Mott MacDonald - Intro to NEC PSSC for APM - 1 hour - 2022.07.11.pdf

Richard Patterson – Mott MacDonald
Ought to be used more often for many contracts!
An introduction
for the Association of Project Management (APM)
20 July 2022
NEC Contracts Professional
Services Short Contract
(PSSC4)

21/07/2022 c. Mott MacDonald | PSC Contract Management 2
Richard Patterson
BA MBA CEng FICE
Mott MacDonald NEC
Advisory Services
33Years with
Mott MacDonald
26Years with
The NEC
1Year with NEC as
NEC Consultant

NEC PSSC - (c) Mott MacDonald 3
NEC Contracts
Advisory Services
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Richard Patterson – Mott MacDonald
Questions,
please –
in the ‘Chat’

10

• designer (for owner or a contractor)
• ECC Supervisor – quality management
(ECC Section 4); title (ECC section 7)
• ECC Project Manager - everything else
• anything else!
Client may employ a Consultant under PSSC
as:

• NEC PSSC is part of a suite of contracts: the NEC
family
• Drafted for:
• clarity
• flexibility
• stimulate good management
• Unlike any other consultancy contract
• Standard NEC provisions for:
• compensation events
• early warning
• very light on programme
• Significant risks – and potential
benefits for both ‘sides’
NEC contracts are very different

Client’s designer
Client
13
PSC in typical project arrangement
ECC Project Manager
ECC Supervisor
Cost advisor
Contractor
Contractor’s designers
Main Contractor’s
Subcontractors
CDM Principal
Designer
Key:
PSC
ECC
ECS
or
PSSC
or
ECSC
ECSC

14
PSSC vs PSC
• Simpler
• Designed for simple, low risk contracts
• No ‘options’
• Almost all in ‘one document’
• No Service Manager – just Client and Consultant
• Mix of lump sums, quantities and work on a ‘time charge basis’
• No requirements for programme unless required in Scope
• The compensation event process is simpler
• quotation submitted with Consultant notification
• Either Client or Consultant can states assumptions
• no option for Client to ask for revised quotation – so talk!
• no Client response in time? - treated as accepted!

Forming the Contract
What’s in it?

Agenda 1 : Before award
Building up
the
conditions
Preparing
the other
tender
documents

• Significantly simpler than PSC
• Only 15 pages
• No ‘options’ (as we have with PSC)
• delay damages included
• Mix of lump sums, quantities and work on a
‘time charge basis’
conditions of contract
• So, if any lump sums or quantities need
Scope for them well defined at tender

• Last line of Client’s Contract Data:
• ‘The conditions of contract are the NEC4 Professional
Service Short Contract June 2017 (with amendments
January 2019 and October 2020) and the following
additional conditions’
additional conditions
• Need to be drafted with care to ‘fit’ with clear language,
structure and processes of PSSC
• Usually an ‘obvious’ place for any required change to
be made
• Can carefully bring in provisions from PSC – but keep it
simple!
• Worth checking the PSC secondary options – do we
NEED any?

Agenda 1 : Before award
Building up
the
conditions
Preparing
the other
tender
documents

20
PSSC Contract Documents
Contract Data
From Client
conditions of
contract
additional
conditions
Client's Contract Data
Price List
Only the conditions incorporated by ref.
Consultants’ Contract Data
From bidder
requires info.to be stated in
Scope
20
NEC PSSC - (c) Mott MacDonald
The
Consultant’s
Offer
and
Client’s
Acceptance
All set out in ‘one’ document
Suggest add
a link to
Scope and
Price List in
the Contract
Data
Some
clients might
want a short
form of
agreement

Agenda 1 : Preparing the other tender documents
Scope Contract
Data
Risk
allocation
Defined
Cost
Price List

and is either
is information which
either
• specifies and
describes the service
or
• states any constraints
on how the Consultant
Provides the Service
• in the document called
Scope or
• is in an instruction given
in accordance with this
contract
Scope
(11.2(11))

• 20.1 ‘The Consultant Provides the
Service in accordance with the Scope.’
• Several references from the conditions
• 60.1 ‘The following are compensation
events.
• (1) The Client gives an instruction
changing the Scope unless the
change is in order to make a
Defect acceptable.
• 63.8 Consultant gets benefit of
ambiguities
Scope
What does it say on the tin?
If it’s not ‘on the tin’
then the Consultant does
not have to do it.
Simple !

