NEC Engineering and Construction Short Contract (ECSC) webinar

Richard Patterson
NEC and Procurement Specialist
An introduction
for the Association of Project Management (APM)
1 June 2022
NEC – Engineering and
Construction Short
Contract (ECSC)

07/06/2022 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
1 Year with NEC as
NEC Consultant

NEC is developing a few
additional conditions to
suit international use by
NGOs
Watch this space!
10
Mott MacDonald | ECSC Introduction

Agenda 1 : Before award
Building up
the
conditions
Extent of
Contractor
design
Preparing
the other
tender
documents
07/06/2022 Mott MacDonald | ECSC Introduction 11

• Significantly simpler than ECC
• Only 17 pages
• No ‘options’ (as we have with ECC)
• Can have ‘additional conditions of contract’
• But delay damages and retention included
• Priced contract
• So need Scope well defined at tender
conditions of contract

Payment - Prices
• 11.2 (13)
• 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.
• So it’s a mix of lump sums and quantities
• (mix of ECC options A and B)

• Price List includes: ‘The method and rules used to
compile the Price List are: …………….
NEC PSSC - (c) Mott MacDonald 14
Simple …. but
• 14.3 (new to ESCS4) ‘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(12) compensation event:
• The Client gives an instruction to correct a mistake in
the Price List.
• So ‘correctness’ of Price List is a Client risk
• ‘Price lists in NEC short contracts and how clients can simply
the process’

Building up
the
conditions
Extent of
Contractor
design
Preparing
the other
tender
documents

Is the ECSC a ‘design and build contract?’
• 20.1 ‘The Contractor Provides the Works in
accordance with the Scope.
• Prompt in Scope is:
• ‘Give a detailed description of what the
Contractor is required to do and of any work
the Contractor is to design.’

Is the ECSC a ‘design and build contract?’
• The Contractor does not start work which the
Contractor has designed until the Client has
accepted that the design complies with the Scope.
• FULL STOP
• No detail on ‘particulars of design for acceptance’;
no reasons for non-acceptance
• NOT appropriate for significant Contractor design

• Scope: ‘Give a detailed
description of what the
Contractor is required to
do and of any work the
Contractor is to design’
• unaffected by
acceptance of
Client (14.4)
• Type: There is no (ECC)
X15 so ‘fit for purpose’
• Surely unreasonable
• Needs an additional
condition (based on ECC
X15) to limit to ‘reasonable
skill and care’
• Value: for damage to
property – limited in
Contract Data
• No overall limit on liability!
Obligations Responsibility Liability
Contractor design

Building up
the
conditions
Extent of
Contractor
design
Preparing
the other
tender
documents

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

21
07/06/2022
ECSC Contract Documents
Contract Data
From Client
conditions of
contract
additional
conditions
Client's Contract Data
Price List
Site
Information
points to
Contractor's Contract Data
From bidder
requires info.to be stated in
Scope
UK CDM
PCI
factual info
constraints
21
The
Contractor’s
Offer
and
Client’s
Acceptance
All set out in ‘one’ document

and is either
is information which either
• specifies and describes the works or
• states any constraints on how the
Contractor Provides the Works
• in the document called Scope or
• is in an instruction given in accordance
with this contract’
Scope (ECSC3 Works Information )
(11.2(14))

• 20.1 ‘The Contractor Provides the Works in
accordance with the Scope.’
• Many 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 Contractor gets benefit of ambiguities
Scope (ECC3 Works Information)
What does it say on the tin?
If it’s not ‘on the tin’
then the Contractor does
not have to do it.
Simple !

Site Information definitely IN the contract
is information which
• describes the site and its
surroundings and is in the document
called Site Information.
• But ONLY to judge physical conditions
for compensation event 60.1(8) and
• only one part of info used to do
so (60.2)
Site Information (11.2(16))
Eg
• Existing (as built) drawings
• Geotechnical – factual information only
• Existing services
- information on what is there
• Other factual reports

Subtitle
Works
Information
(Scope)
and Site
Information
Contract
Data
Risk
allocation
Defined
Cost
Price List

Contract Data
• lists all identified terms – in
italics
• Only two pages ’Client’s
and one page for
‘Contractors’ Contract Data
• BUT it does NOT point to
other documents, like ECC
• Perhaps a ‘form of
agreement’ is appropriate?

