NEC4 - What has changed for Professional Consultants 20 ... - What has changed for...English (United Kingdom) 5 NEC3 PSC Professional Services Contract NEC4 PSC Professional Service

NEC4 – WHAT HAS CHANGED FOR PROFESSIONAL CONSULTANTS

20 February 2018

INTRODUCTION TO CHANGES

English (United Kingdom)

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“This new and updated NEC4 Contract embraces the digital changes that are

happening in the construction industry, especially around BIM ...”

Intended to bring PSC more into line with other NEC contracts.

INTRODUCTIONNEC4 PROFESSIONAL SERVICE CONTRACT (PSC)

NEW TERMINOLOGY & KEY CHANGES


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NEC3 PSCProfessional Services Contract

NEC4 PSCProfessional Service Contract

He / his It / Its

Employer Client (except Supply Contract)

Scope Scope

Risk Register Early Warning Register

Risk and Insurance Liabilities and Insurance

Parent Company Guarantee Ultimate holding guarantee (X4)

Partnering Multi-party collaboration (X12)

Adjudicator’s Contract Dispute Resolution Service Contract

TERMINOLOGY CHANGES


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• 11 (11) The Parties are the Client and the Consultant.

And functions previously attributed to Client are now attributed to Service

Manager, e.g.

• 15.1 The Consultant and the Service Manager give an early warning ...

• 15.2 The Service Manager prepares a first Early Warning Register

• 10.1 The Parties and the Service Manager shall act as stated in this contract.

• 10.2 The Parties and the Service Manager act in a spirit of mutual trust and co-

operation.

OTHER CHANGES : SERVICE MANAGER


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• Service Manager now discharges functions of Client (formerly Employer)

• 40.1/40.2 - Consultant operates a quality management system which complies

with the Scope and provides the Service Manager with a quality policy statement

and quality plan for acceptance.

• New to 40.2: “A reason for not accepting a quality policy statement or quality

plan is that it does not allow the Consultant to Provide the Service”.

• 41 – Correcting Defects

• 42 – Accepting Defects (New)

OTHER CHANGES : QUALITY MANAGEMENT


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• Consultant indemnity (old 80.1) deleted.

• Replaced by

• 80 - Client’s Liabilities

• 81 - Consultant’s Liabilities

• 82 –

– 82.1 and 82.2 – Costs which either Party has paid or will pay (to Others, in the case of

the Consultant) as a result of an event for which the other Party is liable is paid by

that other Party

– 83.3 – Contributory negligence and similar defences preserved (for each Party)

LIABILITIES AND INSURANCE (CLAUSE 8)


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• 83.1 Client provides insurances (if any) as stated in Contract Data

• 83.3 New wording for Consultant PL cover:

• “Loss of or damage to property and liability for bodily injury to or death of a person (not

an employee of the Consultant) arising from or in connection with the Consultant

providing the Service”.

• Minimum amount of cover: “The amount of cover stated in the Contract Data for any one

event with cross liability so that the insurance applies to the Parties separately”. (New)

LIABILITIES AND INSURANCE


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• 84 – Insurance Policies: Consultant required to provide certificates signed

by the Consultant’s insurer or insurance broker.

• 85 – Default provision: If the Consultant does not provide a certificate,

the Client may insure that risk, and recover cost from the Consultant.

• 86 – Insurance by the Client

LIABILITIES AND INSURANCE


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Clause 87 - Cap on liability – as stated in Contract Data, subject to excluded matters:

• delay damages (if applicable – x7)

• consultant’s share if option C applies

• infringement “of the rights of Others”

• loss or damage to TPP and death or bodily injury to third parties (not employees).

Option X18 – If stated in Contract Data, caps may be applied to:

18.2 – Indirect or consequential loss

18.3 – Liability for Defects that are not found until after the defects date

18.4 – Liability for a matter unless details are notified to the Consultant before the

“end of liability date.”

LIMITATION OF LIABILITY


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Option X8: - Collateral Warranties are now “undertakings to Others”

- the form is set out in the Scope

- the Client sends the “undertaking to the Consultant, who must sign

and return within three weeks.

- no provision of Third Party Rights schedule

Option X9: - No change: If used, Consultant’s copyright vests in the Client.

