arbitrators and replacement arbitrators
and time limits. A number of legal jurisdictions have their own standard arbitration
procedures.
If the chosen arbitration procedure does not provide for the appointment and replacement
of the arbitrator, the Client should include the necessary procedures in the Contract Data.
APPENDICES

MANAGE
Secondary Option clauses
CHAPTER 4
CHAPTER 1
OPTION X1: PRICE ADJUSTMENT FOR INFLATION (USED ONLY WITH OPTIONS A, B, C AND D)
Price X1 This clause defines the various terms that are used later to calculate the amount that is
adjustment Defined terms added to the amount due to allow for inflation.
for inflation X1.1
CHAPTER 2
The calculation is made at each assessment date, and uses the latest index available
at the time of the assessment. This will probably be for a period some time before the
actual date of assessment, but the calculation is not subsequently adjusted, see X1.2. This
means that there will be a recovery gap, which the Contractor should have allowed for in
.
ly
its pricing.
on
s
The source of the published priced indices to be used is identified in part one of the
se
Contract Data together with the proportions of the total value of the works to be linked
po
to the index for each category. Allowance is made for a non-adjustable portion which
CHAPTER 3
pu
represents the portion for which the Contractor carries the risk of inflation. The total of
the proportions should be one. g
in
in
Also entered in the Contract Data is the base date, which should normally be a date close
tra
to the starting date.

r
Fo
Price Indices used are the latest available at the time of assessment. For simplicity, they are not
Adjustment later updated either to reflect a change in the index used or to reflect a more up to date
.
ly
Factor index.
on
CHAPTER 4
X1.2
ity
The second part of this clause has the effect of freezing the Price Adjustment Factor at
rs
the last assessment date before the Completion Date for the whole of the works, thus
ve
requiring the Contractor to carry the risk of inflation of the cost of work done after this
ni
date. It should be noted that the Completion Date is the date by which the Contractor
U
should finish the works, not the date when it finishes it.
n
to
As
If there are sectional Completions (Option X5), the effect of this clause is that if earlier
sections are finished late but before the last Completion Date, the Contractor will be paid
by
price adjustment on late work. This is part of the ECC system to avoid the difficulties of
CHAPTER 5
se
subdividing payments after a section has been completed and subdividing the calculation
ru
as between work contributing to various sectional Completions. This could be a complex

Fo
and contentious calculation.

Options A and ‘Each amount due’ is the total to date and only the changes in the amount due are
B X1.3 certified after each assessment date (clause 51.1). Thus, the total of the two bullet points
listed in clause X1.3 represents the total amount in respect of price adjustment up to the
date of each assessment.
CHAPTER 6
Assume the increase in the Price for Work Done to Date in the assessment is £5,000
and the Price Adjustment Factor (PAF) is 0.05 (i.e. 5% inflation since the base date). The
calculation for the first bullet point in clause X1.3 is
£5,000 x 0.05 = £250
The sum of £250, plus the total of the sums resulting from the same calculation in
previous assessments is the amount for price adjustment included in the amount due.
Options C and Adjustment for inflation for target contracts is necessary for the calculation of the total of
APPENDICES
D X1.4 the Prices (Option C) or Total of the Prices (Option D), which is only used to calculate the
Contractor’s share and not the periodic payment of the amount due.

MANAGE
This calculation is different from that for Options A and B because the Price for Work
Done to Date is the Defined Cost plus the Fee. Defined Cost is current cost and
automatically includes any inflation occurring since the base date. However, since the
CHAPTER 1
Contractor’s share is calculated from the difference between the total (Option C) or
Total (Option D) of the Prices and the Price for Work Done to Date, the two must be
compatible in terms of allowance for inflation. The total of the Prices for Option C is
derived from the Activity Schedule, and the Total of the Prices for Option D is derived
from the Bill of Quantities. It is these which must be adjusted for inflation.
The calculation in clause X1.4 determines the inflationary component of the increase in
the Price for Work Done to Date since the last assessment.
CHAPTER 2
Example
Assume the increase in the Price for Work Done to Date for the assessment is £5,000 and
the Price Adjustment Factor is 0.05 (i.e. 5% inflation since the base date). The calculation
.
ly
in clause X1.5 is
on
(5,000 x 0.05)/1.05 = 238.10
s
se
po
The sum of £238.10 is the price adjustment amount for the assessment and is added
to the total (or Total) of the Prices to maintain comparability with the final payment for
CHAPTER 3
r
pu
Work Done to Date.
g
in
Compensation Under clause 63.1, compensation events are assessed on the basis of Defined Cost
in
events of work already done before the dividing date and forecast Defined Cost after the
tra
X1.5 dividing date for future work. Clause 63.1 also states when the dividing date is for
r
each compensation event. Defined Cost is assessed using the Short Schedule of Cost
Fo
Components (for Options A and B) or the Schedule of Cost Components (for Options
.
ly
C and D) in conjunction with the Contract Data, where appropriate. The result is that,
on
in the general case, some Defined Cost will be in current terms (money of the day) and
CHAPTER 4
some will be in base date terms – where rates for people and Equipment are stated in the
ity
rs
Contract Data.
ve
This clause reduces Defined Cost in current terms to base date levels so that changes to
ni
U
the Prices for compensation events are made in base date terms. When assessments of
n
the amount due are made, the Price for Work Done to Date will be adjusted for inflation
to
under clause X1.3 or clause X1.4.

As
by
CHAPTER 5
se
OPTION X2: CHANGES IN THE LAW

ru
Fo
Changes in X2
the law X2.1 If incorporated, this clause deals with changes in the law of the country in which the
Site is located which occur after the Contract Date. Should such an event occur then this
would be a compensation event, to be notified by the Contractor to the Project Manager
under clause 61.3. The Contractor is most likely to do this when a change in the law has
the effect of increasing the Defined Cost. However, the clause is reciprocal in the sense
CHAPTER 6
that the Client gains the benefit of a change in the law which reduces the Defined Cost.
The change in the law must have an effect on Defined Cost and therefore the following
examples would not be compensation events
• income tax or any other tax paid by employees,
• corporation tax or any other charges on profits.
However, changes of law in the following examples would be compensation events

APPENDICES
• employment tax paid by the Contractor,
• import duties,
• customs payments.

MANAGE
For the purposes of this clause, law would include a national or state statute, ordinance,
decree, regulation (including building or safety regulations) and a by-law of a local or
other duly constituted authority or other delegated legislation.
CHAPTER 1
OPTION X3: MULTIPLE CURRENCIES (USED ONLY WITH OPTIONS A AND B)
Multiple X3 Provision for multiple currencies in Options C and D is made in clause 50.7 and in Options
currencies E and F in clause 50.8 which is why this clause is only used with Options A and B.
Where this Option is incorporated, if an item is to be paid for by the Client in the
CHAPTER 2
currency of the contract and the Contractor chooses to pay for it, or part of it, in another
currency, the Contractor carries the risk of changes in the exchange rate. Payment to the
Contractor is not affected.
.
If, however, the total of the Prices at the Contract Date, which will be expressed in
ly
on
the currency of the contract, includes items identified as to be paid by the Client to
the Contractor in another currency, the Client takes the risk of any movement in the
s
se
exchange rate after the date of the published exchange rates stated in the Contract Data.
po
This is achieved by listing the items in the Contract Data and fixing the exchange rate to
CHAPTER 3
be used for each currency relative to the currency of the contract. This ensures that the
pu
Contractor is paid the amount of the other currency which it has quoted for the item.
g
in
Option X3 When Option X3 is used in a contract which also includes Option X1, and if an index
in
with Option used in the formula for price adjustment is local to the Site, published in the country of
tra
X1 the Site, and covers materials which are normally imported to that country, the index will
r
Fo
take account of currency exchange rate variations between the supplying country and
the importing country. Any such materials should not also be covered by the multiple
.
ly
currency arrangement in Option X3, otherwise a double adjustment for exchange rate
on
variation will result.
CHAPTER 4
ity
rs
If an index used in the formula is an index published in the country or origin of a

ve
commodity it will not reflect changes in currency exchange rates between the country of
ni
origin and the country to which the commodity is being supplied. It is then appropriate, if
U
Option X3 is used, to include this commodity in the list of items for payment in a second
n
currency to protect the Contractor from currency exchange rate variations.

to
As
by
CHAPTER 5
OPTION X4: ULTIMATE HOLDING COMPANY GUARANTEE
se
ru
Ultimate X4
Fo
holding X4.1 Where Option X4 is incorporated, an ultimate holding company guarantee should be
company provided by the Contractor to the Client by the Contract Date. If that is not achieved, a
guarantee four-week limit from the Contract Date is provided as a fall-back. Failure to provide the
guarantee within this period entitles the Project Manager to notify the default under
clause 91.2 (Reason 12). If the Contractor does not provide the guarantee within a further
four weeks, the Client is entitled to terminate. An example guarantee is not provided by
CHAPTER 6
NEC but instead should be provided in the form as stated in the Scope.
X4.2 It is often difficult to obtain a guarantee from an ultimate holding company, especially
with larger multi layered international corporations. This clause allows the Contractor
to propose providing a guarantee from an alternative company owned by the ultimate
holding company. The Project Manager should accept this alternative as long as it is
satisfied that the commercial position of the guarantor is strong enough to carry the
guarantee. The Project Manager will need to consult with the Client about this and may
need to obtain further specialist advice as to the strength of the proposed guarantor.
APPENDICES

MANAGE
OPTION X5: SECTIONAL COMPLETION
Sectional X5
CHAPTER 1
Completion X5.1 If X5 is incorporated, then the Contractor is obliged to achieve Completion of any
sections stated in the Contract Data part one by its Completion Date.
If the definition of a section is complex it can be set out in the Scope and the description
in the Contract Data can refer to that Scope. In addition, if there are any additional
requirements as to the state of the works before Completion for each section, these
should be set out in the Scope. This is because the definition for Completion in clause
11.2(2) applies to each section.
CHAPTER 2
Once Completion of a section is achieved the Client takes over that section, see core
clauses 35.1 and 35.3. The Client then assumes the liability for loss or damage to that
section of the works, except for certain events, see core clause 80.1. The Client is required
to give access to the Contractor to any section that it has taken over if it is needed to
.
ly
correct a Defect, see clause 44.4.
on
s
Delay damages and bonus for early Completion can be related to the sectional
se
Completion Dates by using Options X7 and X6, respectively.
po
CHAPTER 3
r
pu
Completion of a section of the works does not affect the defects date, which is defined
by reference to Completion of the whole of the works. Likewise, where Option X16 is
g
in
used, the dates when retention is released are not affected by early Completion of a
in
section of the works as they are defined by reference to Completion of the whole of the
tra
works and the issue of the Defects Certificate.