Subtitle
Works
Information
(Scope)
and Site
Information
Contract
Data
Risk
allocation
Defined
Cost
Price List

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 – Contractor 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
29

Subtitle
Works
Information
(Scope)
and Site
Information
Contract
Data
Risk
allocation
Defined
Cost
Price List

• It’s a priced contract – so the ‘efficiency risk’ is with the
Contractor
• The quantity risk is with the Client
• to the extent that it uses quantities in the Price List
• No secondary options
• No ECC X1 Price adjustment for inflation
• inflation risk with the Contractor
• No ECC X2 Change in law
• risk with the Contractor
• But for specific events……
Risk allocation

forecast
outturn
cost
(or ‘period of
contract’ or
‘requirements’)
base
risk
time
feasibility, outline design, detailed design, construction
award
of
contract
client’s risk
Contractor’s risk
‘total of the Prices’
Need to ensure that compensation events in contract
reflect those risks that client wishes to retain
Risk allocation
07/06/2022
32

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

• 12 are stated in subclause 60.1 • Might need additional conditions
to modify risk profile by changing
or deleting compensation events
ECC compensation events
Where?
• possible ‘assumptions’ stated in
the Scope
• No – ‘additional compensation events’
in Contract Data part one (as ECC4)
– but would be an easy additional
condition

Subtitle
Works
Information
(Scope)
and Site
Information
Contract
Data
Risk
allocation
Defined
Cost
Price List

Defined Cost (11.2(6))
• Used only as part of the assessment of
compensation events: Defined Cost + Fee (new to
ESCS4).
• No ‘Schedule of Cost Components’ (as ECC)
• People : People Rates * time
• = people rates (in Contract Data) (new to ECSC44)
• Plant and Materials : the amount paid
• subcontracted by the Contractor : the amount paid

Defined Cost (11.2(6)) – Equipment on site
• Equipment in the published list of Equipment:
percentage for adjustment for Equipment * rates in the
published list of Equipment * time
• For Equipment which is NOT in the published list of
Equipment: open market or competitively tendered rates
* time
• For the transport of Equipment and for Equipment
which is consumed: amount paid, to the extent that the
rates do not include transport or consumables.

• Simple Offer and Acceptance in the standard
document – perhaps a simple form of agreement is
appropriate?
• Incorporate in contract only those documents you
want to be bound by… ideally as set out in the ITT
• Prepare summary of any changes post tender
• Clean revised offer ideal
• Include ‘addenda’ and possibly clear ‘minutes of
negotiations’ in the form of specific changes
• Do NOT include responses to requests for
‘clarifications’
Forming the Contract
WARNING
a good
opportunity to
mess up that
great structure of
the ECSC!

40
1 General
2 Contractor’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Title, 8
Liabilities and
insurance
Agenda 2 – Managing the contract
07/06/2022 Mott MacDonald | ECSC Introduction

41
Client's
delegate
(14.5)
Client Contractor
designer(s)
designer(s)
Adjudicator
Professional Services
Contract (PSC)
Or
Professional Services
Short Contract (PSSC)
ECSC
Dispute Resolution
Services Contract
PSC or
PSSC
Sub-
contractor
NEC Short
Subcontract
People involved
‘Client’ is ‘Employer in
ECSC3
No Project Manager or
Supervisor as ECC

Key management roles
Client / Contractor
• 1 changes to the Scope (ECC3 Works Information)
• 1 early warning
• 2 design acceptance
• 2 subcontractor acceptance no requirement
• 3 programme acceptance ECSC has a programme only
as requested in the Scope
• 4 testing and Defects
• 5 payment assessment
• 6 compensation events (including change management)

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
ECSC3 has 10.1 and 10.2 together in 10.1 – no effect
Do what it says
in the _ contract
_ talk (and listen) to
each other

07/06/2022 Mott MacDonald | Presentation 44
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 Contractor’s
responsibility to
Provide the Works or
liability for its
design.(14.4)
The Client may
give an
instruction…..
which changes
the Scope.
(14.2)
(ECSC3 Works
Information)
Client may
delegate any
of their actions
(14.5)
Key general
clauses for
Client

• vital part of ECSC – reciprocal obligations to both
notify and solve
• Contractor and Client notify an early warning…
aware of a matter which could
– increase the total of the Prices
– delay Completion,
– impair the performance of the works in use
• Client or Contractor may give an early warning by
notifying the other of any other matter which could
increase total cost
early warning (CI 15 (ECSC Cl 16))

• (15.2) The Contractor 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 ECC4) – but both
will make sense!
• No commercial ‘teeth’ as in
ECC4 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

49
1 General
2 Contractor’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Title, 8
Liabilities and
insurance

Provide the Works – and design
20.1
‘The Contractor
Provides the
Works in
accordance with
the Scope’
(ECSC3 Works
Information)
20.2
‘The Contractor does not
start work which the
Contractor has designed
until the Client has
accepted that the design
complies with the Scope.’
(ECSC3 Works Information)
Scope must state what
Contractor is to design.
There are no
‘particulars of
design’ as stated
in the Scope
submitted for
Client acceptance
(As ECC4 - but a
good Scope will
still list them!)