• 11.2(11) Information which
• ‘specifies and describes the service’ or
• states any constraints
• 16.1 ‘The Client provides information and other
things ….by the dates stated in the Scope…..
• 31.1 programmes as stated
• 70.1 ‘The Client has the right to use the material
provided by the Consultant for the purpose stated in
the Scope.’
• 70.3 ‘The Consultant may use the material provided by
it under the contract for other work unless stated
otherwise in the Scope. 24
A check on references from conditions of contract to the Scope:

• 1 Purpose of the service
• 2 Description of the service
• 3 Existing information
• 4 Specifications and standards
• 5 Constraints on how the Consultant
Provides the Service
• 6 Requirements for the programme
• 7 Information and other things provided by
the Client
• Warning – missing here are the required entries
re ‘rights to material’
The document includes guidance on completing the Scope

Scope Contract
Data
Risk
allocation
Defined
Cost
Price List

Contract Data
• lists all identified terms –
in italics
• Does NOT point to Scope
or Price List - odd
• Only:
• three pages for
’Client’s Contract
Data’ and
• one page for
‘Consultant’s’
Contract Data’

Scope Contract
Data
Risk
allocation
Defined
Cost
Price List

Payment – Prices and Price List
• 11.2 (9) The Prices are the amounts stated in the Price
column of the Price List. Where a quantity is stated for
an item in the Price List, the Price is calculated by
multiplying the quantity by the rate.

Payment – Prices and Price List
• Client can chose which items have ‘unit, quantity and rate’ – for
which the Client takes the quantity risk
• Other items can be lump sums – Consultant takes quantity risk
• May want Bidder to be required to enter lump sum items (as for
ECC option A) – explain in the Instructions to Tenderers
• Price List calls for ‘The method and rules used to compile the
Price List are: XXXXXXX’
• Corrections of mistakes is a compensation event

Price lists in NEC short contracts and how
clients can simply the process
NEC Newsletter, July 2021, and NEC
website
31
Mott MacDonald | ECSC Introduction

Payment – Price for Services Provided to Date
• 50.3 ‘…. The amount due….is:
• the Price for each lump sum in the Price List which the
Consultant has completed,
• where a quantity is stated ……an amount calculated by
multiplying the quantity which the Consultant has completed by
the rate,
• for work carried out on a time charge basis, the time expended
on work which has been completed multiplied by the
appropriate People Rates plus the Fee,
• the amount of the expenses stated in the Price List,
• plus other amounts to be paid to the Consultant,
• less amounts to be paid by or retained from the Consultant.
There is none!
Only mention in
the contract!–
will need to state
in the Scope
what is to be ‘on
a time charge
basis’

Work done on a time charge basis
• 50.3 allows both Prices AND ‘work done on a time charge
basis’.
• This is the only mention of ‘work done on a time charge basis’.
• But the guidance on Price List includes:
• ‘The contract does not provide for the Consultant to be paid on a
mixture of time charge and Prices and one or the other must be
selected.’
• But I do not see why!
• Just need to be clear in the Scope
• And for Consultant to keep records – timesheets!

Super- flexible!
lump sums
quantities with
rates
‘time charge
basis’
Or any combination of the above!