r
Fo
.
ly
OPTION X6: BONUS FOR EARLY COMPLETION

on
CHAPTER 4
ity
Bonus X6
rs
for early X6.1 Where X6 is incorporated, the Client has decided that Completion as early as possible
ve
Completion would benefit it, whether of the whole of the works or, if X5 is incorporated, of a
ni
U
section of the works. This Option motivates the Contractor to achieve early Completion.
n
The bonus calculated in accordance with this clause will be included in the appropriate
to
assessment by the Project Manager (clause 50.2) that follows the Client taking over the
As
whole of the works or any section of the works, if X5 is incorporated.

by
CHAPTER 5
se
ru
OPTION X7: DELAY DAMAGES

Fo
Delay X7
damages X7.1 If X7 is incorporated, delay damages are pre-assessed damages paid by the Contractor if
it fails to complete the works by the Completion Date.
It is important to understand that, if Option X7 is included, the deduction of delay

damages once they become due is part of the assessment made and certified by the
CHAPTER 6
Project Manager. Unlike other contracts, they are not deducted by the Client from the
Project Manager’s certified amount due.
If Option X7 is used in conjunction with Option X5 for sectional Completion, an estimate

of delay damages should have been stated in the Contract Data against the Completion
Date for each section. A separate entry should have been included for delay damages for
the whole of the works.
Since delay damages are amounts to be paid by the Contractor, appropriate deductions
APPENDICES
are made in the first assessment of the amount due occurring after the Completion Date,
and in subsequent assessments up to the earlier of Completion and the date on which
the Client takes over the works.

MANAGE
X7.2 This clause protects the Contractor when it has paid delay damages and a later
assessment of a compensation event results in moving the Completion Date to a later
date. This could occur when a compensation event arises at a late stage in the work or if
CHAPTER 1
an Adjudicator or the tribunal changes the assessment of a compensation event and their
decision is made after delay damages have been paid. The Client is required to repay any
overpayment of delay damages, with interest.
X7.3 Under core clause 35.2, if the Client uses part of the works before Completion is certified
it is deemed to have taken over that part when it starts using it, unless the take-over is
for a reason stated in the Scope or to suit the Contractor’s method of working. In that
case, the Client has had the benefit of using part of the works and it would be unfair
to levy the delay damages in the contract applicable to all the works if the Contractor
CHAPTER 2
subsequently completed the rest of the works late.
The delay damages are therefore reduced in the proportion that the benefit of the taken
over part of the works has to the benefit of the whole of the works.
.
ly
It is important to note that when calculating this proportion the actual (or assessed)
on
benefits known at the time of the calculation should be used, not those assumed when
s
se
the delay damages were originally calculated. This proportion is then applied to the
po
original delay damages. This can best be illustrated by the following example.
CHAPTER 3
pu
The contract is for the construction of a factory to build two types of
g
widgets, types A and B. This has separate buildings with production lines
in
for each type of widget and the Client calculates that it will make £5,000
in
tra
per day profit out of type A and £3,000 out of type B. The Client decides
that it wants Completion of both buildings to occur together and therefore
r
Fo
sets the delay damages at £8,000. However, the Client takes over one of
the buildings first and starts making the type A widgets. Meanwhile, the
.
ly
market price of both widgets has changed so that the Client assesses it will
on
make £4,000 out of type A and £5,000 out of type B (total now £9,000).
CHAPTER 4
ity
rs
The proportion of the new benefit of the part of the works still to be taken
ve
over to the new benefit of all of the works is now £5,000/ £9,000, i.e. five
ni
ninths. This proportion is then applied to the original level of the delay
U
damages to provide the following delay damages for the remaining part of
n
to
the works not yet taken over

As
£8,000 x 5/9 = £4,444.

by
CHAPTER 5
se
If Option X5 is used with Option X7, the same principle applies to the delay damages that
ru
are applicable to a section of the works.

Fo
OPTION X8: UNDERTAKINGS TO THE CLIENT OR OTHERS
Undertakings Option X8 concerns the giving of what are commonly called ‘collateral warranties’ in
to the Client the UK. This clause uses a more generic term called “undertakings”. These undertakings
CHAPTER 6
or Others are set out in the Contract Data. They provide a contractual link between organisations
who do not otherwise have a contract with each other, such that the receiver of the
undertaking can enforce specified obligations under the contract on the giver of the
undertaking.
The form and content of these undertakings will be specific to the project and the
requirements of the Client and Others. Therefore NEC does not produce example forms.
These are often complex provisions and organisations in England, Wales and Northern
APPENDICES
Ireland may consider using the provisions of the Contracts (Rights of Third Parties) Act
1999, see the guidance on secondary Option Y(UK)3.
X8.1 Undertakings to Others are given by the Contractor to the extent set out in the Contract
Data. These will often be given to organisations who provide funds to the Client for the
works, or to organisations who will be leasing or taking control of the works once they
are finished. Others are defined in clause 11.2(12).

MANAGE
X8.2 Subcontractor undertakings to Others are given by the relevant Subcontractor to the
Others specified in the Contract Data but only for the elements of the work listed in the
Contract Data. These undertakings are not given by the Contractor, but they are required
CHAPTER 1
to procure them from the Subcontractor. Therefore, the Contractor must include the
requirement for these undertakings in the contract with each Subcontractor.
X8.3 Subcontractor undertakings to the Client are given by the relevant Subcontractor but
only for the elements of the work listed in the Contract Data. These undertakings are not
given by the Contractor, but they are required to procure them from the Subcontractor.
Therefore, the Contractor must include the requirement for these undertakings in the
contract with the Subcontractor.
X8.4 and X8.5 The Client is responsible for preparing each undertaking and providing it to the
CHAPTER 2
Contractor for signing by either the Contractor or its Subcontractor.
.
OPTION X9: TRANSFER OF RIGHTS
ly
on
s
Transfer of X9
se
rights X9.1 Where X9 is incorporated and rights are to be transferred, the Contractor provides to the
po
Client the documents which transfer these rights.
CHAPTER 3
r
pu
Where parts of the works are to be carried out by a Subcontractor and rights are to be
g
in
transferred, the Contractor must obtain from a Subcontractor equivalent rights for the
in
Client over the material prepared for the design of the works by the Subcontractor and
tra
again provide the required documents. Therefore, provision for this must be made in the
r
contract with the Subcontractor.

Fo
The Project Manager is not involved in this process, unless perhaps the Contractor fails
.
ly
to provide the required documents. In that case, the Project Manager would notify the
on
CHAPTER 4
default and, if the default was considered serious enough, the Contractor would have
ity
four weeks from the notification to put right the default or possibly face the prospect of
rs
the Client terminating (Reason 11).

ve
ni
U
n
OPTION X10: INFORMATION MODELLING

to
As
Information X10
by
modelling Defined terms Five additional defined terms are necessary when Option X10 is incorporated into the
CHAPTER 5
se
X10.1 contract.
ru
Collaboration Further collaboration within the ECC is required through this clause. The importance will
Fo
X10.2 be to identify the Information Providers in the Information Model Requirements.

Early warning A further obligation on both the Project Manager and the Contractor is to notify an early
X10.3 warning for the reason stated here.
Information If there is an information execution plan identified in the Contract Data, then that
Execution Plan becomes the accepted Information Execution Plan. If there is not one identified in the
CHAPTER 6
X10.4 (1) to (4) Contract Data, then the first plan is submitted for acceptance within the time period
There is provision for the plan being treated as accepted if the Project Manager does
not notify acceptance or non-acceptance within the time allowed, but this requires a
notification from the Contractor first.
It may be necessary to change the accepted Information Execution Plan from time to time
and X10.4(3) provides for that.
APPENDICES
Compensation It may also be the case that a compensation event, most likely one that arose due to an
events X10.5 instruction to change the Scope, affects the Information Execution Plan. If this is the case
alterations to the Information Execution Plan will need to be included in the quotation for
the compensation event and reflected in the next plan submitted for acceptance.

MANAGE
Use of the The ownership of the Information Model and the Contractor’s rights over Project
Information Information are covered in this clause. The Contractor will need to provide documents
Model X10.6 transferring such rights to the Client.
CHAPTER 1
Liability X10.7 This clause adds two more Client liabilities in addition to clause 80.1 and covers
the insurance requirements that arise from information modelling. It also limits the
Contractor’s liability for errors in the Project Information to a level of skill and care that
would be expected of other professionals providing similar information.
OPTION X11: TERMINATION BY THE CLIENT
CHAPTER 2
Termination X11
by the Client X11.1 and This covers termination, for any reason at all by the Client, outside of those already stated
X11.2 in R1 to R22 in clause 91. The amounts due recognises that there are some situations
where the Client has to be able to terminate even though the Contractor has not failed in
.
ly
any way.
on
s
se
po
OPTION X12: MULTIPARTY COLLABORATION (NOT USED WITH OPTION X20)
CHAPTER 3
pu
Multiparty X12 When X12 is incorporated into the Contract Data, the Client has decided to, or is required
g
in
collaboration to, utilise a collaborative approach between a number of parties who are all not in
in
contract with each other. X12 joins up a series of bi-party contracts. Contracts are of
tra
course set up with the best intentions of achieving success but sometimes failure occurs;
r
Fo
X12 is another tool within the ECC that may help avoid those failures that result from
taking a less collaborative approach.
.
ly
on
X12 identifies a Promoter, named in the Contract Data, who determines the objective
CHAPTER 4
ity
that the parties are to achieve. In the ECC the Promoter will commonly be the Client.
rs
The Promoter’s objective is stated in the Contract Data. The Partners are identified in
ve
the Schedule of Partners and may change during the contract, allowing the collaborative
ni
process to emerge. The objectives of the Partners are also identified in the Schedule of
U
Partners along with targets for performance. The aim of X12 is to achieve a collaborative
n
to
approach between the Partners so that the Promoter’s objective and the objectives of
As
every other Partner is achieved.

by
However, should a dispute (or difference) arise between Partners who do not have a
CHAPTER 5
se
contract between themselves, then this is resolved by the Core Group. It may not be
ru
possible to identify all the Core Group Members at the Contract Date, because not all
Fo
the Partners may be known. Like the Schedule of Partners, the Schedule of Core Group
Members will develop over time. An example Schedule of Core Group Members is
included below.
An example of the Schedule of Core Group Members:
NAME OF PARTNER ADDRESS AND JOINING DATE LEAVING DATE