OTHER CHANGES


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X10 – Information Execution Plan (X10. 4)

- Project Information

- Information Model and Information Model Requirements

- Information Providers

X10.2 – Collaboration between the Consultant and other Information Providers.

X10.3 – The Consultant and the Service Manager give an early warning of any matter which could adversely

effect the creation or use of the Information Model.

X10.6 – The Client owns the Information Model and the Consultant’s rights over Project Information except as

stated in the Information Model Requirements.

X10.7 – Consultant is only liable if it has not used skill and care in providing its Project Information.

OTHER CHANGES: INFORMATION MODELLING


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• Clause 5: Updated payment procedures, including provision for the

Service Manager to make an assessment of the final amount due, and to

clarify any final payment that is due.

• Clause 6: Compensation Events

• New exceptions to 60.1 (1) – Client instructed change of scope

• New compensation events

– 60.1 (9) An event which is a Client Liability

– 60.2 (13) Correction of Defect for which the Consultant is not liable

– 60.1 (14) Service Manager gives an instruction to correct information

provided by Client

– 60.1 (15) Notification that a quotation for a proposed instruction is

not accepted

– 60.1 (16) Any additional events stated in Contract Data part one.

PAYMENT PROVISIONS AND COMPENSATION EVENTS


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• Option G now removed

• Only three main Options:

• A – Priced Contract with Activity Schedule

• C – Target Contract – the activity schedule is only used to adjust the

Prices when compensation events occur and subsequently for

calculating the Consultants share after completion.

• E – Cost reimbursable contract (no pricing document/activity schedule)

• New Schedule of Cost Components and Short Schedule of Cost

Components.

MAIN OPTION CLAUSES


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- No major alarms for Consultants and their Professional Indemnity and

other insurers

- Helpful clarification of roles and liabilities of Client and Consultant.

- Introduction of Service Manager

- Updated payment arrangements and costs schedules

- Z clauses still likely!

SUMMARY

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NEC4 – ENGINEERING & CONSTRUCTION CONTRACT

What has changed for the project manager?


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NEC3 NEC4

He / his It / Its

Employer Client (except Supply Contract)

Works Information Scope

Risk Register Early Warning Register

Risk and Insurance Liabilities and Insurance

Parent Company Guarantee Ultimate holding guarantee (X4)

Partnering Multi-party collaboration (X12)

Adjudicator’s Contract Dispute Resolution Service Contract

TERMINOLOGY CHANGES


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INTRODUCTION

Contract Set-Up / Early Contract

• Early Contractor Involvement

• Early Warning Register

• Scope (drafting points)

Administering the Contract

• Deemed Acceptance

• Programmes

• Payment

• Quality Management

• Compensation Events

End of Contract / Dispute

• Final Assessment

• Dispute Avoidance

SECTION 1: GENERAL


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• The Scope may now specify the use of a particular communication

system. PM to ensure it follows any specified system.

• In relation to Contractor communications to be accepted by the PM, if

the PM does not accept it now has to state the reasons ‘in sufficient

detail to enable the Contractor to correct the matter’.

• If the PM or the Supervisor delegates an action under clause 14.2, the

notification must now ‘contain the name of the delegate and the details

of the actions being delegated or any cancellation of delegation’.

Communications (Clause 13 & 14)


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The Scope should specify:

• a particular communication system (clause 13.2)

• the form of programme to be used (clause 31.2)

• requirements for the quality management system (clause 40.1)

Scope


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• PM prepares the Early Warning Register (first within 1 week of the

starting date). See clause 11.2(8) for definition of EWR.

• First Early Warning Meeting held within 2 weeks of the starting date

• Subsequent Early Warning Meetings must be held regularly at ‘no longer

interval’ than stated in the Contract Data

• After each meeting, the PM updates the Early Warning Register to record

any decisions made at the meeting and re-issues within one week

• More generally, early warnings should be given by the Contractor and the

PM of any matter that may increase the Contractor’s total cost.

Early Warning (Clause 15)


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• New clause 16 introduces a value engineering mechanism into the core

clauses.

• The Contractor may make a proposal to change the Scope to make a

saving. The PM has to liaise with the Contractor and the Client about this

and respond within 4 weeks.