Price List
ITEM
NUMBER
DESCRIPTION UNIT EXPECTED
QUANTITY
RATE PRICE
(£)
1 Bridge survey
report
No 6 100 600
2 Summary report Sum - - 100
total of the Prices 700
expenses (if any are allowed
by Client – may be
stated as ‘at cost’)
Who is completing the
Price List?
method and rules used
to compile the Price List

Scope Contract
Data
Risk
allocation
Defined
Cost
Price List

• For any priced work
• efficiency risk is with the Consultant
• For items with a quantity in the Price List
• quantity risk is with the Client
• For any work on a ‘time charge basis’
• efficiency risk is with the Client
• No secondary options so risk allocation – eg:
• No PSC X1 Price adjustment for inflation
• inflation risk with the Consultant
• No PSC X2 Change in law
• risk with the Consultant
• But for specific events…………
Risk allocation

The compensation events - principle
• compensation events are
events which, if they occur, and
do not arise from the Consultant’s
fault, entitle the Consultant to be
compensated for any effect the
event has on the Prices, and the
Completion Date
• Key to risk allocation and
management under PSSC

• 8 in subclause 60.1 • Might need additional
conditions to modify
risk profile by adding
to, changing or
deleting compensation
events
PSSC compensation events
Where?
• possible ‘assumptions’
stated in the Scope
• No – ‘additional
compensation events in
Client’s Contract Data’
(as PSC4) – but would
be an easy additional
condition

change is in order to make a Defect
acceptable.
• (2) The Client does not provide
something which it is to provide by the
date stated in the contract.
• (3) The Client gives an instruction to
stop or not to start any work.
• (4) The Client does not work within
the conditions stated in the Scope.
• (5) The Client does not reply to a
communication from the Consultant
within the period required by the
contract.
• (6) The Client changes a decision
which it has previously communicated
to the Consultant.
• (7) Either Party notifies the other of a
correction to an assumption made for
the assessment of a compensation
event.
correct a mistake in the Price List.
What?
60.1
No ‘claims’; no ‘Variations’ – just
compensation events

forecast
outturn
cost
(or ‘period of
contract’ or
‘requirements’)
base
risk
time
feasibility, outline design, detailed design, construction
award
of
contract
client’s risk
Consultant’s risk
‘total of the Prices’
Need to ensure that compensation
events in contract reflect those risks
that Client wishes to retain
Risk allocation
41

Subtitle
Scope Contract
Data
Risk
allocation
Defined
Cost
Price List

Defined Cost (11.2(5))
• Used only as part of the assessment of
compensation events: Defined Cost + Fee
• No ‘Schedule of Cost Components’ (as PSC)

Defined Cost (11.2(5))
Simply:
• People employed directly or indirectly by the
Consultant: People Rates times the time
appropriate to that rate.
• The People Rates are the people rates (in the
Consultant's Contract Data) ……
• Work subcontracted by the Consultant, the
amount paid by the Consultant to the
subcontractor.

47
1 General
2 Consultant’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Rights to
material
8 Liabilities
and insurance
Agenda 2 – Managing the contract

48
subcontractor
Adjudicator
Client's
delegate
(14.5)
Dispute Resolution
Services Contract
PSSC +
Client Consultant
PSSC
People involved
PSSC

Key management roles
Client / Consultant
• 1 changes to the Scope
• 1 early warning
• 2 design acceptance
• 2 subcontractor acceptance
• 3 programme acceptance
• 5 payment assessment
• 6 compensation events (including change management)
programme only as stated in the Scope

RT_C
Read the _ contract
10.1 The Parties shall act as
stated in this contract.
10.2 The Parties act in a
spirit of mutual trust and
co-operation.
DWISIT_C
_TalTEO
Do what it says in
the _ contract
_ talk (and listen) to
each other

21/07/2022 Mott MacDonald | Presentation 51
1
3
2
in a form that can
be read, copied &
recorded (13.1)
‘notifications
‘communicated
separately - missing –
but good practice!
replies within period
for reply unless
otherwise stated in
these conditions of
contract (13.2)
Communications
4
NEED A SYSTEM!
• forms – basic
versions on
www.neccontract.com
• bespoke IT systems
available – CEMAR,
CCM, others - we
know them!