CHAPTER 6
CONTACT DETAILS
APPENDICES

MANAGE
An example of the Schedule of Partners:
THE PARTNERS ARE THE FOLLOWING:

CHAPTER 1
NAME REPRESENTATIVES’ CONTRIBUTION JOINING LEAVING KEY TARGET MEASUREMENT AMOUNT OF

ADDRESS AND AND OBJECTIVES DATE DATE PERFORMANCE ARRANGEMENT PAYMENT IF
CONTACT DETAILS INDICATOR THE TARGET
(KPI) IS ACHIEVED
OF
IMPROVED
UPON
(UNLESS NO
INCENTIVE
CHAPTER 2
IS TO BE
INCLUDED)
.
ly
on
s
se
po
CHAPTER 3
Because Option X12 does not create a multi-party contract it does not include direct
r
pu
remedies between non-contracting Partners to recover losses suffered by one of them
g
caused by a failure of the other. Such remedies are available to each Party to the contract
in
in
(i.e. the Client or the Contractor) within the core and main Option clauses, but only for
tra
the other Party’s failures or the failures of a Partner who is lower down the Contractor’s
supply chain.
r
Fo
The final sanction against any Partner who fails to act as stated in the Option X12 is for
.
ly
the Partner who employed them not to invite them to partner again.
on
CHAPTER 4
Identified and
ity
defined terms
rs
ve
X12.1
(1)
ni
The Contractor becomes a Partner when its contract with Option X12 comes into
U
existence. Other participants, including at least the Client and the Promoter (if they are
n
not the same), will already be Partners. Other organisations become Partners when their
to
Own Contract (which includes Option X12) comes into existence. They should then be
As
named in the Schedule of Partners and their representative identified.

by
(4) Note that not every Partner is a member of the Core Group and the Partners will make
CHAPTER 5
se
that decision.
ru
(7) There are two options for subcontractor Partners with regards to the payment of bonus/
Fo
cost associated with a Key Performance Indicator (KPI). Either the amount payable
cascades down if the schedule allocates the same bonus/ cost to the main contractor and
subcontractor, or the main contractor absorbs the bonus/cost and does not pass it on.
Actions X12.2 The Core Group organises and holds meetings. It produces and distributes records of
each meeting, which include agreed actions. Instructions from the Core Group are issued
in accordance with the Partner’s Own Contract. In the case of the ECC incorporating
CHAPTER 6
Option X12 they are issued by the Project Manager to the Contractor. The Core Group
may invite other Partners or people to a meeting of the Core Group.
X12.2(1) The most important part to X12 is found in this clause. The Partners collaborate with each
other. They set out to achieve the Promoter’s objective and the objectives of every other
Partner stated in the Schedule of Partners.
Collaboration There are nine parts to the collaboration process set out in X12.3. The Partners
X12.3 collaborate as stated in the Partnering Information. They also act in a spirit of mutual
APPENDICES
trust and co-operation. They meet, talk, give early warnings, use common information
systems, give advice, information and opinion to the Core Group fully, openly and
objectively. Each Partner inform the Core Group before subcontracting and implements
decisions of the Core Group with its Own Contracts. There is a great deal of expertise
available between the Partners which is what X12 is trying to bring to the benefit of the
Promoter and all Partners.

MANAGE
X12.3(8) The Partners should give advice, information and opinion when asked, and in addition
whenever they identify something that would be helpful to another Partner.
CHAPTER 1
X12.3(9) A Subcontractor that the Contractor intends to employ for the project may be a Partner,
but the general policy on this should be decided at the beginning of the project. The
Core Group should advise the Contractor at the outset if a Subcontractor is to be asked
to be a Partner. The Contractor should not appoint a Subcontractor which the Core
Group decides should be a Partner if it is not willing to be a Partner.
Incentives If one Partner lets the other Partners down for a particular target (which applies to
X12.4 (also the Partners together) by poor performance, then all lose their bonus for that target.
X12.2 (1) and Therefore, all must work together collaboratively to achieve the targets. Targets are not
X12.3(3)) achieved by coercion.
CHAPTER 2
If the Promoter tries to prevent a target being met, it is in breach of core clause X12.3(1).
There can be more than one KPI for each Partner. KPIs may apply to one Partner, to
.
ly
several Partners or to all Partners.
on
An example of a KPI
s
se
po
KPI Number of days to complete each floor of the building framework
CHAPTER 3
pu
Target 14 days
g
in
Measurement Number of days between removal of falsework from the entire
in
slab and from the slab below

r tra
Amount Main contractor – £5,000 each floor

Fo
Formwork and concrete sub-contractor – £2,000 each floor

.
Structural designer – £750 each floor

ly
on
(2) The Promoter should consult with the other Partners before adding a KPI. The effect on
CHAPTER 4
ity
subcontracted work should be noted; adding a KPI to work which is subcontracted can
rs
involve a change to the relevant KPI for the Subcontractor.

ve
ni
U
n
OPTION X13: PERFORMANCE BOND

to
As
Performance X13
by
bond X13.1 If Option X13 is incorporated, the Client has decided it wishes the Contractor to provide
CHAPTER 5
se
a performance bond. The Contractor should, ideally, provide the bond by the Contract
ru
Date. If that is not achieved, a four-week limit is provided as a fall-back. Failure to provide
Fo
the bond within this period entitles the Project Manager to notify the default under
clause 91.2. If the Contractor does not provide the bond within a further four weeks, the
Client is entitled to terminate.
The form of the performance bond should be included in the Scope and the amount of
the bond should be stated in Contract Data part one.
CHAPTER 6
OPTION X14: ADVANCED PAYMENT TO THE CONTRACTOR
Advanced X14
payment X14.1 The Project Manager will need to include the amount of the advanced payment in the
assesment made at the first assessment date. This is unless an advance payment bond
is required, in which case the Project Manager will include the amount of the advanced
payment in the next assessment date after the Client receives the advanced payment
APPENDICES
bond.
X14.2 The advanced payment bond should be submitted to the Project Manager for
acceptance. The only contractual reason the Project Manager has for not accepting
the bond is that the commercial position of the proposed bank or insurer is not strong
enough to carry the bond.

MANAGE
The bond should normally be provided by the Contract Date, but if this is not achieved,
the advanced payment will be delayed until after the Client has received the bond.
CHAPTER 1
The form of the bond should have been included in the Scope by the Client. The value of
the bond decreases as the Contractor repays the advanced payment.
If the Client is late in making the advanced payment, the financial consequences for the
Contractor may be significant. For example, the Contractor may be unable to purchase or
mobilise the Equipment it needs, which could delay the works and lead to the Contractor
incurring additional costs. Therefore, the delay in making the advanced payment will be a
compensation event, to be notified by the Contractor under clause 61.3.
X14.3 Repayment of the advanced payment takes place in the instalments set out in the
CHAPTER 2
Contract Data. This is dealt with by the Project Manager as part of the calculation for the
amount due at each assessment date.
.
ly
OPTION X15: THE CONTRACTOR’S DESIGN
on
s
se
The X15
po
Contractor’s X15.1 When Option X15 is incorporated, X15.1 reduces the Contractor’s liability for its design to
CHAPTER 3
r
design the skill and care normally used by professionals designing works similar to the works. So
pu
if an exacting design standard is required, this is the basis upon which failure would be
g
in
measured but it would be for the Client to prove the standard has not been met.
in
X15.2 If a Defect is notified the Contractor is required to correct it. However, subsequent
tra
investigations may find that the Contractor was not liable for the Defect because of
r
Fo
the standard of care set out in clause X15.1. In that case the Contractor will recover the
Defined Cost plus Fee for the correction.
.
ly
on
If a notified Defect may be caused by the Contractor’s design, then the Supervisor and
CHAPTER 4
ity
Contractor should discuss the possibility that the Contractor may not be liable for it
rs
because of clause X15.1 before the Defect is corrected.

ve
X15.3 The Contractor is entitled to use its design under the contract for other projects unless
ni
the Scope states otherwise. However, this will not be case if the ownership of that design
U
has passed to the Client using secondary Option X9.

n
to
As
There are no notifications required here by either of the Parties, this just confirms what
the Contractor may do in the future with such material.
by
CHAPTER 5
se
X15.4 The Client will have decided the period for retention that the Contractor must keep its
ru
design. This will be stated in the Contract Data and the form these must be retained in will
be stated in the Scope. It is most likely that the Project Manager will play a role in making
Fo
sure these documents are in place, but this will depend upon the Scope saying so.
X15.5 As part of this Option, the Contractor will be required to provide professional indemnity
insurance of the amount that is stated in the Contract Data. The provisions for the
Contractor submitting an acceptable insurance certificate, and what happens where the
Contractor does not so insure, are provided for in clauses 84 and 85.
CHAPTER 6
Note that if this Option is not used, but the Client still requires professional indemnity
insurance from the Contractor for its design, this will have been included in the relevant
section of the Contract Data part one as other insurances provided by the Contractor.
OPTION X16: RETENTION (NOT USED WITH OPTION F)
Retention X16 When Option X16 is incorporated, the Client is able to retain a proportion of the Price
APPENDICES
for Work Done to Date as security and as an additional motivation for the Contractor to
complete the works. This will be done through the usual Project Manager certification
process (see clause 50 and 51).

MANAGE
The effect of Option X16 on the Contractor’s cash flow also in part depends upon
the amount of work it subcontracts. The Contractor will normally hold an equivalent
retention on its Subcontractors, thus improving its cash flow. To ensure that there is no
CHAPTER 1
double-deduction of retention, the Defined Costs for Options C to E are calculated using
the gross payments made to Subcontractors, i.e. before deduction of their retention (see
clause 11.2(24) and item 41 of the Schedule of Cost Components for Options C to E).
X16.1 Note that the procedure used in the ECC has no effect on the Contractor’s cash flow until
the Price for Work Done to Date exceeds the retention free amount.
It should also be noted that retention is only applied to the Price for Work Done to Date.
It is not applied to any other amounts that the Contractor may be paid or may have to
CHAPTER 2
pay as part of the amount due.
X16.2 Half of the retention being held is released either at Completion of the whole of the
works or when the Client takes over the whole of the works, whichever is earlier. The
amount of retention held after this release does not change in later assessments until the
.
ly
Defects Certificate is issued.
on
Release of the final amount of retention is included in the assessment of the final amount
s
se
due made in accordance with clause 53.
po
X16.3 In lieu of retention monies being held, the Contractor may alternatively give the Client
CHAPTER 3
pu
a retention bond. This is if stated in the Contract Data or later agreed by the Client. It
g
will be the Project Manager that accepts the bond and a valid reason for not accepting
in
the bond is that the commercial position of the bank or insurer is not strong enough to
in
tra
carry the bond. If any other reason for not accepting is used by the Project Manager, a
compensation event arises under clause 60.1(9) and should be notified by the Contractor
r
Fo
under clause 63.1.