• The PM can give any reason for not accepting the proposal.

• In Options A & B there is an incentive for the Contractor to make such

proposals (clause 63.12). The Contractor’s share of the cost saving is

calculated by reference to the “value engineering percentage” stated in

the Contract Data.

Contractor’s Proposals(Clause 16)

SECTION 2: CONTRACTOR’S MAIN RESPONSIBILITIES


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• Appointment of a sub-contractor is now subject to the PM

accepting both the sub-contractor and the sub-contract

documents unless:

– The proposed sub-contract is an NEC Contract which has

not been amended other than in accordance with the

additional conditions of contract or

– The PM has agreed no submission is required

PM needs to be aware of amendments to proposed sub-contract

Sub-contracting (Clause 26)

SECTION 3: TIME


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PROGRAMME

• If a

programme is

not identified

in the Contract

Data, the

Contractor

submits a first

programme to

the PM within

the period

stated in the

Contract Data

• Within 2 weeks

of submission

the PM notifies

the Contractor

of acceptance

or reasons why

it is not

accepted.

• If the PM does

not notify

acceptance or

non-

acceptance

within time

allowed,

Contractor can

notify PM of

failure

• If the PM still

fails to

respond for a

further 1 week

after

notification,

the

programme is

deemed

accepted.

• The consequences

of the Contractor

failing to submit

an acceptable

programme remain

the same – money

deducted from

interim payments.

No programme?

Deemed acceptance

Contractor to notify failure

PM’s Response

Submission


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• Either party (Contractor or PM) can now propose acceleration

• Re-draft of clause so that a general agreement is now reached between

the PM and the Contractor in relation to acceleration in principle (rather

than PM instructing a quote to be provided only to find that the

Contractor does not want to accelerate)

• New timescale - the Contractor has three weeks to provide a quotation

and the PM must reply within a further three weeks

Acceleration (Clause 36)

SECTION 4: QUALITY MANAGEMENT


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• New requirement in ECC (reflects the Professional Services Contract)

• Contractor must maintain quality management system stipulated in Scope

• Contractor provides the PM with (1) a quality policy statement; (2) a

quality plan (within the time stated in the Contract Data) for acceptance

• If Contactor fails to comply with the quality plan, the PM can instruct it

to do so. This instruction would not be a compensation event.

Quality Management (Clause 40)

SECTION 5: PAYMENT


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• Application for payment is a must (clause 50.2 & 50.4)

• If no application, the sum due is the lesser of:

– the amount the PM assesses as due; and

– The amount due at the previous assessment.

(opportunity for a negative assessment by the PM)

• Certainty of Defined Cost – clause 50.9 – see flow chart

– Rolling process of review and verification

– Significant point for PM

PAYMENT


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Certainty of Defined CostCLAUSE 50.9 OPTIONS C - F

• Contractor

decides when

Defined Cost is

ready to be

submitted

• Contractor

notifies PM

when each

part has been

finalised and

make records

available for

PM’s review

• PM take lead

in reviewing

• PM can accept

the costs,

request more

detail or notify

errors

• PM must

respond within

13 weeks of

submission

• Contractor

required to

submit any

further

information

required

within 4 weeks

or PMs

request.

• PM has a

further 4

weeks to

review and can

either: accept

costs as

correct, or

notify the

Contractor of

the correct

assessment of

that part of

Defined Cost.

• If the PM fails to

respond within the

time stated, the

Contractor’s

assessment will be

treated as correct.

Treated as correct

Further review by PM

Re-submission by Contractor

Review by PMSubmission by Contractor


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Finality of assessments(CLAUSE 53) – New full provision

• The PM assesses and

certifies a final

payment, if due, within

a specified period

following issue of the

Defects Certificate or

termination certificate

• The Contractor may

issue its own

assessment of the final

amount due if the PM

fails to do so within

the required time

period

• The assessment is

conclusive as to the

final amount due

unless either party

invokes the dispute

resolution procedures

in clause 53.3 within

the required

timescales.

