NEC3 Contract Trainning

Workshop 4 Delivering the
Contract
Colin Smyth MRICS MBA
Gary Bogle BSc (Hons) LLM MRICS FCIArb
Wednesday 20th September 2011
www.ulster.ac.uk/ceni
Best Practice | Innovation | Best Value
Our Agenda for Today

Delivering a project under a JCT or NEC Contract
Contract Planning & Programming
Risk Management & Cost Control
Budgeting & Cost Management
Resolving Disputes
Company and Project Performance Measurement
General Procurement
General Procurement Methods 2007
General Procurements Methods 2007
Overview of the JCT
JCT Suite of Contracts
Adjudication Agreement
Collateral Warranties
Construction Management
Consultancy Agreement (Public

Sector)
JCT Constructing Excellence

Contract
Major Project Construction Contract
Management Building Contract
Measured Term Contract
Design and Build Contract
Minor Works Building Contract
Framework Agreements
Partnering Charter
Generic Contracts
Home Owner Contracts
Pre-Construction Services
Agreement
Intermediate Building Contract
Prime Cost Building Contract
Repair and Maintenance Contract
Standard Building Contract
SBC/Q - 2005
SBC/Q
Appropriate for major works designed and/or detailed by or
on behalf of the Employer. The contract is based on
drawings and bills of quantities to define the quantity and
quality of the works
Where a Contract Administrator and Quantity Surveyor have
roles to play in the administration of the conditions
Variants:
Where the contractor is to design discrete parts of the work
(Contractors Designed Portion)
Where the work is to be carried out in sections
By both private and local authorities
SBC Conditions (1)

There are nine sections in the SBC/Q
outlining the provisions of this contract
Section 1 - Definitions and Interpretation
e.g. Activity Schedule, Architect/CA, Health & Safety Plan
and Electronic Communications
Section 2 - Carrying out the Works
e.g. Contractors Obligations, Adjustment of Completion
Date and Defects
Section 3 - Control of the works
e.g. Access and Representatives, Person-in-charge,
Architect/CAs Instructions
SBC Conditions (2)

Section 4: Payment
e.g. Contract Sum and Adjustments, Certificates

and Payments, Retention and Loss and Expense
Section 5: Variations
e.g. The Valuation Rules
Section 6: Injury, Damage and Insurance
e.g. Injury to Persons or Property and Insurance
SBC Conditions (3)

Section 7: Assignment, Third Party Rights and
Collateral Warranties
e.g. Assignment, Rights for Purchasers and Tenants,
Contractors Warranties
Section 8: Termination
e.g. Meaning of insolvency, reinstatement and Corruption
Section 9: Dispute Resolution

e.g. Mediation, Adjudication and Arbitration
Overview of the NEC 3
The NEC Journey so far ..
The NEC3 Suite The Contracts

The NEC Suite of Contracts:
Generic name for a family of contracts published for
the Institution of Civil Engineers by Thomas Telford
Ltd.
NEC 3
Engineering and Construction Subcontract
Engineering and Construction Short Contract
Engineering and Construction Short Subcontract
Professional Services Contract (PSC)
Adjudicators Contract
Term Service Contract & Guidance Notes
Framework Contract
The NEC3 Suite The Contracts
NEC 3 - Background
Catalyst for NEC:
Sir Michael Lathams industry report
Constructing the Team, 1994
Believed NEC complied with most of the

principles that the report advocated.
NEC 3 - Background
Latham
Improving industrys performance

Teamwork
better VFM
NEC 3 - Background
Latham
Clients
Well informed know what they want & take decisive
steps to achieve it
Knowledgeable but not necessarily modern in their
approach
Others are feeling their way under new administrative
arrangements
Some know nothing & need extensive help & guidance
for formulate their wishes then match them to the
available budget
NEC 3 - Background
Latham
Client Objectives
VFM
Pleasing to look at
Free from defects on completion
Delivered on time
Fit for the purpose
Supported by worthwhile guarantees
Reasonable running costs
Satisfactory durability
NEC 3 - Background
Sir Michael Latham