.
ly
on
CHAPTER 4
OPTION X17: LOW PERFORMANCE DAMAGES
ity
rs
ve
Low X17 Where X17 is incorporated and the performance of the works in use fails to reach a
ni
performance specified level due to a design or other fault of the Contractor and the Defect is not
U
damages corrected so that it is listed in the Defects Certificate, the Client is able to recover the
n
to
damages it suffers in consequence through this Option. Such damages are deducted
As
through the usual Project Manager’s certification as assessed damages in the amount
stated in the Contract Data. Such deductions of low performance damages are made in
by
the assessment made at the date of issue of the Defects Certificate.
CHAPTER 5
se
ru
If X17 is not used, there are number of other remedies available if the Contractor provides
Fo
substandard work (a Defect such as low quality brickwork, reinforced concrete or

electrical insulation). The Client’s options are to
• have the Contractor correct the Defect to provide the quality specified in the Scope
(clause 44.1),
• recover the cost of having it corrected by other people if the Contractor fails to
CHAPTER 6
correct the Defect within the defect correction period (clause 46.1), or
• accept the Defect and a quotation from the Contractor for reduced Prices, an earlier
Completion Date, or both, in return for a change to the Scope (clause 45).
OPTION X18: LIMITATION OF LIABILITY

APPENDICES
Limitation of X18 If incorporated, this Option places limits on various liabilities that the Contractor may
liability have to the Client arising under or in connection with the contract. Three key liabilities
are addressed and the Option can also provide overall caps, in terms of both time and
money, beyond which the Contractor has no further liability to the Client.
There are no management actions that arise from these clauses as such; X18 basically
contains as series of ‘rules’ which apply to limit the Contractor’s liability to the Client.

MANAGE
If any of the entries for these limits in the Contract Data is left blank, no limit will apply to
that entry, see X18.1.
CHAPTER 1
OPTION X20: KEY PERFORMANCE INDICATORS (NOT USED WITH OPTION X12)
Key X20
performance Incentives The Incentive Schedule provides details of the performance that the KPI is intended to
indicators X20.1 measure, how it is to be measured, the target that is to be achieved and the amount to
be paid to the Contractor if is it achieved. Any payment to the Contractor will be made by
the Project Manager in the usual payment certification process.
CHAPTER 2
When the Contractor is setting up subcontracts after the starting date, it would be the
responsibility of the Contractor to offer any incentives to its Subcontractors it thinks
are necessary to encourage them to help the Contractor achieve its target. In Options
.
ly
A and B those incentives would be irrelevant to the Client. With the other Options the
on
Client may share the cost of such incentives, but subject to the extent that they meet the
s
requirements of core clause 52.1 and item 41 in the Schedule of Cost Components.
se
X20.2 The Contractor is required to report at regular intervals its actual past and forecast future
po
performance with regards to the KPIs. It would be sensible for the Project Manager and
CHAPTER 3
r
pu
Contractor to meet to discuss the format and requirements of the reports in advance of
producing the first one. g
in
in
X20.3 This clause ensures that problems that will prevent a target being met, and methods to
tra
overcome them, are identified as early as possible. This will enable the Contractor and
r
Project Manager to work together to ensure that the targets are met wherever possible.
Fo
However, the Project Manager can neither accept nor reject the Contractor’s proposals,
.
ly
on
and therefore the Project Manager cannot coerce the Contractor into achieving a target
CHAPTER 4
at any cost.
ity
rs
X20.4 The Contractor should be paid the bonus in the next assessment following the date it
ve
meets its target. Payments should not be left until Completion.

ni
U
Payments made to the Contractor under Option X20 are not part of Defined Cost or the
n
Price for Work Done to Date. Therefore, they are not included in the calculation for the
to
Contractor’s share under clause 54 in Options C and D.

As
X20.5 The Client may wish to add further incentives to encourage the Contractor to meet other
by
objectives. However, the Client cannot remove or reduce any incentive already offered,
CHAPTER 5
se
whether or not it has yet been achieved.

ru
Fo
OPTION X21: WHOLE LIFE COST
Whole life X21 Where this Option is incorporated in the Contract Data, the Contractor can submit a
cost proposal to the Project Manager to change the Scope. The reason for the proposed
change is that this might reduce the cost the Client of an asset over its whole life.
CHAPTER 6
X21.1 to X21.3 There may need to be some consultation before the Project Manager instructs the
Contractor to submit a quotation. It may well be that the idea has already been considered
and discounted some time ago, for reasons not obviously apparent to the Contractor.
The quotation provisions are quite extensive to enable the Project Manager to discuss
the implications with the Client fully before making any decision. The Project Manager
though has only the period for reply either to accept or not to accept the quotation.
These sorts of ideas during a live project often have a quite limited time in which a
APPENDICES
decision needs to be made, hence the reason for using the period for reply. However, this
period can be increased with the agreement of the Project Manager and the Contractor
during their discussions.

MANAGE
X21.4 and If the quotation is not accepted by the Project Manager, then the Project Manager
X21.5 cannot later on change the Scope as proposed by the Contractor. This prevents the
Contractor’s potentially good ideas being taken on board without any benefit going to
CHAPTER 1
the Contractor.
If the quotation is accepted, then the acceptance itself changes the Scope, the Prices, the
Completion Date and the Key Dates accordingly. The revised programme is also accepted.
There is no need for any other communications, other than the acceptance.
The change to the Scope is not a compensation event, as is stated in clauses X21.5,
otherwise there would potentially be a double assessment of the proposal (one in this
clause and one through clause 60 to 64 and 66).
CHAPTER 2
As this is not a compensation event, the rules for assessing compensation events do not
apply. The Parties are free to use whatever basis they want to generate the quotation and
assess the whole life cycle savings.
.
ly
on
OPTION X22: EARLY CONTRACTOR INVOLVEMENT (USED ONLY WITH OPTIONS C AND E)
s
se
po
Early X22
CHAPTER 3
pu
Contractor Identified and
involvement defined terms
g
in
X22.1 In X22.1(1) the Budget represents the maximum amount of money that the Client wishes
in
to spend on the project. It should have been stated by the Client within the Contract
tra
Data, usually shown with a breakdown between different heads of cost. The details of
r
Fo
what is included in the Budget – the Contractor costs (total of the Prices), other costs
(for example consultants, land purchase, and the Client own cost) and the Client’s risk
.
ly
allowance – should have been set out in the Scope.

on
CHAPTER 4
ity
In X22.1(4) Pricing Information is provided by the Contractor as part of its submission

rs
for the contract, and will be used during the contract for preparing the prices for Stage
ve
Two. The Scope sets out how the information is to be used. The Pricing Information
ni
will be a document possibly containing unit rates, resource costs, overheads and profit,
U
preliminaries costs, Fee percentages and the like, but will also specify how the Contractor
n
to
will prepare its assessment of the Prices for Stage Two, the ‘rules’.
As
Forecasts During Stage One of the contract, the Project Manager operates control of the
by
X22.2 Contractor’s costs by requiring regular forecasts of work to be done during that Stage.
CHAPTER 5
This is to ensure there is constant dialogue and understanding between the Contractor
se
and the Project Manager, and that the Contractor does not commit the Client to cost
ru
that is unnecessary as decided by the Project Manager. The Project Manager must review
Fo
each submission and, within one week, decide whether the proposed work is required
by the Scope and is necessary to complete Stage One. If not, the Project Manager does
not accept the submission and the Contractor must resubmit. The Contractor is not paid
for work they have carried out in Stage One unless that work has been included in the
accepted forecast.
CHAPTER 6
The Contractor must also provide regular forecasts of total anticipated expenditure
against the Budget – the Project Cost. This is prepared in consultation with Project
Manager, as the Project Manager must advise the Contractor of current expenditure and
forecast future expenditure against other heads of cost in the Budget.
Proposals for Design submissions for Stage Two are submitted in accordance with the procedure in
Stage Two the Scope. If the Contractor’s appointment is to assist the Client’s designer, there may be
X22.3 no, or very few, design submissions. The Client sets out in the Scope what level of detail
is required and at what stage submissions are to be made. These design submissions
need to include anticipated effect on the Project Cost and on the Accepted Programme,
APPENDICES
to allow the Project Manager to assess whether to consider other options. The Project
Manager is required to consider and either accept the submission or explain why not.

MANAGE
Regular submissions of the revised programme will consider the effect of any accepted
design submissions. As Stage One progresses, the Accepted Programme will become
more fully developed for Stage Two.
CHAPTER 1
The design by the Contractor remains the Contractor’s responsibility, and any additional
Scope required as result of the Contractor’s design becomes Scope for the Contractor’s
design. Accordingly, any changes to the design in Stage Two would not constitute Scope
and would not give rise to a compensation event.
In addition, if Option X15 is used with Option X22, the Contractor is required to provide
professional indemnity insurance for its design liability.
CHAPTER 2
Once design submissions are complete, the Contractor is required to produce a priced
Activity Schedule under an Option C arrangement, setting out the total of the prices for
Stage Two. This is prepared using the Pricing Information, and is submitted to the Project
Manager for agreement. The Activity Schedule includes the Price for Work to Date in
.
ly
Stage One, so that the total Defined Cost plus Fee incurred by the Contractor can be
on
compared with the target using the assessment in clause 54.
s
Key people During the early stages of design, the Client is likely to have relied on proposed key
se
X22.4 people in identifying the most advantageous offer. As the Client is relying on those
po
people, they cannot be changed unless they are unable to continue – for example
CHAPTER 3
r
pu
through illness, or because they have left the employment of the Contractor. The
g
Contractor may not change the key people to suit the Contractor’s own convenience.
in
in
Notice to The notice to proceed to Stage Two is only issued once all necessary steps have been
tra
proceed to completed. This includes getting external approvals and consents required by the
r
Stage Two Scope, determining any changes to the Budget and agreement of the Stage Two Prices.
Fo
X22.5 The Project Manager is not able to fix the Prices if they are not agreed – in that event
.
the work does not proceed and an alternative contractor would need to be found. In
ly
on
addition, the Client has the right to decide not to proceed with the works for any reason.
CHAPTER 4
ity
If Stage Two is not to proceed, the Project Manager issues an instruction removing
rs
the Stage Two work from the Scope. The instruction is not a compensation event; the
ve
Contractor is paid for all the work carried out in Stage One but receives no additional
ni
U
payment for not proceeding with Stage Two.

