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Maintenance / Facilities FAQs

Top Frequently Asked Questions

Q We are the service manager on an NEC3 Term Service Contract (TSC). Clause 11.2(9) second bullet (with clause 50.3) allows for payment to be calculated as a quantity multiplied by a rate from the price list. Clause 63.9 tells us that the price list is amended by compensation events. Finally, clause 63.6 and 63.10 tell us that the assessment of a compensation event is, in effect, final. Does this mean that compensation events are added to the price list only as lump sums and not as independent quantities and rates? Also, does it mean that, in assessing payments, an item in the original service information and included on the price list as quantity and rate is paid at quantity by rate, while work that is the subject of a compensation event is paid as lump sum when complete?

By way of illustration, suppose the price list includes 10 m of an item at £10/m and suppose there is a compensation event that adds a further 10 m of the same item and this is priced at £10/m also. Suppose then that of the original scope, 9 m is completed and of the scope added by a compensation event only 9 m is completed. Would we, as service manager, (a) certify 9 m at £10 for the original service plus £100 for the compensation event, or (b) certify 9 m at £10 for the original service plus 9 m at £10 for the compensation event?
Q We are a foundation contractor working under an NEC3 Engineering and Construction Subcontract (ECS) main option B (priced contract with bill of quantities). Some of the piling works have been omitted, causing a compensation event to occur. The main contractor has valued this work by simply not measuring the works omitted. We have argued that the omitted works should be valued using the shorter schedule of cost components. Which is the correct method of assessment?
Q We are the contractor on an NEC3 Engineering and Construction Contract (ECC) where part of the works consists of a new roundabout and its approaches. The approaches have been partially completed and opened to traffic, but the roundabout has not yet been formally taken over by the local authority, which will occur after completion. A couple of weeks ago a road accident occurred in the area causing minor damage to the pavement. For the purpose of this contract and as a learning point, would this be considered as defect, so is a fault on the works in use before completion? Or will the local authority be liable to undertake the repairs?
Q We are the employer on an NEC3 ECC Option B (priced contract with bill of quantities). Our contractor has notified a compensation event on the basis that a bill item was not in accordance with the standard method of measurement referred to in the contract. This is despite the item description being clear. Furthermore, the contractor did not qualify its tender on this item at tender stage. Can the contractor notify this as a mistake requiring correction under clause 60.6?
Q We are the contractor on an NEC3 Engineering and Construction Contract (NEC3 ECC) Option C (target contract with activity schedule). When we purchase an expensive item of equipment for the works, such as a tunnel boring machine, when can we recover the initial payment? Secondly, when is the residual value accounted for and how do we calculate the change in value?
Q What is NEC4?
Q We are the project manager on an NEC3 Engineering and Construction Contract (ECC) Option D (target contract with bill of quantities). Clause 63.2 says, ‘If the effect of a compensation event is to reduce the total Defined Cost, the prices are not reduced except as stated in this contract’. Does this mean the contractor still gets paid the same as the original tendered cost and pockets the difference in profit? I understand this is an incentive to the contractor but, with no incentive for the employer, why would I agree to changing the works information (assuming there are no time benefits with the change – and which would belong to the contractor anyway and the employer would have to pay more to accelerate and benefit from the extra time)? And can you please explain what the exceptions, ‘as stated in this contract’ could be?

Finally, the contractor has suggested a change to the works information provided by the employer, which will reduce defined cost. I accept the change and wish to give an instruction changing the works information. Should I reduce the prices when notifying the compensation event, confirm that the prices will not be reduced or notify a compensation event and instruct a quotation to be submitted?
Q We are shortly going out to tender using the NEC4 Term Service Contract (TSC) for facilities management. We note clause Y2.2 states, ‘The date on which final payment becomes due is…if the Service Manager makes an assessment after the end of an accounting period, fourteen weeks after the end of the accounting period’. Is ‘fourteen weeks’ weeks correct as clause Y2.2 in NEC3 TSC states, ‘The final date for payment is fourteen days’?
Q Is there a written comparison available between the NEC3 Professional Services Short Contract (PSSC) and the NEC3 Professional Services Contract (PSC), identifying what has been missed out from PSC to create PSSC?
Q I am enquiring as to whether an NEC contract can ever be executed as a contract ‘under hand’, that is as a simple contract? My previous experiences working with NEC contracts have always been when an agreement was made under a deed.

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