Believed NEC complied with most of the principles
that the report advocated.
Constructing the Team

A specific duty for all parties to deal fairly with each
other, and with their subcontractors, specialists and
suppliers, in an atmosphere of mutual cooperation.
Firm duties of teamwork, with shared financial
motivation to pursue those objectives. These should
involve a general presumption to achieve win-win
solutions to problems which may arise during the
course of the project.
NEC 3 - Background

A wholly interrelated package of documents which
clearly defines the roles and duties of all involved,
and which is suitable for all types of project and for
any procurement route.
Easily comprehensive language and with Guidance
Notes attached.
Separation of the roles of contract administrator,
project or lead manager and adjudicator. The Project
or lead Manager should be clearly defined as the
clients representative.
A choice of allocation of risks, to be decided as
appropriate to each project but then allocated to the
party best able to manage, estimate and carry the
risk.
NEC 3 - Background
Taking all reasonable steps to avoid changes to preplanned works information. But, where variations
occur, they should be priced in advance, with
provision for independent adjudication if agreement
cannot be reached.
Express provision for assessing interim payments by
methods other than monthly valuation i.e. milestones,
activity schedules or payment schedules. Such
arrangements must also be reflected in the related
subcontract documentation. The eventual aim should
be to phase out the traditional system of monthly
measurement or remeasurement but meanwhile
provision should still be made for it.
NEC 3 - Background
Clearly setting out the period within which interim
payments must be made to all participants in the
process, failing which they will have an automatic
right to compensation, involving payment of interest at
a sufficiently heavy rate to deter slow payment.
Providing for secure trust fund routes of payment.
While taking all possible steps to avoid conflict on
site, providing for speedy dispute resolution if any
conflict arises by a pre-determined impartial
adjudicator/referee/expert.
Providing for incentives for exceptional performance.
NEC 3 - Background
Making provision where appropriate for advance
mobilisation payments (if necessary, bonded) to
contractors and subcontractors, including in respect
of off-site prefabricated materials provided by part of
the construction team.
NEC 3 - Background
Emergence of NEC:
Client Dissatisfaction
Questioned if existing standard forms adequately
served the best interest of all parties
Time, cost and quality of projects

Greater need of certainty of outcome
Required appropriate allocation of risk that
other contracts did not provide
NEC 3 - Background
NEC 3 - Background
Egan Rethinking Construction

UK Construction Industry highly capable
Concern that industry is under-achieving
Low profitability
Invests too little in capital, research &
development and training
Aim of Task Force based on their

experiences in other industries
Deliver improvements in
Quality
Efficiency

Drivers for
Change
Improving the
Project Process
Targets for
Improvement
Capital cost
-10%
Construction
time
Predictability
-10%
the
supply chain
-20%
Production of
Defects
Accidents
components
Productivity
+10%
Turnover & profits
+10%
Committed leadership
Product
Focus on the customer
development
Partnering
Product team integration
Quality driven
agenda
Commitment to people
Project
implementation
5-4-7 Mantra of Rethinking Construction

+20%
-20%

Using experience
Set ambitious targets
Effective measurement of performance
Improvement
Performance
An industry wide group developed a set of
simple headline Key performance Indicators
(KPIs) based on the 7 Rethinking Construction
targets but with the addition of Client
Satisfaction measures:
Product
Service
Rethinking Construction KPIs
Egan Performance Measurement

Drivers for
Change
Committed leadership
Improving the
Project Process
Product
development
Focus on the customer

Project
Product team integration
Quality driven
agenda
Commitment to people
implementation
Targets for
Improvement
Partnering
the
supply chain
Production of
components
Respect for
Sustainability
People
Construction cost
Construction time
Predictability (cost)
Predictability (time)
Client Satisfaction - P
Client Satisfaction - S
Defects
Profitability
Productivity
Safety
5-6-10 Model

Industry
Changes in culture & structure to support
improvement
Safe working conditions
Improve management & supervisory skills at all
levels
Design projects for ease of construction

