The NEC Engineering and Construction Contract: Ron Nobbs (February 2004)

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THE NEC ENGINEERING AND CONSTRUCTION CONTRACT - Some Issues for the 3rd Edition
Ron Nobbs Partner Masons Ron qualified into Masons' Construction and Engineering Group in 1989 and in 1991, spent three years in Masons' Hong Kong office. Ron now focuses on managing the legal risks on UK construction and engineering projects of all types and sizes working for both UK and international clients.

1.	OVERVIEW

1.1	The 2nd Edition of the ECC Form has been used for over 8 years. In that time the main take up of the form has been by large employers such as Sainsburys and BAA and more recently by the Government in the form of the NHS and Highways Agency.

1.2	Critics of the form maintain that it is fundamentally flawed because it is effectively a project procedures manual badged as a contract. However even the critics would concede that to some extent the form must be working because to date there have been so few disputes on it. Although it is likely that such a suggestion might be met with the response that this is hardly surprising given the commercial muscle of the employers who are promulgating the use of the form.
1.3
	It is however clear that the NEC is very popular with Project Managers, which in turn may cause the form to become more widely used by a greater variety of perhaps smaller employers without the same degree of commercial leverage. If thisis the case, any disputes that do then arise are more likely to become subject to judicial scrutiny.

1.4	Against this background, what can be expected then from the 3`d Edition? At thisstage, whilst there is very little detailed information about the changes in the Edition commentators are not expecting a radically different form to be produced. Instead, the likely areas of change relate to A simplification of some of the language an updating of some of the definitions a simplification of some of the procedures.
1.5	Before looking further at some of the areas that have attracted critical comment it is helpful to briefly consider the history and background of the form and how it is intended that it should work.

2.	HISTORY & BACKGROUND

2.1	The ECC form of contract is, in many ways, radically different from other standard forms in use in the construction and engineering industries. Those who drafted it would no doubt agree with and welcome that remark. However, it does mean that the ECC presents particular challenges for Employers, Contractors and Consultants alike.

2.2	In 1991, the ICE published a consultative edition of the New Engineering Contract. The document was used successfully in a number of projects in the UK and abroad. Comments from users were submitted to the ICE, who published the first edition proper in 1993.

2.3	Many will recall that in his Report, "Constructing the Team" published in 1994, Sir Michael reserved high praise for the ECC. He said that its approach was "extremely attractive" and that it contained "virtually all the assumptions of best practice" recommended in his Report. Sir Michael did however, suggest a number of amendments, including a change of name to the "New Construction Contract". He recommended to clients that one third of Government funded projects over the following four years should use the ECC and that its use (as amended) by private sector clients should be strongly promoted by client and industry bodies.

2.4	The ICE took on board Latham's recommendations in the second edition, which was published in 1995. There was a change of name, but not the one suggested by Sir Michael Latham. The ICE decided to call the second edition 'the Engineering and Construction Contract' (ECC).

2.5	Since the publication of the second edition of the ECC, there have been a number of significant developments.

2.6	In April 1998, the ICE published Addendum Y(UK)2, which introduced amendments intended to make the ECC compliant with the Housing Grants, Construction and Regeneration Act 1996 ('the Act'). Whilst the first edition of the ECC had satisfied most of the principles supported by Sir Michael Latham, by the time those principles had been adapted and amended by Parliament and various consultative bodies, the results in the form of the Act were somewhat different. There was therefore a need to amend the ECC and in particular its adjudication provisions.

2.7	n April 2000, the ICE published Addendum Y(UK)3, dealing with the Contracts (Rights of Third Parties) Act 1999. This legislation allowed contracting parties to provide specifically for enforceable third party rights within any contract. In line with the approach taken by other standard forms, Addendum Y(UK)3 expressly excludes the operation of third party rights legislation.

2.8	In June 2001, Option X12 the partnering option was published. More recently a draft term contract has been distributed for consultation.

2.9	The 3rd Edition has been under discussion by the ICE for over a year. As mentioned above, it is understood that this new edition will not be a radically different document. It is apparently intended however that it should take on board feedback and comments from users and to address some of these issues.

