NEC - ECC 3rd Edition

The Engineering and Construction Contract has been in its second edition since 1995.

For some time now a third edition has been on the drawing board with a proposed release date of May/June 2005. At the time of writing a release date has still not been fixed but it is hoped that the release will still be this summer.

Notwithstanding the delays to publication certain key changes between the second and third additions are known to be proposed and I have set these out below.

1.  Option D - Target Cost with Bills of Quantities

The way in which measurement of the variations of quantities was to be measured is considered to be unclear. The third edition will now strive to clarify exactly how the measurement or re-measurement of variations to quantities is to be carried out.

It is perhaps worth remembering that currently the bills of quantities are a tool for tender purposes with the works and variations being based on the schedule of costs to allow the calculation of "actual costs". In many circumstances it may in fact be better to use the bills of quantities for valuation purposes with the "actual costs" being used for compensation events (variations) and the target cost calculations. Clearly whichever method is used for the interim valuations both parties will need to be in agreement and the agreed mechanism reflected within the contract.

2.  Key dates

The Employer may have key dates that he wishes the Contractor to conform to. The proposal is that should these key dates not be met then a payment will become due to the Employer. The key dates are envisaged as being for the Employer to obtain access to parts of the site for a trade to carry out particular works that are outside the remit of the Contractor's Works.

3.  Extended defects period

The defects correction period with the ECC is usually a short period of between two to four weeks. This means that when a defect is notified to the Contractor he is expected to correct the defect within the stated period. Whilst it is also true that the defects period is also given (usually between six and eighteen months) this does not allow the Contractor to simply put right the defects at the end of that period but is rather a longstop period within which defects are to be notified and corrected within the shorter period for defects correction starting from the date of notification. This has the potential for the Contractor to be in breach of contract for failure to correct the defect within the sated period even though he has been unable to obtain access to the site to correct the defect.

It is now proposed that to overcome this potential difficulty the defects correction period will only start when the Contractor has been afforded access to the site to carry out the defects correction.

4.  Separate fees for sub-contract work

Currently the Contractor's fees are based on the value of the main contract and sub-contract works together. It is thought that this puts a greater risk upon the Contractor's shoulders, which results in an increased fee percentage being applied. The third edition will separate the fees of both the main contract and sub-contract works allowing the risk to be spread and it is hoped to reduce the fee level overall.

5.  Unforeseen events

A nineteenth compensation event is to be added to the third edition. This will be for an unforeseen event, which could not have been anticipated by either party. This new compensation event will only come into play when the delay caused is in excess of two weeks. It is thought that the risk will be split in that the first two weeks will be at the Contractor's risk with the risk transferring to the Employer once the risk exceeds two weeks.

6.  Compensation events

The second edition has been drafted in a way so that should the two week notification period for compensation events not been adhered to by the Contractor he would have lost his chance to make a claim. In reality the drafting in the second edition did not allow this to be the case with the result that late notification would still result in a compensation event claim being assessed. In extreme cases where neither the Contractor nor the Project manager have performed in accordance with the contract the Contractor would be able to notify of a compensation event even after the Works were complete. This goes against the intention of the contract for the parties to deal with and agree compensation events as the occur or as soon there afterwards as possible.

The third edition will not tighten up the wording so that failure to notify does become a time bar for claiming a compensation event but at the same time the notification period will be extended from two to eight weeks.

7.  Failure by the Contract Manager to react to compensation event notices and quotations

In the event that a Contact Manager does not respond to a compensation event notice or later a quotation for a compensation event the contract does not provide a mechanism to force him to act. This allows the mechanisms for agreeing compensation events to stall without any specific remedy.

To prevent such a stall in the process the third edition will put the Project Manager under a duty to respond to the compensation event notice and the quotation for a compensation event within a two-week period. If the Project Manager fails to respond within the two-week period the notice and quotation will be deemed to have been accepted.

8.  Programme/Method Statements

Under the second edition a Contractor is expected to produce a very detailed programme along with method statements either with his tender or within a set period (normally two weeks) for the Works. In most cases this expectation is unrealistic as it expects the Contractor to produce detailed methodology before he necessarily has a clear idea of how the works should be carried out.

To avoid this problem the third edition will now only require the Contractor to produce the order and timing of the operations for the Works with the detailed statements to follow when the Contractor has a clear understanding of how he is to carry out each operation. This change will not allow the Contractor to put off providing a detailed programme at the beginning of the Works but rather it relieves him of the obligation of detailed method statements for each operation within the Works until he has the necessary information to provide such a detailed method statements.

9.  Adjudication

Two adjudication procedures will now be made available. The existing procedure as set out in Y(UK)2 (now to be called W1) including the Project manager's decision on a difference, and another procedure that closely follows the Procedure set out in the Housing Grants Construction and Regeneration Act 1996 (W2).

10.  Risk Management

Risk management is to be added to the core clauses as a reflection that it is considered to be best practice to manage risk through a risk register.

11.  Contractor's equipment

To avoid unnecessary confusion and complexity the third edition is to now allow Contractor's equipment to be charged at an open market hire rate rather than utilise the complex calculations required by the schedule of cost components. This will be a relief to anybody that has to calculate equipment rates.

12.  Accommodation/Overheads

Confusion as reigned in respect of what accommodation should be encompassed within the working areas overheads. This confusion is to be dealt with in the third edition by removing accommodation from the working areas overheads and more closely defining the working areas.

13.  Conclusion

The proposed changes are more than cosmetic and will, I believe, allow the ECC to be an easier contract to administer which in turn will allow its great flexibility to be utilised by more projects. We will have to await the actual publication of the third edition but based on the details that have been released I am confident that the ECC will continue to be a much needed and useful addition to engineering and construction contracts.