Maximum use of standard components &
processes

Industry
Replace competitive tendering in favour of
Long term relationships based on
Clear measurement of performance
Sustained improvements in quality & efficiency

Demonstration Projects
Leading edge organisations that demonstrate
Innovation
Change which can be measured & evaluated

Ambition of Rethinking Construction
50 projects
Total value 500m
Accelerating Change - Actual

400 projects
Total value of over 6bn
38% are housing projects
62% the rest of the construction industry
Demonstration Projects
These provide examples of:
Off-site fabrication
Standardisation
Use of new technology
Sustainability
Respect for people activities
Partnering
Supply chain integration
Bring together those committed to

rethinking construction
Encourage openness, sharing and learning
Develop benchmarking and co-operation
Demonstrate innovation and best practice

Disseminate to the whole of the industry
NEC 3 - Background
Difference in NEC3 and other standard forms
of contract:
3 clear objectives:
Flexibility
Clarity and simplicity
Stimulus to good management
Cultural change
Assessment of change
Trust and cooperation
Collaboration
NEC 3 - Background
3 clear objectives
Flexibility
Clarity and simplicity
Stimulus to good management
NEC 3 - Background
Objective 1- Flexibility:
Multi-disciplinary can be used by any
discipline in the industry
Design can be used for Employers design
or Contractors design, or partial design
Pricing 6 main options ranging from fixed
price to cost reimbursement
Applicable worldwide on a variety of
projects
NEC 3 - Background
Objective 2 Clarity and simplicity:
Plain English which avoids excessive use of legal jargon
Simple structure:
short sentences,
same format,
no cross referencing,
no reference to the Law
Procedures are not open ended or conflicting
NEC 3 - Background
Objective 3 Stimulus to good management:
Encourages collaboration and forward planning
Clear allocation of responsibilities
Early warning procedure
Detailed procedure for dealing with changes
Programming facilities that is used in joint decisionmaking by the contractor and project manager
Engineering & Construction Contract

Growth of NEC3:
OGC recommends the use of NEC3 by
public sector construction procurers on their
construction projects.
Office of Government Commerce 2005
Engineering & Construction Contract

Structure of ECC:
pick and mix arrangement
9 Core Clauses
6 Main Options
Employer must select main option
2 Dispute resolution procedures (ECC 3 only)

Employer must select dispute resolution option
18 Secondary Options
Core Clauses
Structure of ECC:
9 Mandatory Core Clauses:
1 General
2 The Contractors main responsibilities

3 Time
4 Testing and Defects
5 Payment
6 Compensation events
7 Title
8 Risks and Insurance
9 Disputes and Termination
Main Options
Structure of ECC:
Options:
A Priced Contract with activity Schedule
B Priced Contract with bill of quantities
C Target Contract with activity schedule
D Target Contract with bill of quantities
E Cost reimbursement Contract
F Management Contract
Secondary Options
Secondary Option Clauses:
X1 price adjustment for inflation

X2 changes in the law
X3 multiple currencies
X4 parent company guarantee
X5 sectional completion
X6 bonus for early completion
Secondary Options

X7 delay damages
X12 partnering
X13 performance bond
X14 advanced payment to the contractor
X15 limitation of the contractors liability for
design
X16 retention
Secondary Options

X17 low performance damages
X18 limitation of liability
X20 key performance indicators
Y(UK)2 Housing Grants, Construction and
Regeneration Act 1996
Y(UK)3 Contract (Rights of Third Parties)
Act 1999
Z Additional conditions of contract
Questions ?
Introduction to the NEC 3 Short Contract
NEC 3 Short Contract

Formally Launched 30 July 1999
Not a minor works form
No financial ceiling on value of projects
Used for contracts which

Do not require sophisticated management techniques
Comprise straightforward work

Impose only low risks on both the employer and the
contractor

Provisions
Early Warnings
Programmes
Compensation Events
NB: Shortened to suit the simpler nature of the contracts
Structure
No main options
No secondary options
Additional conditions can be inserted on page 3
Price list allows for a number of pricing arrangements
(lump sum or rates)