Subcontracting
‘subcontractor’ not defined
21.1
if subcontracts, Contractor still responsible for Providing the Works
21.2
21.2 The contract applies as if a subcontractor’s employees and
equipment were the Contractor’s.
No requirement for Contractor to ask for Subcontractor acceptance

52
1 General
2 Contractor’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Title, 8
Liabilities and
insurance

The ECSC has no programme requirements only:
• 30.2 The Contractor submits a forecast of the date of
Completion to the Client each week from the starting date until
Completion.
• 31.1 The Contractor submits programmes to the Client as
stated in the Scope.

Obligations
11.2(1)
Completion is when the
Contractor has completed
the works in accordance
with the Scope except for
correcting notified Defects
which do not prevent the
Client from using the
works or others from doing
their work.
30.1
The Contractor 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
Contractor within
one week of the
date.
54
Mott MacDonald |

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
Contractor
has risks
and so
provides
insurances
(83.3)
obligation to achieve
Completion (as
modified by
compensation events
(63) and accepted
Defects (43) only)
As updated weekly by
Contractor (30.2)
in Client’s Contract
Data
actual date that
Completion (11.2(1))
achieved, certified
(30.3))
last date to notify Defects
‘Completion’ is a state, not a
date
55
Dates in ECSC
CE01
CE01
CE01
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.

• Completion Date can only
be changed as a result of
• any one of the stated
compensation events
(63.6), or
• acceptance of a Defect
(43.1 ((new to ESCS4).
• No provision for
acceleration
• 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 (ECSC3 63.4))
Changes to Completion Date
Even if programme is not required, it is critical for
Contractor to be able to show entitlement to delays to
the Completion Date

57
1 General
2 Contractor’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Title, 8
Liabilities and
insurance

testing and Defects
40 tests and inspections in Scope
by Client
by Contractor
watched by
Client
notify Defect (41.2)
fail
The Scope needs details of tests/inspections:
• Prior to delivery to Site
• Factory Acceptance Tests
• Routine tests on Site
• tests for Completion
• Who to carry out tests
• Who to provide facilities for testing
• Pass criteria
Inspections (40.1)
Logically (but
not in contract)
add to ‘list of
Defects’
At defects date the
Client issues the
Defects Certificate
(42.4)
Results of
tests
(40.1)
Defects Certificate
(11.2(5)) is a list of
Defects not
corrected

59
1 General
2 Contractor’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Title, 8
Liabilities and
insurance

• ‘amount due’ (50.3)
• Prices
• Price for Work Done to Date (PWDD)
• Defined Cost
Payment Prices
PWDD
time
amount

Price List
ref description unit quantity rate Price (£)
1 Base slab (lump sum item) - - - 20
2 Walls (Quantity related item) No 4 10 40
total of the Prices 60
Shirt the roof !
(quantity risk)
Who is completing the
Price List?
method of
measurement?

Payment – Price for Work Done to Date
• 11.2 (12) The Price for Work Done to Date is the total of
• the Price for each lump sum item in the Price List which the Contractor
has completed and
• where a quantity is stated for an item in the Price List, an amount
calculated by multiplying the quantity which the Contractor has
completed by the rate.
• So in ECC terms it’s a mix of lump sums and quantiles
(ECC options A and B)

• Price List includes: ‘The method and rules used to
compile the Price List are: …………….
NEC PSSC - (c) Mott MacDonald 63
Simple …. but
• 14.3 (new to ESCS4) ‘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(12) compensation event:
• The Client gives an instruction to correct a mistake in
the Price List.
• So ‘correctness’ of Price List is a Client risk
• ‘Price lists in NEC short contracts and how clients can simply
the process’

Payment – assessing the amount due (50)
• The Contractor assesses the amount due and
applies to the Client for payment before each
assessment day. (50.1)
• If the Contractor submits an application for payment
before the assessment day, the amount due at the
assessment day is
• the Price for Work Done to Date
• plus other amounts to be paid to the Contractor
• less amounts to be paid by or retained from
the Contractor. (50.3)
• No application? No extra compared with last
assessment day (50.4)