3.	ECC CONCEPTS

3.1	The ECC was intended to represent a complete rethink of the then existing approach adopted by standard form construction and engineering contracts. Unlike the other standard forms, it is designed to reflect the workings of modern project management. One of the principle aims of the ECC is to facilitate flexibility, for example, of the pricing mechanism (and therefore the allocation of risk), making it suitable for a large spectrum of projects.

3.2	The ECC therefore differs significantly from forms such as ICE and FIDIC as it provides the parties with flexibility to tailor the contract to reflect the desired risk allocation and other parameters of that particular project. More than this though, it also contains a number of concepts which differ significantly from those found in other standard form contracts. These include: the roles of the Project Manager and Supervisor; the fact that the programme is a contractual document prepared to specific parameters with an obligation to update regularly and on the occurrence of specific events; the provision of a number of pricing method options allowing contemporaneous costing of changes; the provision for Compensation Events; the introduction of the new concept of Work Information and Site Information; the allocation of design responsibility which is fully flexible in terms of extent, and also the Contractor's coordination role; the provision for a joint obligation to notify defects and control of the correction period; and the introduction of the Scope of Contract Works and Weather Measurement (in the context of changes).
3.3	In relation to dealing with Risk the ECC demands a new approach from the parties, with greater communication and transparency. Problems should be identified, communicated and resolved early with increased co-operation between the parties.

3.4	The two principles upon which the ECC is based and which impact upon the objective of stimulating good management are: Foresight applied collaboratively mitigates problems and shrinks risk; and Clear division of function and responsibility helps accountability and motivates people to play their part.
3.5	The aim of the ECC is to enable the parties to achieve their own objectives more consistently than has been possible using alternative forms of contract. Its use is intended to lead to a much reduced risk to the Employer of costs and time overruns and of poor performance of the completed projects. It should also lead to a much increased likelihood of achieving a profit for the Contractor, subcontractors and suppliers.

4.	OBJECTIVES

4.1	The stated objectives for the design of the ECC contracts were to make improvements in terms of the following: Flexibility Clarity and simplicity Stimulus to good management
4.2	Flexibility
	4.2.1	The ECC is intended for engineering and construction contracts both in the UK and Internationally. It is also intended to take into account - whether the Contractor has full, some or no design responsibility.

	4.2.2	The ECC is intended for engineering and construction contracts both in the UK and Internationally. It is also intended to take into account - whether the Contractor has full, some or no design responsibility.

	4.2.3	The parties can therefore build upon the Core Clauses by choosing a pricing mechanism to reflect the risk allocation which is required and supplement this with any of the secondary options which they may require.

4.3	Clarity and Simplicity
	4.3.1	The authors also chose to avoid 'legalistic' language in favour of 'every day' language in an attempt to ensure that it was clear and simple although in the areas of insurance, disputes and termination, some phrases or terms which have specific meanings have been retained.

	4.3.2	The design of the ECC is based on flow charts of the procedures to be followed by the parties to the contract. The ECC 'package' includes a separate book (and now CD Rom) with flow charts underlying the clauses of the contract. For example, flow chart 14 reflects the provisions of Section 14 which address the roles of the Project Manager and Supervisor.

4.4	Stimulus to Good Management
	4.4.1	Every procedure is intended to contribute to rather than detract from the effectiveness of the management of the Works.

	4.4.2	Notable examples of the procedures in the ECC which are designed to stimulate good management and collaboration are: the early warning procedure, the compensation events mechanism, and the introduction of the programme as a contract document.

5.	THE STRUCTURE OF THE ECC

5.1	Introduction
	5.1.1	As noted above, the ECC is a modular contract. It consists of nine Core Clauses, running at under 30 pages, which are combined with one of the six main options and any (or none) of the secondary options which are optional additions to the contract.

	5.1.2	One of the key aims of the ECC was to provide a more straightforward, less legalistic framework. With a view to achieving this, the number of clauses was minimised with much of the necessary information to be contained in the Contract Data, Works Information and Site Information. These sources of information therefore play an important role in the operation of the ECC and care must be taken when compiling them.