Contents
1.
Contract Data
2.
Clauses
3.
Index
Programming under NEC
Purpose of NEC Programme
Co-ordinate Works
Assess CEs
Monitor Progress (to learn lessons)

Maintain Focus
Identify Problems
Short Form Programme
Clause 31 The Contractor submits
programmes to the Employer as stated in the

Works Information
ECC Clause 31.1

Cl 31.1 Contractor must submit a first programme within
the period stated in the Contract Data
Cl 31.2 Detailed Programme
Starting date, access dates, Key Dates &
Completion Date
Planned Completion
Order & timing of operations
Provision for float, time risk allowances, health &
safety
Cl 31.3 Project Manager accepts or rejects

Early Warning
Early Warnings
Cl 16.1 Contractor and Employer give early warnings
by notifying the other as soon as either becomes aware
of any matter which could
Increase Prices
Delay Completion
Impair the works
Cl 16.2 - Contractor and Employer co-operate in making

and considering proposals and recording actions
Compensation Events

Compensation Events
Cl 60 Cl 63
Cl 60 Reduced number of CEs
14 in total
Provisions for dealing with change are largely
same as ECC, but Contractor only notifies
change!
Cl 61 Notifying compensation events
Cl 62 Quotations
Cl 63 Assessing
Clause 61 Notification (1)
Cl 61.1 - Contractor notifies Employer if:
He believes its a CE
Employer has not notified him
8 week long stop then NO COMPENSATION
Cl 61.2 Employer decides if it:
Arises from a Contractor default

Hasnt or wont happen
Doesnt effect time or cost
Isnt on the list
Otherwise, Employer asks Contractor for a quotation

Clause 61 Notification (2)

Cl 61.3 Employer notifies missed early warning
Cl 61.4 - Employer may decide effect of CE is too
uncertain to reasonably forecast, so
He makes stated assumptions
If assumption is wrong Contractor notifies
correction
Cl 61.5 No notification after defects date
Clause 62 Quotations (1)

Clause 62.1 - Quotation comprises Contractors
assessment with details of:
Changes to prices
Delay to Completion Date

Contractor submits a quotation within 2 weeks of being
instructed or within 2 weeks of the CE notification if no
instruction was received
Cl 62.2 Contractor does not put a proposed

instruction or change into effect without a instruction
from the Employer first
Cl 62.3 - Contractor submits within 2 weeks.

Employer replies within 2 weeks:
Notifying that instruction will not be given
Accepting; or
Does not agree

Cl 62.4 If Employer doesnt agree with quote
Contractor can submit a revised quotation within 2
weeks
If Employer still doesnt agree with quote
Assesses the CE
Notifies the assessment
Cl 62.5 Employer can ask for alternative quotations
Clause 63 Assessment (1)

Clause 63.1 CE that only affects quantities of work shown
on Price List
Changed quantities X Price List rates = assessment
Clause 63.2 Other CEs are assessed by forecasting the
effect upon the Defined Costs; or
If event has already occurred, the Defined Costs due to the

event which the Contractor has incurred

Effects on Defined Costs are assessed separately for
People employed by the Contractor

Plant & Materials
work subcontracted by the Contractor and

Equipment

Clause 63.3 Defined Costs are assessed at open
market or competitively tendered prices
The following are deducted from the Defined Costs for
assessment
Cost of events for which the contract requires the
Contractor to insure
Other costs paid to the Contractor by insurers

Clause 63.4 - Delay is effect of CE on the Completion
Date
Clause 63.5 Failure to warn, may mean reduction
Clause 63.6 Cost and Time risks are included
Clause 63.7 We assume Contractor reacts
competently and is promptly, additional cost and delay
are reasonable
Clause 63.8 Ambiguities are assessed in the
Contractors favour
Clause 63.9 CE cant be revised if a forecast upon

which is was based is later shown to be wrong
Questions ?
Contract Planning & Programme
Stages of Project & Types of Planning Programme

Project Stage
Type of Programme
Who Plans?
Overall Project
Project master schedule
The client or Project