n
to
If the reason for not proceeding is because the Prices have not been agreed, or the
As
performance of the Contractor is below a standard specified in the Scope, the Client is
by
free to replace the Contractor with another contractor to carry out the work.
CHAPTER 5
se
Changes to The Budget may change if the Client’s requirements change, as instructed by the Project
ru
the Budget Manager. Provision is also made for inclusion in the Contract Data of other reasons for
Fo
X22.6 changing the Budget. This may include, for example, elements of cost where accurate
forecasting could not be made.
If an event occurs which changes the Budget, the Contractor and Project Manager
discuss and attempt to reach agreement on the appropriate change. If they are unable
to reach agreement, the Project Manager must decide and notify the Contractor of the
revision to the Budget.
CHAPTER 6
Incentive These provisions allow for two options for incentivising the Contractor. The first is using
payment an Option C target arrangement based on the Contractor’s own cost. The second is
X22.7 for an incentive based on achieving savings on the Client’s Budget. This allows for the
Contractor to be paid a share of any saving on the Budget, but does not contribute
towards any overspend.
APPENDICES

MANAGE
OPTION Y(UK)1: PROJECT BANK ACCOUNT
Project Bank Y(UK)1 Where Y(UK)1 is incorporated, the Project Bank Account (PBA) is established and
CHAPTER 1
Account maintained by the Contractor. The Contractor pays any bank charges and retains any
interest earned on the account, unless otherwise stated in the Contract Data. The
Contractor must have identified at tender stage a suitable project bank able to offer
arrangements which comply with the requirements for payment in this Option and this
should have been stated in Contract Data part two.
Where the Scope contains any stipulations or restrictions on establishing the list of
suppliers who can participate in payments from the PBA, this must be complied with.
Where Y(UK)3 is also used, any rights of Named Suppliers will have been listed in the
CHAPTER 2
Contract Data.
Subcontractors at any level, known as Named Suppliers (see Y1.1(2)), can be included in
the PBA arrangements. The Contractor initially identified those to be included at tender
.
ly
(named suppliers, stated in Contract Data part two), but subject to the acceptance of the
on
Project Manager, the Contractor can add further Suppliers during the contract.
s
se
The Contractor is required to apply for payment, showing the amounts due to each
po
Named Supplier, following which the Project Manager issues a certificate as normal. The
CHAPTER 3
Client pays to the PBA the amount certified, subject to any amount withheld (see Option
pu
Y(UK)2). The Contractor completes the Authorisation, confirming the payments to Named
g
Suppliers, and forwards it to the Project Manager for the Client’s countersignature. This is
in
in
forwarded to the project bank. It is envisaged that electronic means of authorisation will
tra
be used to simplify this process.

r
Fo
The project bank makes payment to the Contractor and Named Suppliers from the
sums deposited. In the event the PBA has insufficient funds to make all payments, the
.
ly
Contractor is required to add funds to the account to make up the shortfall.

on
CHAPTER 4
Trust Deed This is intended to allow payment to Named Suppliers to continue in the event of the
ity
rs
Y1.13 insolvency of the Contractor. The Deed is executed by the Client, Contractor and initial
ve
named suppliers.
ni
U
Where an Additional Supplier is to be joined into the Deed, a Joining Deed needs to be
n
executed by the Client, Contractor and the Additional Supplier (as defined in the Joining
to
Deed).. A copy of the initial Trust Deed should be annexed to each Joining Deed.
As
by
CHAPTER 5
se
OPTION Y(UK)2: THE HOUSING GRANTS, CONSTRUCTION AND REGENERATION ACT 1996
ru
Fo
The Housing Y(UK)2 If incorporated, this Option is used to supplement the core clause payment provisions
Grants, in order to ensure that they comply with the Housing Grants, Construction and
Construction Regeneration Act 1996 (the Act). The effect of this Option is to keep all the payment
and terms expressly within the contract and avoid additional terms being implied or imposed
Regeneration by this Act.
Act 1996
CHAPTER 6
Y2.1 In the ECC, periods of time are usually measured in weeks to avoid complications of rest
days and statutory holidays. However, to comply with the Act, in this Option time periods
are stated in days, using the same definition as in the Act. This will affect things like
payment, any pay less notice date to be issued by, and so on.
Y2.2 In order to comply with Section 110 of the Act, this clause defines when the payment
becomes due and the final date for payment. It also confirms that for interim payments
the Project Manager’s certificate, issued under core clause 51.1, is the notice of payment
required by Section 110 of the Act.
APPENDICES
It is also deals with the date due and notice of payment for the final payment, as set out
in clause 53.
All certificates or assessments that form the notice of payment need to show the basis
upon which any payment has been calculated.

MANAGE
Y2.3 and Y2.4 To comply with Section 111 of the Act, this sets out the requirement for a notice of any
amount to be withheld and the date by which it is to be issued.
CHAPTER 1
Y2.4 deals with the effects of termination due to certain reasons where a certified
payment has not been made at the date of the termination certificate.
Y2.5 Under Section 112 of the Act the Contractor has the right to suspend performance if
it is not paid in full the amount due under the contract, i.e. the amount in the Project
Manager’s certificate, by the final date for payment, unless an effective “pay less”
notice has been issued under clause Y2.3. If the Contractor exercises this right it is a
compensation event and the Contractor should notify under clause 61.3.
CHAPTER 2
OPTION Y(UK)3: THE CONTRACT (RIGHTS OF THIRD PARTIES) ACT 1999
Y3.1 to Y3.2 The Contracts (Rights of Third Parties) Act 1999 allows a third party (in the ECC called a
.
ly
‘beneficiary’) to a contract, i.e. not the Client or the Contractor, to enforce a term of that
on
contract in certain circumstances. If incorporated, this Option ensures that only those
s
terms that are clearly set out in the Contract Data can be enforced by any beneficiaries
se
that are named. This will ensure that third party rights cannot be implied from any of the
po
other terms of the contract or Scope.
CHAPTER 3
r
pu
Y3.3 This clause deals with the situation where the beneficiary is identified by class or
g
in
description and not as a named person or organisation. Sometimes the named person or
in
organisation is only known part way through a project.
r tra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
Schedule of Cost Components (SCC)
CHAPTER 5
CHAPTER 1
Use of the SCC The SCC is part of the conditions of contract only when Option C, D or E is used. The SCC
• defines the cost components for which the Contractor will be directly reimbursed and
• defines the cost components which are included in an assessment of changed Prices
CHAPTER 2
arising from a compensation event.
The SCC does not apply to Option F (management contract) where the definition of Defined
Cost is restricted to payments due to Subcontractors and suppliers and to the prices for work
.
ly
done by the Contractor itself.
on
s
People 1 Two categories of people are identified whose specific costs can be included as Defined
se
Cost. Items 11, 12 and 13 list the cost components which can be included.
rpo
CHAPTER 3
The first category of people excludes Contractor’s people who are working, for example, at
pu
head office (which is not part of the Working Areas). Their costs must be allowed for within
g
in
the Fee, as is normal practice on reimbursable contracts.
in
tra
The second category deals with Contractor’s people who are required to work temporarily
within the Working Areas, but only for the time they spend in the Working Areas as a
r
Fo
proportion of their total time working. This may, for example, be for unplanned people for
.
work which has arisen due to a compensation event or planned occasional visiting people on
ly
on
human resources, health and safety or quality assurance matters. There costs will be paid in
CHAPTER 4
proportion to the amount of time they work in the Working Areas.
ity
rs
11 to The components listed in items 11 to 13 are comprehensive and covers most of the amounts
ve
13 the Contractor makes to or in relation to people. Any components not stated, such as
ni
training other than safety training, are deemed to be included in the Fee (see clause 52.1).
U
n
Considering each amount is included only if it is incurred to Provide the Works, some of
to
As
these components may need to be carefully considered by the Contractor when using the
SCC to determine Defined Cost when preparing an application for payment (see clause 50).
by
For example, item 12(f) permits severance to be recovered, but it must be only that part of
CHAPTER 5
se
the severance which is incurred to Provide the Works.

ru
14 This is for people who are paid by the time they work, but are not on the Contractor’s
Fo
payroll, and for these the amount paid by the Contractor will be included.
In dealing with a third party who supplies people only it is difficult or impossible to gain
access to the sort of records or accounts needed to justify the wages and any other
payments made to the people. As a result, the Contractor has only to justify the amount it
has paid the supplier of the labour, which in turn (as with most Defined Cost) needs to be at
open or competitively tendered prices (see clause 52.1).
CHAPTER 6
The definition of a Subcontractor (clause 11.2(19)) specifically excludes labour only

subcontractors, so the cost of this labour will be recovered under this cost heading, and not
under item 4 of the SCC.
Equipment 2 Equipment covers the Contractor’s materials, fuels and other consumables, scaffolding,
machinery, testing equipment, transport, construction plant, temporary works, and all types
of accommodation including cabins, workshops and laboratories, etc. It may also include
accommodation for the Client, Project Manager or Supervisor which the Contractor is
APPENDICES
required to provide.
The SCC covers the following.

MANAGE
21 This covers Equipment hired or rented from sources external to the Contractor, its ultimately
holding company or a company with the same ultimate holding group of companies.
CHAPTER 1
22 to These cover the following Equipment.

