Option D - target contract with bill of quantities – again, a cost plus contract subject to a pain/gain share mechanism by reference to an agreed target cost (built up from a bill of quantities). a b Garrett, A., NEC4 - Facilities Management – more contracts, published 18 July 2021, accessed 12 September 2022 The application will contain a breakdown of the contractors’ cumulative “defined cost” plus fee minus any “disallowed cost”. This combined is known as the “Price for Work Done to Date” (PWDD). The sum due to the Contractor in each assessment period is the Price for Work Done to Date which under Option A is defined at 11.2 (27): Although this contract is often referred to as “Cost Plus,” contractors should not get complacent and think Option E means a blank chequebook for works. The terms within the contract should set out clearly what is and isn’t to be reimbursed to the contractor.

The use of the NEC3 family of contracts ensured that most problems were solved when they occurred, rather than ending up in the courts at the end of the process." - Sir John Armitt - Olympic delivery Authority So far in this article we have used two types of terminology, activity schedule and Activity Schedule. The former is the original tendered activity schedule (as included in the Contract Data Part 2), the latter is that original schedule “changed in accordance with this contract” (see clause 11.2(20)). Clause 60.6 mistakes in the Bill of Quantities: The Project Manager gives an instruction to correct mistakes in the Bill of Quantities that are either departures from rules for item descriptions in the method of measurement, or due to ambiguities/inconsistencies with any other contract document. Any such correction will be a compensation event, which can result in either an increase or decrease to the Prices. For items which contain multiple elements of work built into a singular rate, it can be difficult to assess the % of work complete.

Early Contractor Involvement (ECI)

Firstly, I will outline the two different methods to pricing variations before considering the implications of the distinction and the problems each gives rise to. Short Schedule of Cost Components: This is only used under option B to assess compensation events so is slightly more condensed than the full schedule which is used for option D. It is made up of eight categories that the Contractor would be able to claim relevant costs for when assessing a compensation event quotation: If the Contractor changes a planned method of working at his discretion so that the activities on the Activity Schedule do not relate to the operations on the Accepted Programme, he submits a revision of the Activity Schedule to the Project Manager for acceptance. A contractor should look to apportion the price for the design services against specific activities within the Activity Schedule. This is an abbreviated version of the ECC contract and most suitable when the contract is considered "low risk" (not necessarily low value) on a project with little change expected. This contract is still between the employer and contractor but does not use all of the processes of the ECC making it simpler and easier to manage and administer.

NEC, Additional public sector Z clauses required to comply with the requirements of The Public Contracts Regulations 2015, accessed 10 January 2023

The Price for Work Done to Date is the total Defined Cost which the Project Manager forecasts will have been paid by the Contractor before the next assessment date plus the Fee. If an element of the works is incapable of being accurately specified at the outset then it should be described in as much detail as possible in the technical documentation (i.e. the Works Information) together with appropriate assumptions and priced accordingly. Plant and Materials – for all permanent works that are installed such as pipework, cladding, cabling etc flexibility: NEC3 can be constructed from nine sections of core clauses, six main options, two dispute resolution options and seventeen secondary options. This flexible approach is intended to avoid the need for lots of bespoke amendments, reduce the need for lengthy negotiation and also reduce the potential for disputes. However, in practice most of NEC3 contracts include considerable bespoke amendments – known as the 'Z' clauses as they form part of Option Z under the contract.

A contractor can only be entitled to be paid for unfixed materials or fabricated items if the Activity Schedule contains specific activities for their delivery. Works that require immediate attention and cannot be defined at the project outset may benefit from a fast contract agreement. Disallowed Cost is a cost which the Project Manager decides falls within the categories of Disallowed Cost in the contract. These include, for example, cost not justified by accounts and records, cost that should not have been paid in accordance with the terms of the Contractor’s subcontracts, cost incurred in preparation for and conduct of dispute proceedings and the cost of plant and materials not used to provide the works. The purpose of this guide is to help users implement an early contractor involvement (ECI) approach using the NEC3 Engineering and Construction Contract (ECC). This document also provides a model clause and guidance to allow for ECI using the ECC.The Activity Schedule is instead used to assess the Contractor’s share (pursuant to clause 53) by comparing the finally adjusted Activity Schedule (the target) to the final Price for Work Done to Date. Errors in the Activity Schedule Option F - management contract - the Contractor is paid the cost that it pays its subcontractors plus a fee. Evans, S. C., NEC3 compensation events: a practical guide, published April 2013, accessed 13 June 2023