The Client’s
acceptance of a
communication
….or acceptance of the
work does not change
the Consultant’s
responsibility to
Provide the Service or
liability for its
design.(14.4)
The Client may
give an
instruction…..
which changes
the Scope.
(14.2)
Client may
delegate any
of their actions
(14.5)
Key
general
clauses

• vital part of all NEC contracts – reciprocal obligations to
both notify and solve
• Consultant and Client notify an early warning… aware of a
matter which could
– increase the total of the Prices
– delay Completion,
– impair the usefulness of the service to the Client or
– affect the work of the Client or others with whom the
Client is in contract.
early warning (CI 15)

• (15.2) The Consultant and the Client co-operate in making and
considering proposals for how the effect of each matter which has
been notified as an early warning can be avoided or reduced and
deciding and recording actions to be taken.
Early warning
• No formal ‘Early Warning
Register’ or early warning
meetings (as PSC4) – but both
will make sense!
• No commercial ‘teeth’ as in
PSC 63.7

Early warning
• Encourages collaboration and
proactive risk management
• Properly managed, it will also help
– management of risk
– management of change and
– processing of compensation events

56
1 General
2 Consultant’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Rights to
material
8 Liabilities
and insurance

Provide the Service
20.1
‘The Consultant
Provides the
Service in
accordance with
the Scope’
20.2
The Consultant’s obligation
is to use the skill and care
normally used by
professionals providing
services similar to the
service.
As PSC, there are
no words about eg
design
submissions,
reasons for not
acceptance,
whether design can
be in parts etc.
All that will need to
be in Scope

Subcontracting and people
‘subcontractor’ not defined – and no process to ask for acceptance
21.1
If it subcontracts, Consultant still responsible for Providing the Service
21.2
The Consultant either uses each key person named to do the job stated in
the Contract Data or seeks acceptance of a replacement

59
1 General
2 Consultant’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Rights to
material
8 Liabilities
and insurance

The PSSC has no programme requirements only:
• 30.2 The Consultant submits a forecast of the date of
Completion to the Client each week from the starting date until
Completion.
• 31.1 The Consultant submits programmes to the Client as
stated in the Scope.
• Might use some of the PSC requirements?

Obligations
11.2(1)
Completion is when the
Consultant has completed
the service in accordance
with the Scope except for
correcting notified Defects
which do not prevent the
Client from using the
service or others from
doing their work.
30.1
The Consultant does
not start work until
the starting date and
does the work so
that Completion is
on or before the
Completion Date.
30.3
The Client decides
the date of
Completion and
certifies it to the
Consultant within
one week of the
date.
61

Completion
Date
completion
date
forecast of the date
of Completion
date of
Completion
defects
date
starting
date
All dates in italics identified in
Contract Data
Consultant
has risks
and so
provides
insurances
(83.3)
obligation to achieve
Completion (as
modified by
compensation events
and accepted Defects
(42.1) only
As updated weekly by
Consultant (30.2)
in Client’s Contract
Data
actual date that
Completion (11.2(1))
achieved, certified
(30.3))
last date to notify Defects (40.1)
‘Completion’ is a state, not a
date
62
Dates in PSSC
No ‘Key Dates’ or ‘section Completion’ (option X5)
as PSC– just Completion Date for the ‘service’

• Completion Date can only
be changed as a result of
• one of the stated
compensation events
or
• acceptance of a Defect
(42.1)
• A delay to the
Completion Date is
assessed as the length
of time that, due to the
compensation event,
Completion is forecast to
be delayed (63.6)
Changes to Completion Date
Even if programme is not required, it is critical for
Consultant to be able to show entitlement to
delays to the Completion Date
No process for ‘acceleration’ (ie bringing Completion
Date forward)

64
1 General
2 Consultant’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Rights to
material
8 Liabilities
and insurance

• 40.1 The Client may notify a Defect to the
Consultant at any time before the defects date.
• 40.2 At Completion, the Consultant notifies the Client
of the Defects which have not been corrected.
• 41.2 The Consultant corrects Defects within a time
which minimises the adverse effect on the Client or
others who are using the service.
• 42.1 Can do a deal to accept a Defect for a change
to the Prices and/or an earlier Completion Date.
• 43.1 If the Consultant has not corrected a notified
Defect within the time required by the contract, the
Client assesses the cost of having the Defect
corrected by other people and the Consultant pays
this amount.
Defects

66
1 General
2 Consultant’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Rights to
material
8 Liabilities
and insurance

• There is no Price for Services
Provided to Date (PSPD) (as PSC)
• Only ‘amount due’ (50.3)
• ‘Defined Cost’ for compensation
events only
Payment ‘Prices’
‘amount
due’
time
amount

Payment - Prices
• 11.2 (9) The Prices are the amounts stated in
the Price column of the Price List. Where a
quantity is stated for an item in the Price List,
the Price is calculated by multiplying the
quantity by the rate.

