NEC - Engineering and Construction Contract (ECC)

NEC - Engineering and Construction Contract (ECC)

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BackgroundBackground The ‘traditional’ contract is fully specified and

administered by the Engineer or Architect Proportion of ‘traditional’ contracts falling The Latham Report (Constructing the Team, 1994) and the

Egan Report (Rethinking Construction, 1998) both reported widespread Client dissatisfaction with construction contracts which were seen as:

Too many forms, too adversarialContracts which were very inflexibleDisputes - too many, too long to settleLegal compliance seen as being more important than effective contract management

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Contract ProcurementContract ProcurementThe UK Government has embraced the Private

Finance Initiative (PFI)Framework and Partnering agreements have

become widespread with larger clientsThe was therefore a radical need to rethink

traditional construction contractsThis resulted in the introduction of the New

Engineering Contract (NEC), which later became the Engineering and Construction Contract (EEC)

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Engineering and Construction ContractEngineering and Construction Contract

The objectives for the design of the NEC / ECC were to make improvements under 3 main headings

Flexibility– Terminology

Clarity and simplicity Stimulus to good

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Objectives of ECC -1Objectives of ECC -1Flexibility , the ECC is intended to be used for engineering and construction work containing any

or all of the traditional disciplines such as civil, electrical, mechanical and building work.

to be used whether the Contractor has some design responsibility, full design responsibility or no design responsibility.

to provide all the normal current options for types of contract such as competitive tender (where the Contractor is committed to his offered prices), target contracts, cost reimbursable contracts and management contracts.

to be used in the United Kingdom and in other countries.

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Objectives of ECC -1Objectives of ECC -1Terminology In order to achieve uniformity across these sectors,

some changes of terminology have been necessary. One example is that the word `Equipment' is used for

what, in the building and civil engineering sectors, has in the past been called `Constructional Plant'.

The traditional civil engineering and building term `temporary works' is covered by `Equipment' as defined in ECC Clause 11.2(11) and therefore is not used.

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Objectives of ECC - 2Objectives of ECC - 2Clarity and simplicity The ECC is written in ordinary language. The actions by

the parties which follow from use of the ECC are defined precisely so that there should be few disputes about who is to do what and how.

The ECC is based upon flow charts of the procedures to be followed by the parties named in the contract.

Almost all circumstances which may give rise to additional payment to the Contractor are identified as compensation events, which must include reviews of both the cost and time implications.

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Objectives of ECC - 3Objectives of ECC - 3Stimulus to good The ECC is founded upon the proposition that co-operative management of the interactions between the

parties can shrink the risks inherent in construction work clear division of function and responsibility helps accountability

and motivates people to play their part much reduced risk to the Employer of cost and time overruns and

of poor performance of the completed projects. much increased likelihood of achieving a profit for the Contractor,

subcontractors and suppliers.

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Objectives of ECC - 3 continuedObjectives of ECC - 3 continued

Stimulus to good The ECC is founded upon the proposition people will be motivated to play their part in collaborative

management if it is in their commercial and professional interest to do so. Reliance need not be placed upon exhortation either within the contract or outside it.

the Project Manager, acting on behalf of the Employer and in communication with him, should be presented with options for dealing with the problem from which he can choose, directed by the interests of the Employer.

The Contractor should be unaffected by the choice made.

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Other changesOther changes Standard form of subcontract, very similar to ECC Subcontractors cannot be nominated

Must use direct contract with Employer The financial control document in the ECC can be either

a traditional bill of quantities or an activity schedule.The activity schedule is a list of items with lump sum prices. The total price for the work to be done is divided between each of the items.Neither document is used in the ECC for any purpose other than assessing payments due to the Contractor.

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ECC DocumentsECC Documents the core clauses the main option clauses, the secondary option clauses, the Schedules of Cost Components and the Contract Data formatsPlus works information site information Accepted programme

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ECC Core ClausesECC Core Clauses General Contractors responsibility Time Quality Payment Compensation events Property Risks & insurance Disputes and terminations

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ECC Main Option ClausesECC Main Option Clauses

A. Conventional contract with activity scheduleB. Conventional contract with Bill of QuantitiesC. Target contract with activity scheduleD. Target contract with Bill of QuantitiesE. Cost reimbursable contractF. Management contract

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ECC Secondary Option ClausesECC Secondary Option ClausesG. InflationH. RetentionI. Delay damagesJ. Early completion bonusK. Low performance damagesL. Sectional completionM. Advance paymentsN. Advance payment bondO. Performance bondP. Parent company guaranteeQ. Contractors’ liability for his design limited to reasonable skill and

careR. VAT and taxS. Multiple currencies

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A partnering contract, between two Parties only, is achieved by using a standard NEC contract. This Option X12, which puts the NEC Partnering Option into a contract, is used for partnering between more than two parties working on the same project or programme of projects

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ECC Cost and Contract formsECC Cost and Contract formsThe Schedule of Cost Components is a

complete identification of components of cost which is not varied from one contract to another

The Contract Data are selected and completed for each contract. These data identify such things as the completion dates, the contract specific documents (e.g. specifications and drawings), interest rates and price adjustment indices to be used.

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ECC Roles & DutiesECC Roles & Duties The ECC sets out the responsibilities and roles of the

following parties: the Employer, the Project Manager, the Supervisor, the Contractor, the Subcontractor and the Adjudicator

Separate functions of Employer's designer and Contractor's designer are assumed but not mentioned in the contract.

The role played by the Engineer, Architect or Supervising Officer in other standard forms is divided between the Project Manager, the Supervisor, the Employer's designer and the Adjudicator.

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Project ManagerProject Manager Appointed by Employer to manage contract to

achieve Employer’s objectives Appointed at feasibility stage, may advise on

procurement of design, estimates of time and cost, alternative options, construction procurement

He should have Employer’s full authority. Can change/vary work and instruct contractor In compensation events can chose best option for

Employer but must act reasonably or face Adjudication

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DesignersDesigners If design & construct is separated then

Designers appointed directly by EmployerDevelop design to a point where tenders can be invited

If Design & ConstructEmployers Designer provides a performance specificationContractors Designer contracted to Contractor

Project Manager manages whole design process

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SupervisorSupervisorAppointed by Employer for particular contractThe role is to check that works are constructed

in accordance with contractSimilar to role of Resident Engineer or Architect,

but on simple contracts may be a Clerk of WorksDisputes between Supervisor and Contractor

referred to Adjudicator

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AdjudicatorAdjudicatorAppointed jointly by Employer and Contractor, who

share his feeUsually registeredEmployer can insert his choice in contract data and

seek contractor approval, or ask contractor to supply list of names

Responsible for deciding any disagreements in the contract

If either party does not accept his decision, may proceed to arbitration or court

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ConclusionConclusionThe ECC is intended to provide a framework for

all parties to work collaboratively and achieve their own objectives

Aim is to satisfy ClientShould lead to much reduced risk of cost and

time overruns Increased likelihood of achieving profit for

contractors & suppliers