Payment – (51)
• Payment within three weeks of assessment
day – the change in the amount due(51.1)
• Interest on late payment – 0.5% of delayed
amount per complete week of delay
• Any tax which the law requires a Party to pay
to the other Party is added to any payment
made under the contract. (51.3) (new drafting
in ECSC4)

66
1 General
2 Contractor’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Title, 8
Liabilities and
insurance

Where are they?
No ‘claims’; no
‘Variations’ – just
compensation
events
60.1
(1-12)
additional
conditions
of
contract
assumptions
in
the
Scope

• (1) Client gives an instruction
changing the Scope
• (2) The Client does not allow
access to and use of the site to the
Contractor as necessary for the
work included in the contract.
• (3) The Client does not provide
something which it is to provide by
the date stated in the contract
• Missing is default by ‘Others’
• (8) The Contractor encounters
physical conditions….
• (9) The Contractor is prevented
by weather from carrying out all
work on the site for periods of
time, each at least one full
working day, which are in total
more than one seventh of the
total number of days between
the starting date and the
Completion Date.
• (12) The Client gives an
instruction to correct a mistake
in the Price List.
What?
60.1

• 62.1 quotation = proposed changes to the Prices and
Completion Date
• Contractor can state assumptions (not only PM as
ECC). Either Party may notify correction. (not only PM
as ECC).
Compensation events - quotation
_ TALTEO!

70
assumptions
63.10
Assessments of
compensation events are
not revisited
63.7
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 Contractor or Client may state
assumptions when assessing.
60.1
(10)
Either Party notifies (change in ECSC4) ….a correction
to an assumption. That is a new compensation event

Assessing compensation events
• 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:
• the actual Defined Cost of the work already done,
• the forecast Defined Cost of the work not yet done and
• the resulting Fee (new to ESCS4).
• (no formal ‘dividing date’ as ECC but logically date of
notification)
• 63.3 may agree rates or lump sums to assess the change to
the Prices (new to ECSC4).

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, Contractor reacts ‘competently’
• 63.8 ambiguity in Scope? Contractor wins!
• 63.9 In the form of changes to the Price List – so jointly
decide the allocation of quantity risk
• 63.10 If Client acceptance, treated as accepted, or Client’s
assessment then ‘not revised except as stated. (As
‘implemented’ in ECC)

73
ECC compensation events – key clauses – ECSC4
Eg change to Scope Eg physical condition
Client Contractor Contractor
14.2 instruct change to Scope
61.1 notify
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
63.5 delay to Completion?
63.7 risk, competently
63.3 rates and prices?
63.9 changes to Price List
63.8 ambiguity
62.1 assumptions
Unless it ‘arises from fault of
Contractor’, logically say so!
60.1 (1) ie which event?
61.1 instruct quotation
60.1(8) ie which event?
07/06/2022
61.2 submit quotation with
notification
4 reasons for nil
or
63.10 not revised
No response form
Client in time
allowed?
‘Treated as accepted’
(new to ECSC4)
No quotation from Contractor
within time allowed? Client
assesses within a week of when
Contractor should have
submitted.

74
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
helpful in assessment of
(63.6)
07/06/2022 74
delays to Completion Date shown on next

75
1 General
2 Contractor’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Title, 8
Liabilities and
insurance

Liabilities
• 80.1 – Lists Client liabilities - oddly (compared with ECC, these are not
compensation events)
• 81.1 – Contractor liabilities
• 82.2 - ‘Any cost which the Contractor has paid or will pay as a result of an
event for which the Client is liable is paid by the Client.’ (ECSC4 – avoids the
word ‘indemnify’)

Liability limit
• 82.4
• ‘For any one event, the liability of the Contractor to the Client for loss of or
damage to the Client’s property is limited to the amount stated in the
Contract Data.’
• Cap on liability is only re ‘loss of or damage to the Client’s property’ and not an
overall lability limit and
• Suppliers may want an additional condition and an overall limit on liability

78
1 General
2 Contractor’s
main
responsibilities
4 Quality
management
3 Time
9 Termination
and resolving
disputes
5 Payment
6
Compensation
events
7 Title, 8
Liabilities and
insurance

79
The NEC ECC is a collection of processes
to avoid disputes.
Do not go here!
Option W - disputes

80
Contractor, 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
No stage with
‘Senior
Representatives
’ as in ECC4

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

NEC Engineering and Construction Short Contract (ECSC) webinar

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