Manager
Design
Project master schedule
Designer: Architect/
Engineer
Tender
Pre-tender programme
Tendering Contractors
Pre-contract
Master programme
Target programme
Subcontractors
programme Procurement
programme
The Main Contractor
Contract
Stage programme
Short-term programme
As-built programme
The Main Contractor and

Subcontractors
Reasons for Overall Planning Programme

To establish a realistic project master schedule
To identify key dates or gateways at critical stages of the
project
To facilitate control of the design and tendering process

To identify potential risks to progress and avoid possible
delays to project completion and revenue generation
To facilitate the arrangement and draw-down of client
cash funding
To establish a realistic time period for the construction
stage
To monitor actual progress and take corrective action
Microsoft Project
Project Management Software
Helps with assigning resources and tasks to a given
project
Assists in monitoring budgets, production progress and
workloads
Can help companies maximise the use of physical and
human resources on numerous production projects
Microsoft Project
Entering Production Tasks:
The production of buildings can be broken down into a
series of tasks that must be carried out to achieve the
overall result
A task is an activity that requires a period of time or the
input of a physical or human resource, for example:
Concrete and adhesives need a certain amount of
time to cure
Pouring concrete or applying adhesives need human
input before they can cure
Entering production tasks
Text also appears

in the entry bar.
Point and click

your cursor in the
first Task Name
cell.
When you press
Return, notice this
task has been
given a duration of
1 day
Re-entering misspelled tasks
If mistakes are made when entering

tasks they can be changed in two
ways.
Firstly, by clicking on the erroneous

cell, or by navigating using the arrow
keys, a wrongly entered task can be
re-entered correctly. This requires
the whole task to be re-typed.
Secondly, by clicking on the
erroneous cell, or by navigating
using the arrow keys, the entry bar
can be used to change a specific part
of the task.
Deleting tasks
In order to delete a task, all

attributes of that task must be
deleted. The whole row must
be selected. This is done by
clicking on the number
identifier as highlighted
Deleting tasks
Note: Erect front formwork has

been deleted and all
subsequent tasks have moved
up
Note: after Erect front
formwork is deleted, the row
with the fourth task remains
highlighted.
Inserting tasks
In order to insert a task you

must select the task which is
going to become the next task
in the list.
For example, the task to be
inserted now will become task
4, so the current task 4 Place
concrete will become task 5.
Inserting tasks
Assigning task duration
Notice that the default duration applied

to each task is 1 day?. This shows that
the default duration is one day however
it is also asking Is this the duration to
be assigneed to this task?
In order to assign a different duration,
highlight the duration cell for the
specific task. Input the new duration. If
the duration is one week input 1w, if the
duration is two days input 2d and if the
duration is three hours input 3h.
Applying task duration
Notice that as the task

durations were
applied, the Gantt
chart changed to
reflect these changes.
Applying milestones
Tasks 1 and 9 are changed

to milestones by giving
them a duration of 0d as
they are specific points in
time and do not have any
duration.
Assign task relationships (1)
Notice how all

tasks have been
linked in the Gantt
Chart. To link two
or more tasks,
select the tasks in
the Task Name
column.
Assigning
a
relationshi
p between
tasks can
be done in
threes
ways.
Firstly, when
tasks have
been selected
use the link and
unlink
commands
under the Edit
menu,
Secondly, when
tasks have
been selected
use the link and
unlink
shortcuts on
the Standard
menu toolbar.
Thirdly, the mouse

can be used to
link tasks by
clicking on one
task and dragging
the mouse cursor
to another task.
Assign task relationships (1)
The relationships in the previous slide are

all series relationships. This means that
they happen one-after-the-other.
There are times when tasks can be run
simultaneously, or parallel
TASK 1
TASK 1
TASK 2
TASK 2
Series tasks
Parallel tasks
Parallel relationships
The task
information box
can be accessed
by double clicking
on the task or
clicking on the
Task Information
shortcut on the
standard toolbar.
The predecessors
tab is used to
change tasks from
running in series
(or one-after-theother) to parallel.
Note that tasks 3
and 4 are now
parallel tasks that
can be carried out
at the same time.
Task 4 through 9
continue in series
with this parallel
pair (task 2 and 3).
Network diagram
The network diagram