24
Equipment owned by the Contractor, i.e. purchased from external sources either new or
second hand, or purchased from the Contractor’s ultimate holding company or from a
company with the same ultimate holding group of companies.
Equipment purchased by the Contractor under a hire purchase or lease agreement. This
category is included because the question of ‘ownership’ is legally complex and treated
differently under the laws of different countries.
CHAPTER 2
Equipment hired by the Contractor from the Contractor’s ultimate holding company or from
a company with the same ultimate holding group of companies.
For item 21 the Defined Cost is the hire or rent cost and includes operators if the item
.
ly
of Equipment is charged by the hirer on an all-inclusive basis. If the operators of hired
on
Equipment are shown as a separate charge by hirers then these operators should be costed
s
under the people item, as required by item 28.
se
po
For Equipment covered by the three bullets of item 22 it is not appropriate for Defined
CHAPTER 3
r
pu
Cost to be the inter-company charge as it is difficult to assess whether internal rates are fair
commercial rates. Thus, a ‘surrogate hire rate’ is needed and the options are provided as
g
in
follows.
in
tra
• Equipment not listed by the Contractor in part two of the Contract Data is dealt with
r
under item 22 by establishing open or competitively tender prices. Generally, those items
Fo
of Equipment for which it is easy to establish these prices would not be listed in the
.
Contract Data.
ly
on
CHAPTER 4
• The Contractor may have Equipment which is non-standard and open market or
ity
competitively tendered prices are difficult to establish. Such Equipment should have been
rs
listed in the Contract Data so that its cost will be dealt with under item 23.
ve
ni
• The change in value approach adopted in item 23 may not be suitable for some
U
Equipment, such as an old but effective crane barge for offshore work. Special
n
to
Equipment should have been listed in the Contract Data with the rates to be charged in
As
accordance with item 24.

by
25 Some items of Equipment will be consumed in carrying out the works. These include fuels,
CHAPTER 5
se
lubricants, shuttering materials, welding rods and other similar items. For Equipment which
ru
is consumed, the Defined Cost is the purchase price.

Fo
26 This covers payments to others for work done on Equipment, such as erecting a batching
plant or a workshop. If the Contractor does this work itself its Equipment and people costs
are covered through the relevant part of the SCC.
27 Again, if the Contractor uses its own Equipment and people to secure, for example, the
store’s compound, materials purchased separately for this purpose are covered by this clause.
CHAPTER 6
Plant and Materials 3 The definition of Plant and Materials (clause 11.2(14)) makes it clear that a charge to Defined
Cost can only be made for those items which are intended to be included in the works.
A part of Disallowed Cost (clause 11.2(26)) is designed to deter the Contractor from
excessively over-ordering Plant and Materials and permits the cost of surplus Plant and
Materials to be disallowed after allowing for reasonable wastage. This should be considered
when assessing Defined Cost under items 31. However, item 31 does allow payments for
removing Plant and Materials from the Working Areas to be included in Defined Cost. An
example of the need for this would be when an item of Plant and Materials is not required
APPENDICES
due to a change in the Scope.
The Disallowed Cost clause in Options C, D and E also permits costs to be disallowed if a
procurement procedure stated in the Scope has not been followed. This could be particularly
relevant to the procurement of Plant and Materials.

MANAGE
32 This clause deals with an unintended outcome of clause 11.2(26) working in conjunction with
this part of SCC.
CHAPTER 1
Assume the Contractor spends £10,000 on materials but has significantly over-ordered. The
Project Manager disallows £1,000 so the Contractor is paid £9,000. The Contractor then
disposes of the surplus for £500 which it retains. The effect on the Contractor is the same
if no costs had been disallowed. The Contractor would initially have been paid £10,000 but
cost would now be credited £500, reducing its payment to £9,500.
The effect on the Client differs. If the cost had been disallowed, the cost to the contract
would be £9,000. If the cost had not been disallowed, the cost to the contract would be
£9,500.
CHAPTER 2
Subcontractors 4 It is the payments to Subcontractors for work which is subcontracted which is covered in this
part of the SCC. It only covers those persons or organisations who meet the requirements of
clause 11.2(19) so the supplier of Plant and Materials will be paid under item 3 of the SCC.
.
ly
on
The amount to be paid must not take account those amounts which would result in the
Client paying or retaining the amount twice. So, if retention is used at main and subcontract
s
se
level it is only retained at main contract level and the amount retained at subcontract level is
po
not considered otherwise retention will be held twice. The reverse of this is also applicable
CHAPTER 3
where, for example, an amount is paid for an X20 Key Performance Indicator target being
pu
achieved at main contract level. Any amount for the same target paid at subcontract level
g
would result in the Client paying twice for the same thing. So for each amount paid or
in
in
retained for things such as retention, uncorrected Defects and Key Dates in the ECC, the
tra
equivalent amounts at subcontract level will not be taken into account.

r
Fo
Note that if retention is not taken from the Contractor, but then sums are retained by the
Contractor on its Subcontractors, the retention amount will be withheld by the Client until it
.
ly
is paid to the Subcontractor.

on
CHAPTER 4
ity
Charges 5 All the components in items 51 to 53 are paid at their actual amounts, subject as usual to
rs
such cost being at open or competitively tendered prices.

ve
ni
Note item 53(h) covers payments for consumables and equipment provided by the Contractor
U
for the Project Manager’s and Supervisor’s offices. Those equivalent items for the Contractor
n
to
will be paid through item 2 Equipment.

As
Item 54 includes the costs of removing materials from excavation or demolition from the
by
Site and disposing of them, to the extent that these costs are not covered elsewhere in the
CHAPTER 5
se
Schedule, for example as a payment to a Subcontractor. They can include costs such as
ru
tipping fees and landfill tax. Any amounts the Contractor recovers by selling these materials
Fo
is also accounted for under this clause. And the Contractor must pay these amounts to the
Client as part of the assessment of Defined Cost.
Manufacture and 6 This item is intended to cover manufacturing and fabrication carried out outside of the
fabrication Working Areas directly by the Contractor, and not a supplier or Subcontractor. Items 1 and 2
of the SCC are restricted to people and Equipment used within Working Areas and therefore
people, equipment, machinery, tools, etc. used in fabrication shops outside the Working
CHAPTER 6
Areas is not directly recovered but instead recovered indirectly through the people rate that
is applied to the amount of time worked. The categories of people are stated in the Contract
Data.
The Contractor will need to keep accounts and records of the time spent, but that is required
through clause 52.2 anyway.
Design 7 Item 7 is restricted to design done outside the Working Areas. Where any design is done
inside the Working Areas the item 1 people rules will apply. The time spent designing
APPENDICES
Equipment as well as the works are recoverable, for the categories of people listed. The
Contractor will need to keep accounts and records of the time spent, but that is required
through clause 52.2 anyway.

MANAGE
Insurance 8 The first of these deductions avoids the Client having to pay for costs which the Contractor
should have insured against but chooses not to claim upon its insurance to keep down future
premiums, or cannot recover because it is less than the excess on the policy.
CHAPTER 1
The second deduction ensures that the Contractor does not receive double payment thus, for
example, of insurance which it has voluntarily taken or from insuring for a greater cover than
required by the contract.
CHAPTER 2
.
ly
on
s
se
po
CHAPTER 3
r
pu
g
in
in
r tra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
Short Schedule of Cost Components (SSCC)
CHAPTER 6
Short Schedule of Cost Components
CHAPTER 1
(SSCC)
Purpose and use The SSCC is used to define the cost components only when assessing a compensation event.
CHAPTER 2
It is always used for this purpose when Option A or B is chosen.
People 1 The three bullet points are identical in principle to the SCC, capturing people who are directly
employed and not directly employed by the Contractor and working within the Working
Areas, but because there are People Rates stated in the Contract Data the Contractor only
.
ly
on
has to justify the time people spend in the Working Areas, which simplifies the process.
s
Equipment 2 As with the SCC, all accommodation is treated as Equipment.
se
po
The cost components for Equipment in the SSCC make use of published lists and rates. An
CHAPTER 3
pu
example of such a list is the ‘CECA Schedule of Dayworks carried out incidental to contract
g
works’, published in the United Kingdom. Items of Equipment likely to be used, but which
in
are not included in a published list, should have been listed separately in the Contract Data
in
part two.
r tra
Fo
Occasionally Equipment may be required because of a compensation event which is not in

the published list and not listed in the Contract Data. This is covered by item 27, using open
.
ly
or competitively tendered prices.

on
CHAPTER 4
The Equipment rates stated in the published list are adjusted by the ‘percentage adjustment
ity
for listed Equipment’ referred to in item 21. The percentage is found in the Contract Data
rs
ve
part two.
ni
U
Plant and Materials 3 See notes for the SCC as the items are identical in both schedules.
n
to
Subcontractors 4 See notes for the SCC. Since the SSCC is only used to assess compensation events there will
As
be no need to account for double recovery.

by
Charges 5 All of the components in items 51 to 53 are paid at their actual amounts, subject to as usual
CHAPTER 5
se
such cost being at open or competitively tendered prices.

ru
Fo
Manufacture and 6 See notes for the SCC as the items are identical in both schedules.
fabrication
Design 7 See notes for the SCC as the items are identical in both schedules.
Insurance 8 See notes for the SCC as the items are identical in both schedules.
CHAPTER 6
APPENDICES

MANAGE
Contract start-up checklist
APPENDIX 1

CHAPTER 1
Responsibility key: Client, Project Manager (PM), Supervisor (S), Contractor (C)
ECC CLAUSE RESPONSIBILITY ACTION COMMENT
Introduction
CHAPTER 2
All Review and understand requirements of All need to review the documents that make up the
the contract contract including the all-important Scope.
All Identify training needs if not done so Training can be an effective part of arrangements
.
ly
already to promote collaborative working. It should aim
on
to help the Client, PM, S and C understand the
s
requirements of the contract and how they will
se
work together to meet them.
po
CHAPTER 3
r
All Collaborative working Identify and implement appropriate interventions to
pu
support collaborative working.
g
in
Section 1 General
in
tra
13.2 Client Establish system for communications under Set up communication system if the Scope specifies
r
the contract one (as stated in clause 13.2). If not then agree
Fo
one, perhaps using the simple ECC communication

forms, more complicated tracking spreadsheets or
.
ly
perhaps a proprietary system.

on
CHAPTER 4
ity
13.2 All Addresses for communications to be Recipients to notify if the Contract Data address is
rs
confirmed to be changed.
ve
14.2 PM and S Appoint any delegates PM and S to notify C of delegated actions. Think
ni
about holiday or periods of illness, it is prudent on

U
most projects to have delegates for the PM and S.

n
to
As
Good practice suggests that the C should also

notify the PM and S of those who are delegated to
by
give and receive communications.

