Experience Sharing on NEC Implementation and its Effectiveness in Hong Kong

Transcription

1 Experience Sharing on NEC Implementation and its Effectiveness in Hong Kong KH Fok NEC3 ECC Accredited Project Manager Mobile: January 2017

2 Note: This set of notes has been prepared according to the speaker s interpretation of the NEC and related documents and is intended for knowledge sharing purpose only. While every care has been taken in the assembly of this material, no responsibility for loss occasioned to any person acting or refraining from action occasioned by or as a result of any material included herein can be accepted by the speaker.

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5 DEVB's website (for access by the construction industry stakeholders)

6 DevB Webpage:

7 Contents in the 120-pages PN Background Information (Chapters 1 3) Pre-Tender Stage (Chapter 4) Tender Stage (Chapter 5) Construction Stage (Chapter 6) Knowledge Sharing (Chapter 7) This 120-pages PN Part A (a living document) is for ECC only. There will be Part B and Part C for TSC and PSC.

8 Key Topics in Part A for ECC 1. Option selection A Partnering A Pain/Gain for target cost contracts A Pre-tender estimate, contingency and provisional sums A Tender documents set of standard documents such as amendments to the NEC clauses, ACC, etc. 6. Effective project management A6.1 to A Healthy financial management under target cost contracts A Cost control and corruption prevention for subcontracting A pages 9. Payment checking for target cost contracts A Equitable risk allocation and management of compensation events A CSD and alternative proposals A Performance benchmarking A Knowledge sharing 7

9 Coverage in this Seminar NEC provisions, highlights of the PN and common issues in the following aspects: Time (Programme) Subcontracting Payment Compensation event Specific issues encountered / anticipated by the participants

10 NEC provisions, PN Highlights and Common Issues TIME (PROGRAMME)

11 Time NEC Provisoins Cl. 31.1: Contractor submits a first programme; failing in submitting the first programme, 25% payment reduction (cl. 50.3) Cl. 31.2: Programme requirements (detailed requirements like float, time risk allowances, information from others etc.) Cl. 31.3: Project Manager has 2 weeks to accept the programme. If not accept, state reasons Cl. 32 Onerous requirement for the Contractor to revise the programme (prospective approach, no longer retrospective); failing in updating the programme, Project Manager s assessment of compensation event (cl. 64.2) Cl. 36 Acceleration Project Manager may instruct Contractor to submit quotation for acceleration to achieve Completion before the completion date

12 Time Cases for Discussion 1. Whether the Contractor s Programme should include time risk allowance for inclement weather? 2. Can the planned Completion shown in the Contractor s programme go beyond the completion date? 3. If the Contractor s programme shows a duration for design acceptance different from the period for reply as stated in the Contract Data, which duration prevails?

13 PN Highlights on Time Programme Acceptance: Better have an Accepted Programme in place, otherwise will become a compensation event (Cl (9) or Cl (6)), or the Project Manager to make his own assessment of compensation event(s) under Cl Programme meeting / workshop to ensure mutual understanding Detailed sub-programme for next 3 months or so Identify key changes in subsequent revised programmes Programme Register to trace changes of planned Completion and Completion Date

14 NEC provisions, PN Highlights and Common Issues SUBCONTRACTING

15 Subcontracting NEC Provisions Cl. 26.1: If a Contractor subcontracts works, he is responsible for Providing the Works as if he had not subcontracted Cl. 26.2: Contractor submits the name of each proposed Subcontractor Cl. 26.3: Contractor submits the proposed conditions of contract for each subcontract The Contractor does not appoint a Subcontractor until the Project Manager has accepted them.

16 PN Highlights on Subcontracting Clause 26 (with amendments) should be followed Clause C9 of the standard additional conditions of contract sets out the tender requirements for subcontracting for Options C & D and for compensation events under Options A & B Should not prevent the appointment of any proposed Subcontractor on unreasonable grounds Project Manager should attend pre-tender meetings 2-stage selection process with alternative designs can be accepted Ensure competitive tender Declaration of no linkage Qualification of tender is not accepted; clarification is needed if there is different interpretation

17 PN Highlights on Subcontracting If insufficient number of return tenders, Project Manager should make decision within three weeks If not the lowest tender is proposed, Project Manager should make decision within three weeks Practices to ensure a smooth subcontracting process Benefits from early Project Manager s involvement in the subcontracting process Involve Subcontractors in regular meetings during construction Finalize subcontracts as soon as possible Discuss whether new Subcontractors will be invited for compensation events with reasons; if yes, clauses C9 and C11 of the standard additional conditions of contract should be followed

18 Subcontracting Cases for Discussion 4. Will a design consultant be treated as a subcontractor in target cost? How the design fee be recovered Defined Cost or Fee? 5. Whether the Contractor should follow the subcontracting or procurement procedures for works / services required at early construction stage such as hoarding erection, security? 6. Can the Project Manager accept Subcontractor whose tender return price is not the lowest? 7. If the accepted Subcontractor quits, does a retender process require or the 2 nd lowest tender can be proposed?