5.2	Core Clauses
	5.2.1	The Core Clauses are arranged in the following 9 sections:

	5.2.2	Core Clause 1 - General Acting in a spirit of mutual trust and co-operation Identified and defined terms Interpretation of the contract and law of the contract Procedure for communications Roles of the Project Manager and the SupervisorSubmission of proposals by the Contractor to add to the Working Areas Details of an early warning procedure Procedure to deal with any ambiguity or inconsistency in or between the contractual documents Compliance with health and safety requirements stated in the Works Information Notification by the Contractor of any illegal and impossible requirements
	5.2.3	Core Clause 2 - The Contractor's main responsibilities Provision of the works in accordance with the Works Information The Contractor's general design responsibilities and the procedure for its acceptance by the Project Manager Grant of licence to the Employer to use and copy the contractor's design for various purposes The Contractor's responsibility with regards to design of equipment The employment, replacement and removal of people Co-operation with 'Others'3 by the Contractor Sub-contracting of the works by the Contractor Obtaining of approval for Contractor's design Provision of access to the work for various people by the Contractor Compliance by the Contractor with instructions
	5.2.4	Core Clause 3 - Time Start and completion of work; certification of Completion Details regarding submission, acceptance and rejection of programme not identified in the Contract Data Details of contents of revised programme and when these are required Possession, access and use of the site; provision of facilities and services by the Contractor Instructions to stop, not start, re-start or start work by the Project Manager Take over of the site and works by the Employer Instructions to submit quotations for acceleration Others are people or organisations who are not the Employer, the Project Manager, the Supervisor, the Adjudicator, the Contractor, or any employee, Subcontractor or supplier of the Contractor.
	5.2.5	Core Clause 4 - Testinq and Defects Process dealing with tests and inspections required by the Works Information and the applicable law Action where testing and inspection is required before delivery Details of searching for defects by the Contractor Correction of defects by the Contractor including access to and use of the works; issue of Defects Certificate by the Supervisor Procedure for acceptance of defects Payment of uncorrected defects by the Contractor
	5.2.6	Core Clause 5 - Payment Procedure for assessment by the Project Manager of the amount due Certification of payment Inclusion of the Contractor's costs in the fee percentage if not in the Actua
	5.2.7	Core Clause 6 - Compensation Events What constitutes a compensation event Procedure behind notification of compensation events Procedure for submission of quotations Method of assessment of compensation events Circumstances when the Project Manager assesses a compensation event and time limits for doing so Means of implementing a compensation event
	5.2.8	Core Clause 7 - Title Title to equipment, plant and materials passing from the Contractor to the Employer Circumstances leading to marking of equipment, plant and materials outside the Working Areas When the Contractor is to remove equipment from the Site Extent of the Contractor's title to objects and materials within the Site; notification of finding objects of certain value
	5.2.9	Core Clause 8 - Risks and Insurance All other risks to be carried by the Contractor Replacement of and repairs to works, plant and materials by the Contractor Indemnification by each party and extent of liability Details of insurance cover Submission and acceptance of, contents of, compliance with and extent of insurance policies Where the Contractor fails to insure, the Employer insures and the Contractor pays Submission and acceptance of the Employer's insurance; where the Employer fails to insure, the Contractor insures and the Employer pays
	5.2.10	Core Clause 9 - Disputes and Terminations Table detailing method for settlement of disputes Details of adjudication process Role of the Adjudicator including acting as an independent adjudicator and extent of his powers; change of identity of the Adjudicator Details of review by tribunal where a party is dissatisfied with the decision of the Adjudicator or lack of it List of the Employer's risks Table detailing procedure for termination List of reasons for termination Procedure following termination Calculation of payment due on termination

5.3	Main Options
	5.3.1	The above core clauses are combined with one of the main options which determine the pricing mechanism of the contract. The chosen option must be identified in the first statement of part one of the Contract Data. The six options, A to F, consist of the following:

	5.3.2	Option A: Priced activity schedule: This is a fixed price contract identified by various activities in the schedule. The Contractor prepares the schedule and it is up to him to identify those parts of work which he wishes to price. As the Contractor is only paid for completed activities in the activity schedule, the preparation of the schedule also determines the cash-flow. This acts both as an incentive for the Contractor to finish the activities and means that there is no need to assess the value of a partly completed activity.

	5.3.3	Option B: Payment measured rates by reference to Bills of Quantities: This is the pricing mechanism traditionally used by ICE 6m Edition and FIDIC. However, this approach is not favoured by the authors of the ECC who suggest that it should be the least preferred option.