can be accessed by
selecting Network
Diagram under the
View menu.
Questions ?
Risk Management
Application of RM in Construction
RM Application stages
Initial appraisal
Outline or sketch
design
Detailed design
Contract strategy
Construction
Potential for
Risk Management
Risk Management Process
Risk Identification
Risk Assessment /
Risk Management Framework
Classification
Risk Analysis / Evaluation Risk Identification
Risk Classification
Risk Response / Control
Risk Analysis
Risk Response
Risks in construction projects: How they

arise?
Expectations
Decisions
Activities
Risk
Results
Decisions lead to activities which may differ from
expectations
Uncertainties are the cause of differences
Information allows to foresee results
Helps the decision maker
Example: deep basement construction
Defining Risk in Construction

Risk in construction projects
The possible occurrence of an uncertain event or
outcome, which should it occur, will cause
significant variations or consequences
Additional costs (cost risk)
Delays (time risk)
Substandard quality (quality risk)
Risks occur due to risk causes or risk factors

Bad weather
Industrial action
Turbulent economic conditions, many more..
Nature of Risk
Risks occur as a result of poor prediction?
Measured by chance or probability of happening
3 Attributes of risk
Risk factor - Range of outcomes
Optimistic outcome, pessimistic outcome, most likely outcome
Only one will actually happen
Individual consequences
Consequence of each outcome
OO Profit, PO Loss
Probability
Assess the probability of each of the outcomes occurring
Purpose of Identifying Risks (Risk Analysis)

Identification of major risks that affect project
objectives
Possible outcomes and consequences of risks
Likelihood of project objectives being attained

Methods of controlling or accommodating risks
Increased confidence in investment decision

Provides a framework for identifying & managing
risks
Example of Construction Risk Types
Techniques for Identification of Risk
Brainstorming
Team based: identify potential risks
Creative process: generate ideas, no criticism
List of large number of potential risks
Group output better than individual: sense of
involvement
Tree diagrams
Traces: causes, origins and consequences of risks
Multi-level analysis, graphical
Uses probability values for each risk
Techniques for Identification of Risk
Risk Registers
List of pre-identified typical risks
Developed through consultation
example
113
114
Risk
Sources
Source
Event
Effect
Example:
115
Risk Analysis
Quantitative evaluation of risk factors

Risk to the project
Consequences of risk
Individual risk
Combined consequences of all risks
Risk profile of the project

Possible future events and probability of
occurring
Adopt strategy to deal with major risks
Risk Analysis
Process
117
Risk Analysis Process

Alternatives and options
Risk attitude
Identify and classify risks
Measure the risk: quantitatively & qualitatively
Interpretation of results
Strategy to deal with risks
What risks to deal and what risks to allocate
Example of Analysis
Likelihood of damage to adjoining buildings as a result of pile driving
Risk Measurement
Involves finding what is more risky
Different techniques used

Probability analysis
Sensitivity analysis
Simulation technique (Monte-Carlo simulation)
Scenario analysis
Correlation analysis
Probability Analysis
How probable is the risk

Uses probability distribution against all
possible occurrences of risk
Probability classified as:
Objective probability - common
Subjective probability
Defined from experience, intuition
Standard probability distributions used for

interpretation
Probability Analysis Example
Scenario:
Estimate: need for connection to gas main
Full survey not done, hence, uncertainty as to the
exact condition of the gas main connection costs
Typical cost of new gas main 2,500
Highly competitive: many sub contractors looking
for work
Fixed price job
Estimate the cost of new gas mains to