Payment – Price for Services Provided to Date
• 50.3 ‘…. The amount due….is:
• the Price for each lump sum in the Price List which the Consultant
has completed,
• where a quantity is stated ……an amount calculated by multiplying
the quantity which the Consultant has completed by the rate,
• for work carried out on a time charge basis, the time expended on
work which has been completed multiplied by the appropriate
People Rates plus the Fee,
• the amount of the expenses stated in the Price List …..
• plus other amounts to be paid to the Consultant,
• less amounts to be paid by or retained from the Consultant.
There is none!

• Price List includes: ‘The method and rules
used to compile the Price List are: …………….
Simple …. but
• 14.3 ‘The Client gives an instruction to correct
a mistake in the Price List which is
• a departure from the method and rules
stated in the Price List and used to compile
it or
• due to an ambiguity or inconsistency.’
• 60.1(8) compensation event:
• The Client gives an instruction to correct a
mistake in the Price List.
• So ‘correctness’ of Price List is a Client risk

Payment – assessment (50)
• The Consultant assesses the amount due
and submits an invoice to the Client for
payment before each assessment day.
(50.1)
• No application? No extra compared with last
assessment day (50.4)

Payment – assessment (50)
• Client can ‘correct the amount due and give
details of how the corrected amount has been
calculated …...’ (50.5)
• delay damages (50.6)

73
1 General
2 Consultant’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Rights to
material
8 Liabilities
and insurance

compensation events
Where are they?
No ‘claims’; no
‘Variations’ – just
compensation
events
60.1
(1-8)
additional
conditions
of
contract
assumptions
in
the
Scope

change is in order to make a Defect
acceptable.
• (2) The Client does not provide
something which it is to provide by the
date stated in the contract.
stop or not to start any work.
• (4) The Client does not work within
the conditions stated in the Scope.
• (5) The Client does not reply to a
communication from the Consultant
within the period required by the
contract.
• (6) The Client changes a decision
which it has previously communicated
to the Consultant.
• (7) Either Party notifies the other of a
correction to an assumption made for
the assessment of a compensation
event.
correct a mistake in the Price List.
What?
60.1
No ‘claims’; no ‘Variations’ – just
compensation events

76
assumptions
63.10
Assessments
are not
revisited
63.7
Assessment includes
risk allowances for cost
and time for matters
which have a significant
chance of occurring and
are not compensation
events
62.1
62.5
The Consultant or Client
may state assumptions
when assessing (not only
Service Manager as
PSC).
60.1(7)
Either Party (not
only Service
Manager as PSC)
notifies ….a
correction to an
assumption. That
is a new CE.
_ TALTEO!

Assessing compensation events - money
• 63.1 IF…. ‘only affects the quantities of work shown in the
Price List, the change to the Prices is ….multiplying the
changed quantities of work by the appropriate rates in the
Price List.
• Other compensation events (63.2):
• the actual Defined Cost of the work already done,
• the forecast Defined Cost of the work not yet done and
• the resulting Fee.
• (no formal ‘dividing date’ as PSC4 but ‘logically’ the date of
notification)
• 63.3 may agree ‘rates or lump’ sums to assess the change to
the Prices.

Assessing compensation events - money
• 63.4The effects of compensation events upon the Defined
Cost are calculated using
• rates and percentages stated in the Contract Data and
• other amounts at open market or competitively
tendered prices
• with deductions for all discounts, rebates and taxes
which can be recovered.
• 63.5 If…….People Rates do not include a rate for a category
of person required, the Client and Consultant may agree a
new rate. If they do not agree the Client assesses the rate
based on the People Rates.