	5.3.4	The use of this traditional re-measurement pricing mechanism is foregoing an opportunity to determine the desired risk allocation between the parties in conditions where it would have been possible to quantify the price with at least a degree of certainty. While civil engineering projects in particular are often uncertain in scope, there are also many projects such as pipelines, energy production and electronics contracts which bring with them a greater degree of certainty and for which a more tailored risk allocation is more appropriate.

	5.3.5	Options C & D: Payment to the Contractor of actual cost plus a fee: Here the actual cost is measured against a target cost. The Contractor shares a percentage of savings and pays a percentage of cost overrun. The percentage is determined at the outset of the contract by the Employer. This can be extended to include, for example, the designer. Even if the designer is on a fixed fee, he can be rewarded for pursuing potential design savings by sharing in such savings. This incentive should work both ways, if the final cost overruns the target cost, then the designer would also have to absorb some of this. In practice Options C and D are tending to be amended so that the Contractor is responsible for 100% of any cost overrun thereby effectively turning these Options into Guaranteed Maximum Price forms. Such an amendment will of course encourage a Contractor to unnecessarily inflate the Target Cost to protect its margin thereby defeating the main object of the forms.

	5.3.6	Option E: Cost reimbursable contract: In Option E, the Contractor is paid actual cost plus fee. This option is only suitable in exceptional circumstances where the value of the works is unknown at the outset of the contract.

	5.3.7	Option F: Management contract option : In this option, the Contractor is only paid a fee.

5.4	Secondary Options
	5.4.1	The chosen Secondary Options, together with the chosen primary option, must be identified in the first statement of part one of the Contract Data. They are as follows: Option G: Performance Bond Option H: Parent Company Guarantee Option J: Advance Payment to the Contractor Option K: Multiple currencies (not to be used with Options C, D, E and F) Option L: Sectional completion Option M: Limitation of Contractor's Liability for his design to reasonable skill and care Option N: Price Adjustment for Inflation (not to be used with Options E and F) Option P: Retention (not to be used with Option F) Option Q: Bonus for Early Completion Option R: Delay Damages Option S: Low performance damages Option T: Changes in the law Option U: The Construction (Design and Management). Regulations 1994 (to be used for contracts in the UK). This option must be used for UK contracts only and will not be used for other contracts. Option V: Trust Fund. This establishes a trust fund to secure payments in the event of the liquidation of the contractual pyramid, and will also only be used for projects in the UK. Option Z: Additional Conditions of Contract
	5.4.2	One of the aims of the ECC is that the conventional view that either time, cost or quality tends to be compromised with traditional, management or design and build procurement respectively can be discarded when the appropriate ECC Secondary Options are selected.

5.5	Contract Data
	5.5.1	The term 'Contract Data' refers to data which exists at the Contract Date. It defines the details of the agreement which is in the contract and is therefore a key document in any contract using the ECC. In fact, it is similar to an appendix used in other forms of contract. Its purpose is therefore to provide data as required by the conditions of contract and by a particular contract. These conditions of contract make provisions for certain changes such as replacement of key people, change of completion date and the replacement of the Adjudicator.

	5.5.2	It is essentially a 'fill-in-the-blanks' exercise, and care should be taken in doing so as the information given provides a significant role in the operation of the ECC. Contract Data Part One is filled out by the Employer and issued to tenderers, whilst Contract Data Part Two is completed and returned by a tenderer as part of his offer.

	5.5.3	Part One comprises two sections: statements given in all contracts (such as a description of the works, key people, site boundaries, etc.); and optional statements (such as the arbitration procedure, programme dates, performance bond amounts, instalments and repayment periods, etc.).
	5.5.4	Part Two is divided into three sections: statements given in all contracts (such as name and address of the Contractor, key people, etc.); and optional statements (depending on the terms of the invitation to tender may include completion date, bill of quantities, programme, etc.); and data for schedule of costs components.
	5.5.5	There is no requirement in the ECC that the Contract Data be signed and a definition of the Contract Data is not set out. This means that there is doubt over whether the Contract Data would be incorporated into the contract. Therefore, it is prudent to attach the Contract Data to the signed ECC contract.

5.6	Works Information
	5.6.1	The documents containing the Works Information provided by the Employer are identified in part one of the Contract Data. The Works Information contains: all the relevant specifications, bill of quantities and drawings provided by or on behalf of the Employer; health and safety requirements; statements of any constraints such as required sequences and site access restrictions; details of design to be carried out by the Contractor; details of bonds and warranties which are required; particular requirements with regard to sub-Contractors; and other information which is relevant to the project.