minimise risk to the contractor
Probability Analysis Example
Option
A
B
C
Price
Probability
Probable
Cost
Some
modification
No modification
5000
0.50
2500
2000
0.30
600
Substantial
modification
Risk free
estimate
15000 0.20
3000
6100
123
Risk Response
Risk Response
Risk Retention
Risk Absorption
Risk Reduction
Risk Transfer
Risk Avoidance
Risk Response Options
Retention
Not all can be transferred, not economical to do so
Consider risk reward: insurance - limited excess
provision
Reduction
Spread of risks to other parties
Sub contractors, work packages
Methods:
Education and training (staff training)
Physical Protection (e.g. sprinkler system, protective gear)
Checking & monitoring (QA)
Risk Response Options
Transfer
Reduce the burden, not the possibility
Insurance: professional indemnity, all risk
Retention to cover residual risks
1-5% of contract sum
Performance bond
Avoidance
Refusing to accept risks (non contracting)
Rescind the contract for fundamental breach
Usually avoidance occurs at early stage of projects

Use of exemption clauses
Questions ?
Budgeting & Cost Management
Cashflow Forecast
Cash flows for the company are usually
prepared on a contract by contract basis
and accumulated for the company as a whole
so as to give a complete picture of what is
happening
This helps a company to predict the minimum

and maximum cash required over the trading
year so as to arrange a comfortable working
capital facility
Company Cash Flow for a Small Contractor
Value Forecasting Using the Bar Chart
Expenditure Forecasting
Strategies for Improving Cash Flow

At Tender Stage
These methods will bring in early money but must be done
before submitting the priced bills:
Load money into under measured items
Load money into early items such as excavation and
substructures
Load money into mobilisation items in the preliminaries

During the Contract
These methods will reduce working capital requirements:
Submit interim applications on time
Over measure the work in progress

Over value materials on site
Agree on the value of variations as soon as possible
Keep good records and submit claims early
Deal with defective work quickly to avoid delayed payment
Make maximum use of trade credit facilities

Post Contract
These methods will increase profit levels:
Submit all documentations as soon as possible
Ensure timely release of retentions by submitting
health and safety file information on time

Agree on final account as soon as possible
Collect outstanding retentions on time

Questions ?
Dispute Resolution
Dispute Resolution
Dispute Resolution:
Litigation
Arbitration ?
Alternative Dispute Resolution
Civil Procedure Rules 1998 the courts are to actively
manage the process by encouraging the parties to use an
alternative dispute resolution procedure if the courts
consider that appropriate and facilitating the use of such
procedure r 1.4 (2) (e)
Dispute Resolution
Alternative Dispute Resolution:
Negotiation
Mediation
Conciliation
Med-Arb
Mini Trial
Expert Determination
Adjudication

Features:
Third party
Is not binding unless parties agree
Consensual
Emphasis on encouraging parties to reach

settlement

Negotiation:
Bargaining position of the parties
Relationship between the parties
Who is undertaking the negotiation
Amount in dispute
Relative strength of case/legal argument
Personal style of negotiator
JCT Provisions
There are 4 methods of dispute resolution:
1. Mediation
2. Arbitration
3. Adjudication
4. Litigation
JCT Provisions
Article 7: Adjudication
If any dispute or difference arises under this Contract,

either part may refer it to adjudication in accordance with
clause 9.2
JCT Provisions
Article 8: Arbitration
Where Article 8 applies, and subject to Article 7 any
dispute or difference between the parties of any kind
whatsoever arising out of or in connection with this
Contract, whether before, during the progress or after the
completion of abandonment of the Works or after the
termination of the contractors employment, shall be
referred to arbitration in accordance with clauses 9.3 to 9.8
and the JCT 2005 Construction Industry Model Arbitration
Rules (CIMAR)
JCT Provisions
Article 9: Legal Proceedings
Subject to Article 7 and (where it applies) to Article 8, the

