NEC Target Cost Contract – Cost Assurance Product code: L07100-HK

Jul 11 th

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Lump sum contract with a bill of quantities has traditionally been the norm in the Hong Kong construction industry. Clients pay the contractors based on the quantities of work done with reference to the bill. However, as NEC Engineering & Construction Contract (ECC) is gaining momentum and the market is moving to cost based contracting (main Options C to F) from price based contracting (traditional lump sum contracts / ECC main Options A and B), a new way of cost management is required to ensure money is well spent in a project.
In cost based contracting, the client is in principle paying costs incurred by the contractor subject to a pain/gain share mechanism, if a target cost contract (option C/D) is used. All actual costs? Not quite – its only the Defined Cost plus Fee that is payable to the contractor with the objective to drive “value for money” for the client.
Cost assurance is all about achieving this objective within the contractual framework of the NEC ECC main Options C to F. Defined Cost is subject to agreed rates in the contract, value for money test, records, audits, Disallowed Cost and the like. The briefing explores what the contract requires in respect of cost assurance, where it focuses, how it may be set up and implemented and what practical considerations would be.
The agenda is as follow:

18:00     Registration and networking
18:30     Welcome Address
18:35     Presentation/Open Discussion
19:50     Q&A
20:00     Closing

Key takeaway:
  • Cost based contracting under main Option C to F
  • What is cost assurance?
  • Why is it important?
  • How is it set up and implement?
  • What are the challenges?
Daniel Cheung, NEC Tutor
Daniel-Cheung Daniel is a Director at an international consulting firm and leads its Infrastructure and Contract Services business in the North East Asia region. He is a professional engineer and contract specialist with strong commercial acumen. He believes and advocates collaborative approach in contract risk management which adds value to his client’s projects.
Daniel has extensive exposure in the international construction industry with professional legal, commercial, engineering and business management experience and qualifications. He has expertise in advising board level senior managers in various major organisations on procurement strategies, commercial models, contract drafting, project risk management and dispute management. He is also a claim specialist and has been appointed as independent quantum expert. He has extensive experience in various types of dispute resolutions and is skillful in delay analysis, complex quantum evaluation, drafting of expert reports and claims avoidance through advanced risk management of contract life cycle.

Daniel started to work on NEC2 contract over 10 years ago in the UK. Since then he has been delivering successful projects for his clients under NEC2 and NEC3 contracts as well as advising on the use of NEC4. His hands-on experience of the NEC contract covers the whole life cycle of major projects such as procurement/contract strategy advisory, contract drafting, tender management, contract training, setting up of contract administration system, contract management, cost auditing, and project close-out. He has advised UK Highway Agency, UK National Audit Office and London Metronet Railway on various aspects of the NEC contract. He is currently the NEC Advisor for AAHK’s Three Runway System (3RS) Project which has one of the largest NEC target cost contracts in Hong Kong.
Daniel has been invited to deliver guest lecture/seminar/training at Peking University Law School, PolyU SPEED, HK Institute of Vocational Education (IVE), Hong Kong Institute of Surveyors (HKIS), Royal Institution of Chartered Surveyors (RICS), Hong Kong Institution of Engineers (HKIE), Chartered Institutes of Civil Engineering Surveyors (ICES) and client’s office for project owners and contractors. These cover NEC contract, FIDIC contract and international contract and claims management.

3F, Joyous Hub, The Tanner Hill, North Point: Multi-function Room
North Point MTR Station: ExitB4, cross the road, The Tanner Hill is right at the ally (3 mins walk from MTR station)

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