5.7	Site Information
	5.7.1	The documents in which the Site Information is contained are also identified in part one of the Contract Data. Site Information may include the following: sub-soil investigation, borehole records and test results; reports obtained by the Employer concerning the physical conditions within the Site or its surrounding. This may include mapping, hydrographic data and hydrological information; references to publicly available information about the Site and its surroundings such as published papers and interpretations of the Geological Survey. The purpose of listing these references is to help a tenderer to decide his method of working and programme. Not only factual information but physical conditions on the Site and its surroundings are included in the Site Information. Interpretation is a matter for the Contractor. However, the Employer may wish to include interpretative information such as infra-geological section; information about piped underlay services; and information about buildings, structures, plant (including machinery) adjacent to and on the Site.
	5.7.2	It is important that the parties ensure that all necessary information is actually included within the Contract Data, the Works Information and Site Information. It is not sufficient to focus on the Core Clauses, the Main Options and the Secondary Options alone.

6.	AREAS THAT HAVE ATTRACTED CRITICAL COMMENT

6.1	Language and Brevity
	6.1.1	The language used and the new terms introduced have proved to be a double-edged sword; while intending to promote clarity and simplicity, in the opinion of some commentators, these have led to increased uncertainty and have been cited as being amongst the main reasons for a general reluctance to use the contract.

	6.1.2	It is often said that one of the greatest difficulties is with the use of the present tense in the form and the resultant difficulty in deciding whether a provision is descriptive or prescriptive. Clause 10.1 addresses this problem to an extent in that it requires the parties to 'act as stated in this Contract' thereby providing that descriptive provisions are in fact obligations.
	6.1.3	A greater issue is perhaps the brevity of the form, when compared to other standard contracts. Whilst in principle any attempt to reduce the length of contracts should be applauded, where this is achieved at the expense of clarity then the drafting cannot be considered to have been successful.

6.2	Definitions
	6.2.1	Clause 11.2(3), defining the Contract Date, begs the questions, what is 'this contract' and when did it come into existence? The 'contract' is also not defined and there is no entire contract or reliance provision which gives rise to yet further questions. Are the works carried out prior to contract covered by the contract? Are monies paid prior to contract on account of sums due under the contract or not? This lack of definition also increases the risk of misrepresentation arguments and pre-contract qualifications undermining contract.

	6.2.2	Clause 11.2(4) There is some debate as to what 'incidental work' means. It has been argued that this could be interpreted as a restriction on the nature of varied work which the Contractor can be instructed to perform. In the absence of such an interpretation, there is arguably no limitation whatsoever on the number and type of variations that can be instructed by the Project Manager given that variations are not dealt with expressly in the ECC contract. This arises because: the Contractor has to provide the works in accordance with the Works Information (see clause 20.1). The Project Manager may change the Works Information (clause 14.3). The Contractor has to obey the Project Manager's instructions (clause 29.1).
	6.2.3	Does the definition of Works Information in clause 11.2(5) include that which is shown rather than specified and described in drawings? In addition, is a programme or methodology a 'constraint' on how the Contractor provides the Works ?

	6.2.4	The same issue arises in relation to the definition of Site Information in clause 11.2(6).

	6.2.5	In relation to completion whilst the ECC sought to avoid arguments about whether completion has occurred which can plague traditional standard forms, by attempting to define completion in clause 11.2(13), this approach has in turn given rise to the problem that completion could be delayed by the failure to deliver a document/manual if care is not taken with the drafting of the Works Information.

	6.2.6	However, clause 11.2(12) doesn't actually say what the Completion Date is or will be in the event that it is changed in accordance with the contract.

	6.2.7	The definition of Defects in clause 11.2(15) gives rise to a number of questions: Why is it only Contractor designed works which must comply with the applicable law ? What about compliance with standards and codes of practice, planning / statutory / third party consents ?
	6.2.8	Clause 12 dealing with Interpretation provisions is wholly deficient. It fails to refer to amendments / re-enactments of specific standards, codes of practice, regulations and successor authorities/agencies.