English courts shall have jurisdiction over any dispute or
difference between the Parties which arises out of or in
connection with this Contract.
JCT Provisions
Clause 9.1 Mediation:
Parties have the right to resolve dispute via Mediation they are not obligated to do so
A footnote directs the reader to the Guide which says

that while supporting the use of Mediation and ADR in
suitable cases the JCT did not think it appropriate to
endorse any particular method or body
JCT Provisions
Clause 9.2
Adjudication
Parties have the right to resolve dispute via Adjudication

and JCT has adopted rules in compliance with the Scheme:
Appointment:
Adjudicator named in the contract particulars
Nominating body to be stated
The Adjudicator should have appropriate experience/

expertise
If the adjudicator does not have appropriate experience/
expertise there is provision to appoint an expert witness
JCT Provisions
Clause 9.3 Conduct of Arbitration:
Arbitration shall be conducted in accordance with JCT 2005

Construction Industry Model Arbitration Rules (CIMAR)
JCT Provisions
Clause 9.5 Powers of an Arbitrator:
Power to obtain advice
Powers set out in s 38 of the Arbitration Act
Power to order the preservation of work, goods and

materials
Power to request the parties to carry out tests
Power to award security for costs
Powers to review and revise any certificate, opinion,

decision, requirement or notice and to disregard them if
need be
NEC Provisions
Clauses W1 & W2:
Option W1 used, unless the HGCR Act 1996 applies
Option W2 is used when the HGCR Act 1996 applies
Employer states in the contract data which option applies
NEC Provisions
Clause W1:
Specifies what disputes can be referred to

adjudication
What notifications are to be given
It allows eight weeks for the adjudicators decision to

be given
NEC Provisions
Clause W2:
W2 is compliant with the HGCR Act 1996
It is not restrictive on what disputes can be referred or

when
It allows four weeks for the adjudicators decision to

be given (subject to extension by consent)
NEC Provisions
Review by the tribunal
Tribunal should be stated in the contract data
In the event none is stated

Litigation will apply by default
NEC Provisions
Review by the tribunal
The tribunal settles the disputes referred to it
The tribunal has power to reconsider any decision of

the adjudicator and to review and revise any action or
inaction of the project manager or the supervisor
related to the dispute
A party is not limited in tribunal proceedings to the

information, evidence (and in W1.4(4) arguments) put
to the adjudicator
Questions ?
Company and Project Performance

Measurement
2011 UK Industry Performance Report
Centered upon projects completed during

2010
Sharp fall in profitability from 7.7% to 5%
Workloads have fallen
Margins squeezed
Previous improvements in client

satisfaction sustained
Predictability of project delivery, both to
cost and budget has improved further
Questions ?
Workshop 4 Delivering the

Contract
Colin Smyth MRICS MBA
Gary Bogle BSc (Hons) LLM MRICS FCIArb
Wednesday 20th September 2011

NEC3 Contract Trainning

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Workshop 4 Delivering the

Wednesday 20th September 2011

Best Practice | Innovation | Best Value

Our Agenda for Today

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General Procurement Methods 2007

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General Procurements Methods 2007

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Overview of the JCT

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JCT Suite of Contracts

Consultancy Agreement (Public

JCT Constructing Excellence

Major Project Construction Contract

Management Building Contract

Measured Term Contract

Design and Build Contract

Minor Works Building Contract

Home Owner Contracts

Intermediate Building Contract

Prime Cost Building Contract

Repair and Maintenance Contract

Standard Building Contract

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Best Practice | Innovation | Best Value

SBC Conditions (1)

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SBC Conditions (2)

e.g. Contract Sum and Adjustments, Certificates

e.g. Injury to Persons or Property and Insurance

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SBC Conditions (3)

Section 9: Dispute Resolution

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Overview of the NEC 3

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The NEC Journey so far ..

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The NEC3 Suite The Contracts

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The NEC3 Suite The Contracts

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Believed NEC complied with most of the

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Improving industrys performance

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Best Practice | Innovation | Best Value

Best Practice | Innovation | Best Value

Sir Michael Latham

Constructing the Team

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Constructing the Team

Best Practice | Innovation | Best Value

Best Practice | Innovation | Best Value

Best Practice | Innovation | Best Value

Best Practice | Innovation | Best Value

Time, cost and quality of projects

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Best Practice | Innovation | Best Value

Best Practice | Innovation | Best Value

Egan Rethinking Construction