CONCLUSIVITYCONTRACTOR ASSESSMENT

PM ASSESSMENT


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Schedule of Cost Components & Fee:

• All contracts include SCC – used to assess Defined Cost

• SSCC removed from main options C, D & E (just one SSC)

• Subcontractors – Defined Cost is cost paid, not actual cost

• Working Areas Overhead removed and items paid as Defined

Cost

• SSCC used in main options A&B and adopts pre-priced

approach for people. People overhead removed

• Only one fee percentage (sub-contracted fee percentage has

been scrapped)

PAYMENT

SECTION 6: COMPENSATION EVENTS


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• New CEs:

– payment for producing quotations that are not instructed

(clause 60.1(20)) – the PM will need to assess the cost of

this work;

– additional CEs can be listed in Contract Data (clause

60.1(21))

COMPENSATION EVENTS


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• Notifying CEs – 1 communication (not 2)

• Introduction of ‘dividing date’ (clause 63.1)

– date on which forecast Defined Cost switches to

actual DC

– Programme for assessing delay is that which is

current on the dividing date

• Proposed instructions – consolidated in clause 65

Compensation Events

RESOLVING AND AVOIDING DISPUTES


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• Options - W1 and W2 remain but with amendments, new Option W3

– W1 (Construction Act does not apply) – Senior Reps, adjudication,

tribunal

– W2 (Construction Act does apply) – Senior Reps and/or adjudication,

tribunal

– W3 (Construction Act does not apply) – Dispute Avoidance Board (DAB),

tribunal

PM will be the party who briefs the Senior Reps or the Dispute Avoidance

Board and who will need to effect any decisions made

Resolving and Avoiding Disputes


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• New Option W3 in the ECC only, to appoint a standing Dispute Avoidance

Board (DAB) as an alternative to adjudication.

• This is primarily designed for use on major international projects where

dispute adjudication boards and increasingly, dispute avoidance boards,

are a common feature.

• The DAB consists of 1 or 3 members who are appointed at the start of the

project.

• The DAB makes regular visits to the project site so that it is familiar with

the project before a dispute arises.

Resolving and Avoiding Disputes Dispute Avoidance Board (DAB)


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• If the parties are not able to settle the potential dispute with the DAB’s

help, the DAB provides a non-binding recommendation for resolving it.

• The DAB process is mandatory if option W3 is selected. A dispute cannot

be referred to the tribunal (courts or arbitration) for final determination

unless it has first been referred to the DAB.

• The parties may accept the recommendation of the DAB. Alternatively, if

either party is dissatisfied with the recommendation, it must give notice

of intention to refer the dispute to the tribunal within four weeks of the

date the DAB notifies its recommendation.

Resolving and Avoiding Disputes Dispute Avoidance Board (DAB)

SECONDARY OPTION CLAUSES


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New secondary option X22 – introduces ECI for Options C&E of EEC

Benefits perceived as:

• Reducing tender costs

• Shorter project timescales

• Allowing early identification, management / mitigation, allocation and

pricing of risks

• Encouraging collaboration across project team

• Enabling client to retain control of project during early stages

Where this secondary option is selected, it will have a significant impact on

the role of the PM at procurement stage.

Early Contractor Involvement

SUMMARY OF CHANGES


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There should be no fundamental issues with clients moving from NEC3 to

NEC4.

However, the areas that will continue to cause difficulty are:

The Project Manager not operating the contract mechanisms properly - The

PM has a central role in administering the ECC and it is critical that the PM

understands the NEC philosophy and has the skills and resources to fulfil the

duties required. PMs need to ensure they are fully familiar with the changes

(some timescales which could cause issues).

Incomplete or inaccurate Scope - It is critical that the Scope is complete and

accurate, especially since the Contract does not address how inadequacies

(as opposed to ambiguities / inconsistencies) in the Scope are to be handled

Summary


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KENNEDYS - GLOBAL


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CONSTRUCTION CONTACTS

Sarah MaylorPartner

Sheffield & London

T: +44 114 253 2050

M: +44 7584 471 888

E: [email protected]

James ShawPartner

London

T: +44 20 7667 9275

M: +44 7775 918 438


Helen JohnsonSenior Associate

Sheffield

T: +44 114 253 2052

M: +44 7584 471 889


Documents

NEC4 - What has changed for Professional Consultants 20 ... - What has changed for...English (United Kingdom) 5 NEC3 PSC Professional Services Contract NEC4 PSC Professional Service