	6.2.9	The Accepted Programme is defined as the programme identified in the Contract Data or is the latest programme accepted by the Project Manager. The latest programme accepted by the Project Manager

6.4	Responsibilities of the Contractor
	6.4.1	The Contractor's main responsibilities are set out in section 2 of the ECC (clauses 20-29).

	6.4.2	The primary obligation is to Provide the Works in accordance with the Works Information. It is therefore immediately obvious that this needs to contain an enormous amount of detail to ensure that the Contract is effective. However what about the need to ensure that the Works are in accordance with legal and regulatory requirements; planning, statutory and third party consents; applicable standards and codes of practice; and the terms and conditions of the contract?

	6.4.3	The intended flexibility of the ECC in relation to Contractor design is evident from the terms of clause 21.1, which states that "the Contractor designs parts of the works which the Works Information states he is to design". This raises the question as to whether 'states' includes implied design; and it would certainly be preferable to make this clear. The particulars of the Contractor design have to be submitted to the Project Manager for acceptance. The Project Manager may decide not to accept the design on the basis that it does not comply with the Works Information or that it does not comply with the applicable law. The Contractor it not permitted to proceed with the relevant work until the design has been accepted. There is no mention however of how the Contractor is to go about his design, the parameters within which he has discretion to design and in what manner he is to design. There are also no express obligations to comply with planning, statutory and third party consents, applicable standards or codes of practice (Clause 21.2). All of these gaps need to be filled by the Works Information raising the possibility of conflicts between this and the Terms and Conditions.

	6.4.4	There is also a need for a provision so that the production and review of design submissions is programmed.

	6.4.5	Whilst design responsibility (i.e., the scope of the works to be designed by the Contractor) is therefore dealt with very briefly in the ECC, design liability is not dealt with at all. The law is clear that where a design and build contract is silent upon the point, a design and build contractor will have a fitness for purpose obligation. He will not have the benefit of the so-called 'state of the art' defence and he may also have difficulty in obtaining professional indemnity insurance in respect of his design work. Even if insurance cover is available, it may be at prohibitively expensive premiums.

	6.4.6	Other standard forms of contract, such as JCT98 With Contractors Design, include a provision limiting the liability of the design and build contractor to reasonable skill and care ie that of a professional engaged under a traditional form of contract. The fundamental point to note about the ECC is that there is no such limitation on design liability in the core

	6.4.7	Instead you have to look to include Secondary Option M (which could easily be missed by a simple typing error) which provides that ("the Contractor is not liable for Defects in the Works due to his design so far as he proves that he used reasonable skill and care to ensure that it complied with the Works Information") to gain this protection.

	6.4.8	In relation to People and Sub-contractors, clauses 24.1 and 26.2 are unnecessarily narrow from an Employer's perspective. There are numerous additional reasons why a Sub-contractor may not be acceptable to the Project Manager; for instance he may not have been the sub-contractor identified in the Contract data or the Project Manager may be concerned about his financial standing or have had a previous bad experience with him. There are also numerous additional reasons why a key person replacement may not be acceptable to the Project Manager; for instance previous bad experience, criminal record, security risk etc.

	6.4.9	Finally and in particular where Options C or D are used, there are also numerous additional reasons why a particular form of sub-contract may or may not be acceptable to the Project Manager. Most Employers would argue that they should be entitled to reject any sub-contract which they do not like the look of. clauses.

6.5	Communication
	6.5.1	Clause 13.1 states that any instruction, certificate, submission, proposal, records, acceptance, notification and reply which is required by the contract has to be communicated in a form that can be read, copied and recorded. This is generally understood to require communications to be in writing.

	6.5.2	Extensions to the period for reply may be agreed by the Contractor and the Project Manager before the reply is due. Given that a failure to respond to a communication within the period required by the contract is a compensation event, at first sight it looks as if there is a strong disincentive to the Contractor to agree such extensions. However, the Contractor should be mindful of clause 10.1, i.e., the requirement to act in a spirit of mutual trust and co-operation (whatever it means).

	6.5.3	It is also noteworthy that clause 13.8 does not permit the Project Manager to do other than accept or withhold acceptance of a submission by the Contractor which may be undesirable when considering a series of designs from the Contractor.