CHAPTER 5
se
15.2 PM Prepare a first Early Warning Register (EWR) The EWR is defined in clause 11.2(8). Suggest
ru
simple spreadsheet and the starting point is the

Fo
matters which are listed in the Contract Data for

inclusion.
15.2 PM Arrange first early warning meeting PM instructs the C to attend this first meeting;
there follows regular and irregular meetings.
Although the clause says ‘instruct’, better to discuss
first. These meetings are very different to progress
CHAPTER 6
meetings, make sure all appreciate the importance

of early warnings.
17.1 and 17.2 PM and C Requirements for instructions Notify ambiguities or inconsistencies, or if the
Scope includes illegal or impossible requirements,
as soon as aware.
18.3 C Corrupt Acts Ensure equivalent clause 18 Corrupt Acts provisions

are put in any subcontracts being prepared.
APPENDICES

MANAGE
Section 2 The Contractor’s main responsibilities
20.3 C, D, E C and PM C advises PM on practical implications of Link with action under 26.2 and 26.3 below.
CHAPTER 1
and F the design of the works and subcontracting
arrangements
20.4 C, D, E C and PM Forecasts of Defined Cost Agree dates for meetings for consultation prior to
and F C’s submission of forecasts of Defined Cost for the
whole of the works. Agree a sensible reporting
approach and format.
21.2 PM Establish C’s plan for submission of Requirements should be set out in the Scope and
‘particulars of its design’ taking note of shown on the C’s programme.
CHAPTER 2
clause 21.3 which requires that each part
submitted can be assessed fully
23.1 PM Review requirements for C’s submission of Requirements should be set out in the Scope and
‘design of an item of Equipment’ shown on the C’s programme. PM can request
.
ly
other items that are not in the Scope.
on
24.1 C Replacement of any key persons C to provide each key person as in the Contract
s
se
Data or provide a replacement person for
po
acceptance by the PM.
CHAPTER 3
pu
26.2, 26.3 and PM Getting Subcontractors accepted – Whilst not explicitly required in the conditions of
26.4 (in Option developing a plan for subcontracting contract it makes sense for all to set out the likely
g
in
C, D, E and F) packages to be subcontracted, timescales and
in
so on. Any requirements for subcontracting or
tra
constraints will be in the Scope. The C must submit

r
name of proposed Subcontractors then proposed

Fo
subcontract documents to the PM for acceptance.

This can be shown in the developing plan.
.
ly
on
27.4 C Comply with health and safety Not only will the applicable law health and safety
CHAPTER 4
ity
requirements requirements need to be complied with but also

rs
those of the Client stated in the Scope. Ensure all

ve
know of such.
ni
U
Section 3 Time
n
to
11.2(2) PM Check and review the definition of If not clear and sufficient, change the Scope as
As
Completion in the Scope soon as possible to make it so. The change will be a
compensation event.
by
CHAPTER 5
The access dates
se
30.1 and 33.1 E Ensure the dates can be met, sometimes the
legalities are not quite in place.
ru
Fo
30.3 PM and C Any Key Dates Familiarise yourself with the information in the
Contract Data.
31.1 PM and C PM to work with C to get the first There is quite an exhaustive list of things to include
programme submitted and accepted in the programme (see clause 31.2). Working
(assuming not already in Contract Data collaboratively should produce better outcomes.
part two) Having an Accepted Programme in place is critical
CHAPTER 6
for successful management of ECC.
32.2 PM and C Establish routine programme meetings Though not explicitly required in the contract, put
some thought into establishing good practice for
keeping the programme up to date.
Section 4 Quality Management
40.1 and 40.2 C Operate quality management system, Whether stated in the Scope or not, the C may
put in place quality policy statement and still operate a quality management system due
quality plan to corporate requirements. Submit quality policy
APPENDICES
statement and quality plan within the timescales in

the Contract Data.

MANAGE
41.3 S and C Plan tests and inspections The S’s tests and inspections are likely stated in the
Scope but work collaboratively to develop a regime
to be compliant with the requirements of the
CHAPTER 1
contract and C’s own quality management system.

Try not to duplicate, see how you can simplify.
42.1 S and C Testing and inspection before delivery Start some dialogue on this, although the delivery
may be a while away. Feed this into a testing plan.
Section 5 Payment
50.1 PM Decide the first assessment date This needs to suit the procedures of the Parties.
50.2 PM and C Set up process to determine the amount This can be quite straightforward for Option A.
CHAPTER 2
due The PM and C might share the burden of quick

re-measurement each assessment for Option B.
For Option C to F the PM and C need to consider
the keeping of records (clause 52.2) and inspection
.
ly
rights that the PM has (clause 52.3) to give the
on
Client cost assurance. May be able to dovetail into
s
C’s own cost auditing and may be advisable to
se
speak with Client’s auditor, if there is one.
po
50.9 (in PM and C Set up process to finalise Defined Cost Start dialogue on closing down parts of Defined
CHAPTER 3
r
pu
Options C to F) Cost.
g
in
51.2 PM and C Making payments Ensure Client’s finance department properly geared
in
up to pay promptly, without any problems.
tra
52.1 PM and C Defined Cost Although it may be some way off, start dialogue on
r
Fo
how to identify/account for clause 52.1 discounts,

rebates and taxes.
.
ly
on
Section 6 Compensation events

CHAPTER 4
ity
PM and C Develop process for managing The Parties must follow the conditions of contract
rs
compensation events of course but how can that be done more

ve
collaboratively? Start with clause 63.2 wherever

ni
possible, do joint quotations? Create a joint register

U
of compensation events and regular reviews

n
to
thereafter. Try not to duplicate resource inputs into

As
the process.
by
Section 7 Title
CHAPTER 5
se
71.1 S Marking Equipment, Plant and Materials S and C to work together on planning this. Will
ru
outside the Working Areas dovetail into testing, programming provisions

Fo
above.
72.1 PM and C Removing Equipment Establish appropriate procedure for this.
Section 8 Liabilities and insurance
84.1 C Insurance policies Quickly obtain the certificates confirming the

insurances are in place, prior to the starting date.
CHAPTER 6
86.1 PM Insurance by the Client Quickly submit the certificates confirming the
insurances are in place, prior to the starting date.
Section 9 Termination
- - Hopefully, no initial actions required.
Resolving disputes
W1 Client and C Senior Representatives need to be in place Make sure the members’ list is up to date.
APPENDICES
W2 Client and C Senior Representatives need to be in place Make sure the members’ list is up to date.
W3 Client and C Dispute Avoidance Board needs to be in Make sure the members’ list is up to date. Get
place acceptance of 3rd DAB member

MANAGE
Secondary Options (where used)
X4 C Ultimate holding company guarantee Give the Client the guarantee or propose an
CHAPTER 1
alternative guarantor; guarantee to be within four
weeks of the Contract Date.
X8 C, Client and PM Undertakings to the Client or Others The Client prepares the undertakings and sends
them to the C for signature. The C signs the
undertakings, or arranges for the Subcontractor to
sign them, and returns them to the Client within
three weeks. The PM should assist the Client here,
if required.
CHAPTER 2
X9 C, Client and PM Transfer of rights Ensure equivalent transfer of rights provisions
are put in any subcontracts being prepared. Start
dialogue about documents transferring rights to
the Client.
.
ly
X12 C, Client, PM and Multiparty collaboration Select members of the Core Group not already
on
Partners made, the Core Group decides how it will work,
s
when it will meet and set about achieving
se
multiparty collaboration. Start dialogue on the
po
reports to be provided for KPIs at the intervals
CHAPTER 3
stated.
pu
X13 C Performance bond
g Give the Client the bond within four weeks of the
in
Contract Date.
in
tra
X14 Client, E and PM Advanced payment to the C The advanced payment is included in the
r
assessment made at the first assessment date or,

Fo
if an advanced payment bond is required, at the

next assessment date after the Client receives the
.
ly
advanced payment bond. Bank details/method of

on
CHAPTER 4
payment will need to be finalised.
ity
rs
X15 C and PM Professional indemnity insurance This insurance provides cover from the starting date
ve
and dealt with alongside the other insurance (see

ni
clause 84.1).
U
X16 Client, C and PM Retention bond If stated in the Contract Data or agreed by the
n
to
Client, the C may give the Client a retention bond.

As
X20 C and PM Key Performance Indicators Start dialogue on the reports to be provided at the
by
intervals stated.
CHAPTER 5
se
X23 C and PM Early Contractor Involvement (ECI) The C provides detailed forecasts of the total
ru
Defined Cost of the work to be done in Stage One

Fo
for acceptance by the PM. The C prepares forecasts

of the Project Cost in consultation with the PM.
Both of these need dialogue between the PM and
C, and should be considered alongside clause 20.4
above.
Y(UK)1 Client, C and PM Project Bank Account (PBA) The C establishes the PBA with the project bank
CHAPTER 6
within three weeks of the Contract Date. The C

submits to the PM for acceptance details of the
banking arrangements for the PBA. Setting up any
back account can take some time and this needs to
be done before the first assessment can be properly
processed.
Note: most of these are extracts of the clauses in note form, this is just a guide and users should follow the precise provisions of the
contract.
APPENDICES

MANAGE
Contract close down checklist
APPENDIX 2

CHAPTER 1
Responsibility key: Client, Project Manager (PM), Supervisor (S), Contractor (C)
ECC CLAUSE RESPONSIBILITY ACTION COMMENT
Section 1 General
CHAPTER 2
13.2 All Update system for communications under Ensure all communications have been dealt with.
the contract
Section 2 The Contractor’s main responsibilities
.
ly
on
n/a
s
se
Section 3 Time
po
n/a
CHAPTER 3
r
pu
Section 4 Quality Management
g
in
43.1 S Searching for and notifying Defects The S may instruct the C to search for a Defect –
in
tra
this right under the contract expires at the defects

date.
r
Fo
44.1 S and C Correcting Defects The C corrects a notified Defect before the end
.
of the defect correction period. The S and C are

ly
on
obliged to notify each other of Defects they find as

CHAPTER 4
soon as either becomes aware of a Defect (clause

ity
43.2).
rs
ve
44.3 S and C Correcting Defects The S issues the Defects Certificate at the defects
ni
date if there are no notified Defects. Otherwise

U
it is the earlier of on the end of the last defect

n
correction period and the date when all notified

to
Defects have been corrected.

As
by
46 PM and C Uncorrected Defects The PM will need to assess the deductions to be

made for any last uncorrected Defects. The S and
CHAPTER 5
se
C should work closely together to help the C avoid

ru
Defects in the first place but correct them in a

Fo
timely manner if they do occur.
Section 5 Payment
50.1 PM and C Assessing the amount due An assessment date occurs when the S issues the
Defects Certificate
50.2 PM and C Assessing the amount due For Option C to F, we are approaching the end
CHAPTER 6
of C’s needs to keep records (clause 52.2) and

inspection rights that the PM has (clause 52.3)
to give the Client cost assurance. May need final
dialogue with Client’s auditor, if there is one.
53 PM and C Final assessment Four weeks after the S issues the Defects Certificate
the PM assesses the final amount due and certifies
a final payment, if any is due. That will be the
end of the PM’s role under the contract, once the
certificate is issued.
APPENDICES
Section 6 Compensation events
61.7 PM and C Notifying compensation events A compensation event is not notified by the PM or
the C after the issue of the Defects Certificate – the
PM and C need to ensure all communications are
up to date to avoid missing any notifications.

