How to procure a series of work packages using NEC

It is a not unusual for a client to want to procure a series of packages of work – either consultancy or works – over a period of time.

For each package, the client and its supplier need to agree, document and define the three corners of the classic project management triangle:
  • Quality – the project scope and any constraints (working hours, etc.),
  • Time – when it is required
  • Cost – how much the client will pay and how

The triangle can be extended to a tetrahedron with risk allocation – including the events which will allow the supplier extra time and/or money.

In the public and utility sector, the client may be required by procurement regulations to tender separately for each package of work unless the series of work is let under a framework agreement. However this is carried out, clear processes and proper organisational governance are needed.

The flexibility of the NEC family of contracts means there are three main ways to procure a series of packages of work. These include the NEC3 Framework Contract (FC); a modified NEC3 Engineering and Construction Contract (ECC) or NEC3 Professional Service Contract (PSC), with each package let as a new section; and tasks under the NEC3 Term Service Contract (TSC). Each of these is discussed in more detail below.

Using the FC


The FC is hugely flexible. It provides for each work package to be placed as a standalone contract under the terms of one of the other standard NEC contracts. The contract data to the FC will identify the particular NEC contracts that can be chosen.

It is a bi-party contract, so if the employer wants a number of suppliers to call upon then each supplier has a separate FC with the employer, on the same terms. The FC includes the following
  • The ‘framework information’, which sets out how supplier and employer work together
  • Partially completed contract data fixed by the employer for all packages let under each type of contract allowed by the FC
  • In a multi-supplier approach where there are other suppliers able to provide the work, a bespoke ‘selection procedure’ to decide which suppliers are to be invited to tender for the piece of work
  • A process to allow the employer to complete the contract data part one for each specific work package – including relevant works information and site information (ECC) or scope (PSC)
  • Bespoke (and tendered) ‘quotation information’ that the supplier later uses to build up a quotation for the package
  • A process for the employer to accept the quotation and so put the package in place or reject the quotation
Note that the employer cannot impose its own assessment on the supplier. It can accept, ask for a revision or state it will not be issuing the work package. Of course, if it has more thanone supplier bidding, it might place the same package with another supplier.

The FC includes as a special case a ‘time charge order’, which is a consultancy contract under the PSC Option E (time based contract). The employer can use this option for example for some up-front consultancy work to help define the contents of a following work package to be tendered or negotiated.



Using the ECC or PSC


New packages of work could simply be added as compensation events to a starter contract under the ECC (for works) or PSC (for consultancy). However, under ECC and PSC, the project manager and employer respectively can only change the works information and scope. They cannot change the information in the contract data, for example the required completion date for the package.

A solution to the issue was developed in 2000, before publication of the FC, by a neat and short set of Z clauses (Patterson, 2001). This allowed the project manager or employer to issue a special compensation event as a new section of works with certain entries in the contract data being specific to the new section.

For that contract the base main option was C (target contract with activity schedule), but the share ranges and share percentages were required to be defined separately for each section and the contractor’s share was evaluated separately for each section. In this case the packages could use share percentages of
  • 0% – mimicking the effect of the reimbursable (Option E) contracts
  • Standard pain and gain percentages as typically found in an Option C contract
  • 100% – mimicking the financial effect of a lump sum contract
The employer could therefore choose how it wanted to allocate the efficiency risk for each section independently. Certain modifications were needed to the standard conditions to make this work. The contract was modified so that the award of a new section had to be endorsed by the employer.

Using the TSC


The TSC is designed as a contract to provide a physical, as opposed to consultancy, service for a period of time – the service period – rather than to construct a project with a specific date for completion.

It includes a secondary option X19, task order. This allows the employer to ask for a discrete task to be carried out over and above the general service, and it is the use of this option that allows the employer to instruct separate packages of work at any time during the service period. Care must be taken to ensure that this discrete package of work is within the definition of the TSC services.

The task is written in a form that defines a mini-project. It has a scope, a required completion date and may have delay damages for late completion. It is priced based on items in the price list where possible and based on defined cost plus fee where not. It is consulted on by the employer with the contractor before its issue and has an associated task order programme.

It important to note that the standard TSC does not provide all the full resource and risk management for this mini-project task that an ECC contract would for a project.

Some employers are using TSC and its task orders to instruct a series of packages of work. This is the backbone of the model proposed by the UK’s Highways Maintenance Efficiency Programme (www.highwaysefficiency.org.uk) for road maintenance works. This then becomes similar to a single-provider framework contract, but to avoid any conflict with the procurement legislation for publicly funded contracts there has to be an underlying core service.

Pros and cons


Some of the pros and cons of the three options are set out in Table 1 together with how, in principle, the cons might be mitigated. In each case there will be a need: to define quality, cost, time and risk; and to include for appropriate governance over the process of letting a new package.

Summary


NEC provides different ways for employers to let a series of packages. The most appropriate of these is most likely to be the FC, which was expressly designed for this purpose. However, there are other alternatives which may be appropriate in some situations.

Any of the options requires careful consideration and NEC experience to implement properly – especially governance to cover the process of awarding packages.

Reference


Patterson R (2001) Using NEC for multiple site, undefined contracts Proceedings of the Institution of Civil EngineersCivil Engineering May 2001
 
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