19 NEC provisions, PN Highlights and Common Issues PAYMENT

20 Payment NEC Provisions Clause 1 definition of terms (PWDD, Fee, Defined Cost, etc.) Clause 5 payment process (payment applications [as amended], payment assessment, payment date, etc.) X1 Price adjustment for inflation X6 Bonus for Early Completion X7 Delay Damages X14 Advanced payment to the Contractor X16 Retention X17 Low performance damages X20 Key performance indicators

21 PN Highlights on Payment Project Manager decides the first assessment date (clause 50.1) PAH 25-day rule payment to the Contractor within 25 days from the assessment date for contracts using NEC Clause 51.2 each certified payment is made within three weeks of the assessment date or, if a different period stated in the Contract Data, within the period stated Interest not for corrected amounts in later certificates due to compensation event or other reasons (clause 51.3 [as amended]) X1 Price Adjustment for Inflation X1.4 for Options A & B and X1.5 for Options C & D A total of 34 pages (out of 120) on checking of payments covering: Start-up procedures Checklists

22 Payment Cases for Discussion 8. There were confusion in payment related to People since the definition has been amended to exclude management and supervisory staff : Is a land surveying team entitled for payment under People of the Schedule of Cost Components [as amended]? Is a procurement team classified as management and supervisory staff? Is the MPF for management and supervisory staff part of the amount due? 9. Are performance tied payments in X20 subject to retention (X16)? 10. Item 23 of the Schedule of Cost Components is deleted. Will the Contractor be entitled for full payment of the purchased Equipment?

23 NEC provisions, PN Highlights and Common Issues COMPENSATION EVENT

24 Compensation Event NEC Provisions Cl lists 19 situations which are compensation events if happen Cl lists Employer s risks Clauses 61 to 65 set out procedures in handling compensation events

25 Compensation Event NEC Provisions

26 Compensation Events Cl (13): Weather measurement worse than that once in ten years (but has been amended to:) One or more of the following weather conditions: (i) the hoisting of tropical cyclone warning signal No. 8 or above, or (ii) Black Rainstorm Warning, or (iii) Red Rainstorm Warning, or (iv) Amber Rainstorm Warning, or (v) inclement weather and/or its consequences adversely affecting the progress of the works.

27 Compensation Events Cl (20): A Change in Law as defined in Clause [A1] of the additional conditions of contract. (21): A shortage of labour which would have been unreasonable for an experienced Contractor to have allowed for at the tender closing date.

28 PN s Highlights on Compensation Event Amendment to cl time only Weather (cl. 60.1(13)) time only for A & B Unforeseen physical conditions (cl. 60.1(12)) difference from the Site Information (cl. 60.2) Shortage of labour (cl. 60.1(21)) time only Utility interface (cl. 60.1(5)) time only Change in law (cl. 60.1(20)) as stated in additional conditions of contract A1; X2 not used Prevention (cl. 60.1(19)) time only Change to the Works Information (cl. 60.1(1)) similar to variations ; not applicable to Contractor s design Correction to an assumption of a compensation event (cl. 60.1(17)) assumption made by PM only Delay by the Employer or Others (cl. 60.1(2) or (5)) time only Failure to respond (cl. 60.1(6)) Contractor s design, subcontractors procurement Change in quantities (cl to 60.6) re-measurement record Assessment of prolongation costs time-related resources; to be established early

29 Compensation Event Delegate s authority up to HK$300,000 Talk before submission in view of PM s authority Cl effect of compensation event Defined Cost plus Fee; cl Contractor s risk For Options A & B rates or lump sums can be used if agreed but not subject to fee percentage Assessment should be properly documented in the Project Office for audit Programme update Changes to the Activity Schedule (cl. 54.2) payment follows the adjusted Activity Schedule

30 Compensation Event Cases for Discussion 11. EPD s notification of increasing the waste disposal charges in August 2016: Is this a compensation event? Such increase does not cause additional resources in the physical works. Does the Employer need to pay Contractor the Fee? 12. What if Subcontractors quotations for compensation events do not follow the NEC s approach, i.e. not use the Schedule (or Shorter Schedule) of Cost Components?

31 GROUP SHARING

32 Thank you