6.6	Ambiguities and Inconsistencies
	6.6.1	These are dealt with in very short order in clause 17.1. Both the Project Manager and the Contractor have an obligation to notify the other as soon as they become aware of an ambiguity or inconsistency in or between the contract documents. The Project Manager must then give an instruction resolving the ambiguity or inconsistency.

	6.6.2	This clause has attracted some criticism for being extremely widely drafted. It does not simply require the parties to identify ambiguities and inconsistencies within the Works Information. The resolution of these inconsistencies might lead to a change in the Works Information, which in most circumstances is a compensation event. The provision also appears to place an obligation on the Project Manager to resolve ambiguities and inconsistencies in the Contractor's design.

6.7	Programming Provisions
	6.7.1	The detailed requirements of the programme are extremely comprehensive. For example, note the requirements for: a method statement for each operation, identifying the Equipment and other resources which the Contractor plans to use; the order and timing of the work of the Employer and Others; provisions for float, time risk allowances, health and safety requirements and the procedures set out in the contract; other information which the Works Information requires the Contractor to show.
	6.7.2	It is clear from the final point that there is potential for the programme requirements to be even more detailed.

	6.7.3	In the Option C target contract with activity schedule, clause 31.4 requires the Contractor to show the start and finish of each activity on the activity schedule on each programme.
	6.7.4	There are a number of points that can be made about the time/programming clauses of ECC: The combination of a binding programme plus binding method statements makes these provisions very onerous from a Contractor's perspective. There is no requirement that the Contractor should start on or about a particular date. Instead, in clause 30.1, there is a prohibition on the Contractor starting work before the first possession date; There is no express provision to the effect that the Contractor should proceed regularly and diligently; The Contractor is not obliged to use best endeavours to prevent any delay. Clause 33.1 seems to make possession of the Site conditional upon there being an accepted programme in existence. Is it intended that if the Contractor fails to submit or gain approval of his programme, then he is not entitled to possession? Clause 34.1 allows the Project Manager to instruct the Contractor to stop or not start any work and later instruct him to re-start it. Does this mean that the Project Manager can effectively re-sequence the works by instructing the Contractor to stop certain parts of the works whilst allowing the Contractor to proceed with others? Clause 35 does not identify what constitutes 'Take Over' and also suggests that the Employer can take early possession of part of the Works simply by taking over a given part whether completed or not. However, the consequences of such early taking over upon the Contractor's obligation to complete the Works by the Completion date or otherwise are not set out.
	6.7.5	There is also no provision for liquidated and ascertained damages in the core clauses. The LADs provision can be found in secondary option R. In the absence of secondary option R, in the event of late completion, the Contractor will be liable for general damages for delay.

6.8	Testing and defects
	6.8.1	Neither 'test' nor 'inspection' is defined and so it will be for the parties to include these details in the Works Information.

	6.8.2	Further, whilst clause 40.6 provides that the Contractor shall pay for any repeat testing, there is no specific provision identifying who pays for the initial inspection/test. Is it to be presumed that the party carrying out the test/inspection will pay for the cost?

	6.8.3	The supervisor has the power to instruct the Contractor to search (clause 42), however, this is not expressly linked to defects. Whilst there is likely to be an implied term that searching is linked to finding defects, the clause is unnecessarily opaque.

	6.8.4	The Contractor is obliged to correct 'Defects' whether or not the supervisor notifies him of them6 but then only provides for an express period for the correction of notified ones. Furthermore, no distinction is made between the timing for the correction of major as opposed to minor defects and those arising before and after completion. The clause needs re-drafting so that defects notified prior to completion are rectified within a reasonable time and completion does not occur until they are rectified. Defects notified post-completion are rectified within a reasonable period of notification not exceeding the defect correction period.

6.9	Disallowed Costs
	6.9.1	In relation to Option C one of the provisions to cause problems in practice has been clause 11.2.30 dealing with the Project Manger's ability to deduct 'Disallowed Cost'. Arguably the wording here is not tight enough to act as 'brake' on any 'rogue' Project Manager.

6.10	Early warnings
	6.10.1	Clause 16.1 places an obligation on both the Contractor and the Project Manager to give an early warning by notifying the other as soon as either becomes aware of any matter which could: increase the total of the Prices; delay Completion; or impair the performance of the works in use.
	6.10.2	Clause 63.4 states that if the Project Manager notifies the Contractor of his decision that the Contractor did not give an early warning of a compensation event which an experienced Contractor could have given, the event is assessed as if the Contractor had given early warning.