MANAGE
Section 7 Title
n/a
CHAPTER 1
Section 8 Liabilities and insurance
83 Client Insurance cover Deciding on insurance requirements for the asset as

the C’s insurances provide cover for events which
are the C’s liability from the starting date until the
Defects Certificate or a termination certificate has
been issued.
Section 9 Termination
CHAPTER 2
- - Hopefully, no actions required!
Resolving disputes
n/a Hopefully, no actions required!
.
ly
on
Secondary Options (where used)
s
se
X17 PM and C Low performance damages If a Defect included in the Defects Certificate shows
po
low performance with respect to a performance
level stated in the Contract Data, the PM makes a
CHAPTER 3
pu
deduction in the next assessment.
g
in
Note: most of these are extracts of the clauses in note form, this is just a guide and users should follow the precise provisions of the
in
contract.
r tra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
Example communication forms
APPENDIX 3

CHAPTER 1
Instruction
To: Address:
CHAPTER 2
From: Address:
Project Name: Project ID:
.
ly
on
Instruction No: Date:
s
se
Under clause ……… I instruct you to:
po
CHAPTER 3
r
pu
g
in
in
rtra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Fo
Copy to:
Signed:
CHAPTER 6
APPENDICES

MANAGE
Notification
CHAPTER 1
To: Address:
From: Address:
Notification No: Date:
CHAPTER 2
Under clause ……… I notify you:
.
ly
on
s
se
rpo
CHAPTER 3
pu
g
in
in
r tra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
Copy to:
As
by
Signed:
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
Submission
CHAPTER 1
To: Address:
From: Address:
Submission No: Date:

CHAPTER 2
Under clause ……… I submit:
.
ly
on
s
se
po
CHAPTER 3
r
pu
g
in
in
tra
r
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
Copy to:
As
by
Signed:
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
Acceptance
CHAPTER 1
To: Address:
From: Address:
Acceptance No: Date:
CHAPTER 2
Under clause ……… I accept:
.
ly
on
s
se
rpo
CHAPTER 3
pu
g
in
in
tra
r
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
Copy to:
As
by
Signed:
CHAPTER 5
se
ru
Fo
CHAPTER 6
APPENDICES

MANAGE
Payment Certificate
CHAPTER 1
To: Address:
From: Address:
Payment Certificate No: Date:

CHAPTER 2
Under clause 51.1:
Price for Work Done to Date £
.
ly
Plus other amounts to be paid to the £
on
Contractor
s
se
Sub-total £
po
CHAPTER 3
r
pu
Less amounts to be paid by or retained from £
the Contractor g
in
in
tra
Amount due £
r
Fo
Less amount due in the last payment £

.
certificate
ly
on
CHAPTER 4
ity
Sub-total £
rs
ve
Tax which the law requires the Client to pay £

ni
to the Contractor
U
n
to
Change in the amount due since the last £

As
payment certificate which is certified for

by
payment
CHAPTER 5
se
ru
Copy to:
Fo
Signed:
CHAPTER 6
APPENDICES

MANAGE
Completion Certificate
CHAPTER 1
To: Address:
From: Address:
Completion Certificate No: Date:
CHAPTER 2
Under clause 30.2:
the date of Completion of ………….. [insert either any section of the works or the whole of
the works] is …………….. [insert date]
.
ly
on
s
se
rpo
CHAPTER 3
pu
g
in
in
rtra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
Copy to:
se
ru
Fo
Signed:
CHAPTER 6
APPENDICES

MANAGE
Take Over Certificate

CHAPTER 1
To: Address:
From: Address:
Take Over Certificate No: Date:

CHAPTER 2
Under clause 35.3:
the Client took over ………….. [state which part of the works] on …………….. [insert date]
.
ly
on
s
se
po
CHAPTER 3
r
pu
g
in
in
r tra
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
Copy to:
CHAPTER 5
se
ru
Signed:
Fo
CHAPTER 6
APPENDICES

MANAGE
Defects Certificate
CHAPTER 1
To: Address:
From: Address:
Defects Certificate No: Date:
CHAPTER 2
Under clause 44.3/11.2(7):
[either] there are no Defects.
[or] the following is a list of Defects notified before the defects date which the Contractor
.
ly
has not corrected.
on
s
se
rpo
CHAPTER 3
pu
g
in
in
tra
r
Fo
.
ly
on
CHAPTER 4
ity
rs
ve
ni
U
n
to
As
by
CHAPTER 5
se
ru
Copy to:
Fo
Signed: CHAPTER 6
APPENDICES

APPENDICES CHAPTER 6 CHAPTER 5 CHAPTER 4 CHAPTER 3 CHAPTER 2 CHAPTER 1
120
APPENDIX 4
Fo
ru
se
CE NR NOTIFICATION QUOTATION by ASSESSMENT IMPLEMENTATION COMMENTS
COMM. REF. DATE DESCRIPTION COMM. ADATE COMM. DATE COMM. REF. DATE
REF. REF.
st
on
Managing an Engineering and Construction Contract

1 PMI/1 13/11/17 Procure trees U
tracking schedule
ni
PMN/2 13/11/17 Notified CE Submission/2 18/11/17 ve PMN/3 24/11/17
and quotation rs
instructed ity
2 CN/10 3/12/17 Physical
on
conditions – voids ly
.
PMN/11 6/12/17 Not a CE
Fo
r
3 PMI/8 4/12/17 Additional tra
signage in
in
PMN/13 4/12/17 Notified CE g
pu
PMI/9 4/12/17 Quotation PMA/1 6/1/18 PMN/17 r No quotation
instructed submitted by C
Example joint compensation event tracking schedule
po6/1/18
se
s
on
ly
.
Example joint compensation event
neccontract.com
MANAGE
© nec 2017
MANAGE
Example quotation of a compensation event
APPENDIX 5
Example quotation of a compensation
CHAPTER 1
event
Option A example
CHAPTER 2
£
People
.
Labourer 10 hours @ £30/hour 300.00
ly
on
Plasterer 3 hours @ £40/hour 120.00
s
se
Foreman 1 hour @ £30/hour 30.00
r po
CHAPTER 3
pu
Equipment
g
in
in
Generator 2 hours @ £25/hour 50.00
tra
Pump 4 hours @£25/hour 100.00

r
Fo
.
ly
Plant and Materials

on
CHAPTER 4
ity
Concrete say 80.00

rs
ve
ni
Subcontractors
U
n
As attached 1300.00
to
As
by
Charges
CHAPTER 5
se
ru
Water, electricity say 20.00

Fo
Manufacture and 0.00

fabrication
Design 0.00
CHAPTER 6
Insurance n/a
Clause 63.8 risk 0.00

allowance
APPENDICES
Sub-total 2000.00
Add Fee % @ 10% 200.00
Total 2200.00

NEC 4: Managing An Engineering and Construction Contract / Volume 4

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

NEC 4: Managing An Engineering and Construction Contract / Volume 4

Uploaded by

Copyright:

Available Formats

NEC 4 : managing an engineering

and construction contract / Volume 4.

Course of Study: EC2CMA - Construction Contract Management & Administration 2

Name of Publisher: NEC

managing an engineering and

The Government Construction Board, Cabinet Office UK

The Development Bureau, HKSAR Government

ISBN (Engineering and Construction Contract) 978-0-7277-6209-2

ISBN (Preparing an Engineering and Construction Contract) 978-0-7277-6224-5

ISBN (Engineering and Construction Contract Flow Charts) 978-0-7277-6267-2 (e-only)

First edition June 2017

Reprinted with amendments January 2019

© Copyright nec 2017

Typeset by Manila Typesetting Company

How to use the NEC4 user guides x

8 Liabilities and insurance 76

Chapter 3 Clauses for resolving and avoiding disputes 81

Chapter 4 Secondary Option clauses 85

Option X2: Changes in the law 86

Option X3: Multiple currencies (used only with Options A and B) 87

Option X4: Ultimate holding company guarantee 87

Option X5: Sectional Completion 88

Option X6: Bonus for early Completion 88

© nec 2017 neccontract.com Managing an Engineering and Construction Contract iii

Option Y(UK)1: Project Bank Account 99

Chapter 5 Schedule of Cost Components (SCC) 101

Chapter 6 Short Schedule of Cost Components (SSCC) 105

Appendix 1 Contract start-up checklist 106

Appendix 2 Contract close down checklist 110

Appendix 3 Example communication forms 112

Appendix 4 Example joint compensation event tracking schedule 120

iv Managing an Engineering and Construction Contract neccontract.com © nec 2017

Tony Meggs, Chief Executive, Infrastructure and Projects Authority

Reporting to Cabinet Office

© nec 2017 neccontract.com Managing an Engineering and Construction Contract v

There were three key objectives in drafting NEC4:

• provide greater stimulus to good management

• support new approaches to procurement which improve contract management and

• inspire increased use of NEC in new markets and sectors.

It was to be evolution, not revolution.

Some features of NEC4 include:

operational requirements in timing and extent

• new forms of subcontract to improve integration of the supply chain.

Further enhancements include:

• finalising cost elements during the contract

• incorporating a party-led dispute avoidance process into the adjudication process

• increasing standardisation between contracts and

• providing enhanced guidance to give greater practical advice to users.

Peter Higgins BSc (Hons), CEng, FICE

© nec 2017 neccontract.com Managing an Engineering and Construction Contract vii

The NEC4 Contract Board is:

The NEC4 drafting team consisted of: g

M. Garratt, BSc (Hons), MRICS, FCIArb

R. Hayes, BSc (Hons), MEng, CEng, MICE, MAPM

T. Knee-Robinson, BEng (Hons), CEng, MICE, MAPM, MCIHT

R. Patterson, BA, MBA, CEng, MICE

B. Trebes, BSc (Hons), MSc, FRICS, FInstCES, FAPM

B. Walker, BSc (Hons), GMICE, ACIArb

P. Waterhouse, BEng (Hons), MBA, CEng, FICE, FCIArb, FCInstCES, FCMI

organisations in releasing their staff:

Anthony Collins Solicitors LLP

© nec 2017 neccontract.com Managing an Engineering and Construction Contract ix

How to use the NEC4 user