Assessing compensation events
• 63.6 ‘A delay to the Completion Date is assessed as the
length of time that, due to the compensation event,
Completion is forecast to be delayed..
• (No rules, no reference to programme that only MIGHT be
required)
• 63.7 risk allowance, Consultant reacts ‘competently’
• 63.8 ambiguity in Scope? Consultant wins!
• 63.9 In the form of changes to the Price List – need to agree
how to allocate any quantity risk?
• 63.10 If Client acceptance, treated as accepted, or Client’s
assessment then ‘not revised except as stated. (Same as
‘implemented’ in PSC)

80
ECC compensation events – key clauses – PSSC
Eg change to Scope Eg late response
Client Consultant Consultant
14.2 change to the Scope
61.1 notify compensation event
1 week
61.2 quotation
2 weeks
62.2 reply
61.1 notify
Client
No revise!
< 4 weeks
aware of event
accept
Client assessment
62.1 requirements for quotation
63.1, 63.2 change to Prices
63.6 delay to Completion?
63.7 risk and competently
63.3 rates and prices?
63.9 changes to Price List
63.8 ambiguity
62.1 assumptions
63.4 rates and open market
If ‘arises from fault of Consultant’,
logically say so!
60.1 (1) ie which event?
61.1 instruct quotation
60.1(8) ie which event?
21/07/2022
61.2 submit quotation
with notification
4 reasons for nil
or
63.10 then ‘not revised’
No response form
Client in time
allowed?
‘Treated as accepted’
No quotation from Consultant
within time allowed? Client
assesses within a week of when
Consultant should have
submitted.

81
Prices, £
time
at tender
completion date
changed Prices and
Completion Date due to
compensation events
amount due
‘Incremental certainty?’

82
Separate processes
early
warnings
15
may lead to…
may
lead to
a….
compensation
events
6
other
events
programme
(if required)
31.1
show on (if there is one) …
change to
Scope
14.2
changes
corrections
may be helpful in assessment of
(63.6)
82
delays to Completion Date shown on next

NEC newsletter May 2019
http://www.neccontract.co
m/news/index.asp?Type=
Newsletters#

84
1 General
2 Consultant’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Rights to
material
8 Liabilities
and insurance

• Client has the right to use the material
provided by the Consultant for the
purpose stated in the Scope. (70.1)
• The Consultant has the right to use the
material provided by the Client only to
Provide the Service.
• The Consultant may use the material
provided by it under the contract for other
work unless stated otherwise in the
Scope.
7 Rights to material – all needs to be in the Scope

• 80.1 Client liabilities – oddly in PSSC these are NOT
compensation events
8 Liabilities and insurance
• 81.1 Consultant liabilities:
• Claims and proceedings from the Client and others
and compensation and costs payable to the Client and
others which arise from a failure by the Consultant to
use the skill and care normally used by professionals
providing services similar to the service.
• Death or bodily injury to the employees of the
Consultant.
• 82 Recovery of costs rather than ‘indemnity’ and
proportionate liability.
• 83 Insurance cover

• The Consultant’s total liability to the Client [no
mention of others] which arises under or in connection
with the contract is limited to the amounts stated in
the Contract Data. These liabilities and limits apply in
contract, tort or delict or otherwise to the extent allowed
under the law of the contract.
• There is only one!
84 Limitation of liability – where the Consultant will focus!

88
1 General
2 Consultant’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Rights to
material
8 Liabilities
and insurance

89
The NEC PSSC is a collection of processes to
avoid disputes.
Termination or disputes – get a lawyer!
Disputes

90
Consultant, Client
– sort it out!
Adjudicator
Decision in four weeks from
receiving info
the ‘tribunal’ –
arbitration
or
the courts
(as stated in Contract Data)
Disputes - process
Additional
clause ‘If
the Housing
Grants Act
applies’
No Senior
Representatives
first as PSC – but
one hopes this
would happen

Any queries, please contact:
Richard Patterson
01233 463606
Richard.Patterson@mottmac.con
Thank you

Mott MacDonald - Intro to NEC PSSC for APM - 1 hour - 2022.07.11.pdf

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Mott MacDonald - Intro to NEC PSSC for APM - 1 hour - 2022.07.11.pdf