The ECC offers an employer various ways of requiring something to be done by a certain date. The mechanisms for these ways and the consequences are set out in Table 1. The same provisions apply in the PSC except that the equivalent of the ECC works information is the PSC scope.
It should be clear from the table that setting significant time-bound requirements in the works information is not appropriate. An employer should use either sectional completion under option X5 or key dates.
Take-over risks (ECC only)
As is often the case in NEC, there is no right answer. In deciding which is appropriate, the employer should be aware of the consequences as set out below. In the case of the ECC, often the deciding factor will be whether the employer wants take over a part of the works prior to completion of the whole of the works.
In the ECC, if the employer does take over part of the works, it takes on risks in relation to the part of the works because of clause 80.1. This states the employer is liable for loss of or wear or damage to the parts of the works taken over (with a few exceptions). Loss to or wear or damage to the parts of the work taken over is therefore a compensation event under clause 60.1(14). In this case the employer should use secondary option X5, sectional completion and then may use associated delay damages for late completion (secondary option X7).
If the employer does not want to take over a part of the works, then a key date may be appropriate. If so, the employer needs to be aware of the lack of clarity for the bidder on the consequences of it not meeting the key date – and might chose to use a Z clause to put a predetermined amount of damages on not achieving the stated condition by the key date.
Example situation
As an example, a contract may include two separate buildings and the provision of an access road for use by another contractor. If the employer wishes to take over one of the buildings before the other, then it will have the first of the buildings as a section under option X5 and the whole of the works being the two buildings.
The contract data will need a completion date for the whole of the works and, under option X5 for section 1, a brief description and a completion date. The works information needs to set out the requirements and constraints relating to building 1 clearly. Also, because of the definition of completion, the works information will need to set out the detailed requirements for completion of section 1 and for the whole of the works. When the section and the whole of the works separately achieve completion, the employer will be required to take them over within 2 weeks (clause 35.1).
For the access road, the contract data will need to set out the condition to be met – that is the road to be ready for use by others – and the key date by which that condition is to be met. The works information needs to set out the requirements and constraints relating to the construction of the road clearly as well as the proposed level of use of the road by others after the condition is met, plus any ongoing obligations of the contractor to maintain the road after the key date is met. The works information should also be clear on the required quality of the road at completion of the whole of the works.
| Method | How and where | Remedy for employer if the contractor / consultant does not meet the date | Does the employer have to take over once the requirement is met (ECC only)? |
How is the obligation affected by compensation events? | How can the required date be changed? |
| Sectional completion | Use option X5 (sectional completion) and set the ‘completion date’ for each ‘section’ in the contract data Set out clearly in the works information what the contractor has to do for ‘Completion’ (clause 11.2(2)) of each section Make sure the naming of the sections is consistent between the contract data and the works information / scope. |
The employer may also use option X7 (delay damages) and so set a redetermined amount (the delay damages) that the contractor / consultant must pay the employer for every day that section completion is after the (required) section completion date. | Yes. Under clause 35.1 the employer is required to take over the section within two weeks of completion. Note that in the case of the whole of the works, there is a prompt in the completion date for the employer to state, if it so chooses: ‘The Employer is not willing to take over the works before the Completion Date.’ There is no similar prompt in the contract data related to the take over of particular sections of the works under option X5. However, there is no reason why such a statement could not be introduced in the contract data if required. |
Because of clause X5.1, every mention of completion and completion date in the conditions of contract applies to the completion and completion date for the whole of the works and also for every section completion date. The contractor’s quotation for a compensation event must include the effect of the compensation event on the ‘planned Completion’ of the section (clause 62.2) and may result in a delay to the section completion date (clause 63.3). |
If the employer (through its project manager in the case of ECC) wants to bring forward a section completion date, this has to be by an acceleration, negotiated and agreed (ECC clause 36, PSC clause 34). Such a change cannot be ‘instructed’ by the employer / project manager and the contractor / consultant will have the upper hand in any such negotiation. |
| Key dates | The employer may require ‘conditions’ to be met by ‘key dates’ set out in the contract data part one. | ECC clause 25.3 and PSC clause 23.3 includes, ‘If …[fail to meet Key Date]….. and, as a result, the Employer incurs additional cost either in carrying out work or by paying an additional amount to Others in carrying out work on the same project, the additional cost which the employer has paid or will incur is paid by the contractor / consultant.’ This is not a complete indemnity as the ‘damage’ is only if the failure results in the employer incurring ‘additional cost’ for ‘work’ ‘on the same project’. But the amount is not predetermined – instead it is assessed by the project manager (ECC) or employer (PSC). If the contractor / consultant does not agree with the assessment, the only place to go is adjudication. Some clients sometimes use a simple Z clause instead to put predetermined ‘delay damages’ to a failure to meet key dates. |
No. | The effect of compensation events on key dates is assessed in exactly the same way as the effect on completion dates (clause 63.3). Hence there needs to be a planned date for achieving each condition shown in the accepted programme (clause 31.2). |
Under ECC clause 14.3 the project manager can unilaterally ‘change’ a key date, while in the PSC the employer can act under clause 20.2. This will be a compensation event under clause 60.1(4). If the change is to bring the key date forward, clause 63.6 allows the contractor / consultant to price into the compensation event quotation the additional risk of incurring the (unknown) cost of the assessment (ECC clause 25.3, PSC clause 23.3) were it to miss the key date. This might be a difficult compensation event assessment to agree. |
| Include in ECC works information or PSC scope | Simply state the requirement to do something by a certain date in the works information / scope. In theory this could be in the works information / scope at the contract date or could be added by the project manager in a change to the works information (ECC clause 14.3) or a change to the scope (PSC clause 20.2). |
If the contractor / consultant fails to meet the requirement in time it will be a breach of contract. ECC clause 25.2 includes ‘Any cost incurred by the Employer as a result of the contractor not providing the services and other things which he is to provide is assessed by the Project Manager and paid by the Contractor.’ This clause might be ‘stretched’ by the project manager to give the employer a remedy in the contract for the contractor’s non-compliance. However, it is considered that this clause is intended for incidental ‘services and other things’ and not for significant time-bound obligations. |
No. | There is no mechanism in the contract for such a time-bound obligation in the works information / scope to be delayed by compensation events. If a compensation event was to make achieving one or more of such dates difficult, the contractor / consultant might try to persuade the project manager / employer to delay the requirements set out in the works information / scope to reduce the level of risk it would otherwise have to include in its quotation. |
If the requirement and the date are set out in the works information/scope, then they can be changed by the project manager (ECC 14.3) or by the employer in the case of the PSC (20.2) This will result in a compensation event (clause 60.1(1)). In the case of the ECC, if the change is to bring the requirement forward, clause 63.6 allows the contractor to price into the compensation event quotation the additional risk of incurring the (unknown) cost of the project manager’s assessment under clause 25.2, were the project manager to miss the required date. This might (also) be a difficult compensation event assessment to agree. |
- Author
- Richard Patterson, Mark Anders, and Petter Siljehah, Mott MacDonald
- Share this page
-
- Copy link