	6.10.3	This wording causes some difficulties. It appears at first sight that it does not matter whether the Contractor gives an early warning notification or not. However, the clause probably operates to limit the assessment of the compensation event to the assessment that would have been made, had the early warning been given. In other words, the Contractor cannot make additional recovery. See also clause 11.2.30 in relation to Disallowed Cost.

	6.10.4	There is no express sanction on the Project Manager for failure to give an early warning. However, such a failure might be seen as a breach of the requirement to act in a spirit of mutual trust and co-operation. In theory, that would entitle the Contractor to damages. However, in practical terms, there would be a potential breach of contract by the Employer, which is in itself a compensation event (see clause 60.1(18)).

6.11	Compensation events
	6.11.1	There is no definition of 'compensation event' in the Contract. Rather the Contract lists events which are to be compensation events. By reference to Clause 62.2, a compensation event is essentially an event which can increase the Prices and/or delay completion,

	6.11.2	Compensation events (clause 60.1) which have attracted comment, include: Failure to provide something by the date in the accepted proqramme (clause 60.1(3)) - This could be extremely onerous on the Employer. The use of the word 'something' is potentially very wide. It should also be qualified such that the cause of the delay is not attributable to the Contractor. The same qualification needs to apply to clause 60.1.(4) and 60.1(5). Changinq a decision - The word 'decision' is not often used in the ECC. Does this clause therefore only refer to those areas in the contract where a 'decision' is mentioned? In other words, does it relate to other forms of communication such as an instruction? If it is given a wide meaning and the Project Manager or supervisor goes back on any communication given to the Contractor then the Employer could potentially be liable. Withholdinq an acceptance - This requires a certain amount of crystal ball gazing as this means that the Employer either needs to set out every possible reason why acceptance might not be forthcoming or alternatively some form of general discretion provision to try to cover this. Physical Conditions - This is likely to be construed much more widely than 'ground conditions'. The reference to "not weather conditions" as opposed to "not due to weather conditions" may also not exclude floods. Finally, the wording "conditions which an experienced Contractor would have judged" is on one view extremely uncertain.
	6.11.3	The notification procedure is lengthy and has to be carried out within very tight time constraints and therefore the practical difficulties and costs of implementing it can be considerable. For example, any circumstances which fall within the definition of a compensation event must be notified by the Contractor within two weeks of the event. These notices in turn are followed by quotations, and where appropriate, revised quotations.

	6.11.4	Consequently, it is not uncommon for the parties to recognise at an early stage of the contract that this system of notices and quotations is impracticable and agree to replace it with a simpler procedure.

	6.11.5	Clause 63.3 in relation to the assessment of delays is silent as to the treatment of float and/or time risk allowances in the Accepted Programme as provided for under clause 31.2.

	6.11.6	The wording of clause 63.4 is as has already been noted, not as clear as it might be. There is no guidance for the Project Manager in applying this test but the Project Manager must notify the Contractor that he did not give early warning and it is open for the Contractor to take the matter to adjudication. It can be seen that the application of this clause could lead to conflict rather then have a preventative effect because of the uncertainty of the test.

6.12	Adjudication
	6.12.1	he secondary option, Y(UK) 2 replaces core clause 90 of the ECC with the intention of retaining the principles of the Adjudication provisions in the NEC but at the same time complying with the Construction Act.

	6.12.2	However, the Court in John Mowlem v Hydra-Tight Limited (6 June 2000) determined that it was not in fact compliant and therefore it should not be used without amendment.

7.	CONCLUSION
7.1	To what extent some of the issues in the preceding sections will be addressed in the 3rd Edition will not be clear until the end of March 2004 when the 3rd Edition is due to be circulated.

7.2	Whether or not those who have described the form as being 'fundamentally flawed' have cause to revise their views remain to be seen. However, it is suspected that those who are unhappy with the form will not be swayed by the 'tweaking' expected in the 3d Edition. For this group the level of uncertainty with the form will continue to cause them to avoid using it where possible. Moreover, the views of this group will be difficult to change given the limited opportunities to clarify the meanings in the form as a result of both the lack of commercial disputes and the increased use of adjudication as opposed to High Court litigation to determine any such disputes.

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