24/06/24
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Newsletter #12:
This is the Instruct newsletter, bringing you NEC contract insights, like shorts in hot weather, we are keeping you cool. Because NEC is cool, right?
This week we had an interesting discussion around Contract Data, let’s break down the key questions:
What is Contract Data?
Is it important? Surely its a tick box exercise?
Isn’t it just filed away once the contract is signed?
How do I ensure success when writing Contract Data?
Getting Contract Data wrong (as a Client or Contractor) can cost you the project!
Let’s go…
1. What is Contract Data?
Contract Data is the heart of the contract and its split into two parts, Contract Data Part One and Part Two. Part One is where the Client explains to the Contractor what they want to be built, how they want it built, and when they want it built.
Part Two is where the Contractor responds to the Clients requirements by saying ‘Yes we can do that, but this is how much it will cost you, here is our team, and these are our requirements, e.g. programme, risk etc.
Two parts create the whole and the whole explains to everyone involved what has been agreed. Once the contract is executed of course…
2. Is it important? Surely its a tick box exercise?
Saying Contract Data isn’t important is guaranteeing failure at the beginning. The Contract Data will be relied upon by everyone during delivery. Why? Because this is what it explains:
What is the Scope? - It’s in Contract Data
What are the boundaries of the site? - It’s in Contract Data
Is this a fixed price or cost reimbursable contract? - It’s in Contract Data
Who do I notify for communications? - It’s in Contract Data
The Data sets the baseline for all questions going forward throughout the contract.
Let’s explain some practical situations where the Contract Data will be needed…
3. Isn’t it just filed away once the contract is signed?
Filing the contract away is like buying an ice cream and choosing to eat it in 3 months time, it just doesn’t work!
Here is a real life scenario (NEC4 ECC Option C):
Contractor is claiming for Equipment costs in their monthly application. The Client doesn’t believe they are using this Equipment for the works (Schedule of Cost Components only allows Equipment used within the Working Areas). So what do we do? Here are the steps:
Document where the Equipment is being used, find the physical location. Is it on site or somewhere else?
Reference the Contract Data and determine:
The boundaries of the site (CD Part 1)
The working areas (CD Part 2)
Clause 11.2(20) Working Areas are the Site and those parts of the working areas which are necessary for Providing the Works.
Clause 11.2(17) The Site is the areas within the boundaries of the site
Cross reference the location of the Equipment with the Working Areas
If the Equipment is within the Working Areas then the equipment cost is acceptable, as long as it has been used to Provide the Works.
We couldn’t do this without the Contract Data, and this is just one simple example. Further issues include:
Assessing compensation events, you need the Scope from the Contract Data
Rates for Equipment
Assessing change to Site conditions, Contract Data Site Information
Changes to Key People, they are listed in the Contract Data
The list goes on…so how do we avoid this?
4. How do I ensure success when writing Contract Data?
Ensuring success is not as difficult as you might believe. It all boils down to accuracy and availability of information as well as having a contract team (Client, Contractor, Project Manager, Supervisor) who are all experienced in preparing and managing the contract.
Here are a selection of tips:
Be specific about your Scope, what do you want to be built? Detail is key.
Obtain as much information about the Site as possible, fewer surprises. E.g. ground investigation, trace services, test contamination
Specify the boundaries of the site very specifically
Include a period for reply which is acceptable to all parties and the contract speed.
Capture a robust set of timescales, Key Dates, access dates, and the completion date. Be certain that the dates achieve what you require as a Client, as well as being realistic for the Contractor
Use Payment to establish the financial boundaries of the contract, e.g. period for payment and interest rates
Compensation events are critical, ensure specific weather data is recorded at the location specified in the Contract Data
Establish liability boundaries and insurance requirements. Will the Client take additional liabilities, and does the Contractor have enough insurance cover?
Select appropriate X clauses, e.g. if you need part of the work completing by a specific date, include X5 and have Sectional Completion
Use Z Clauses when appropriate, i.e. to supplement the contract when it doesn’t meet the needs of the project. Do not use Z Clauses as a means to transfer risk of responsibility.
Why is Contract Data the biggest risk? If you get it wrong, you wont get what you want, it can take longer, it can cost more, and it will be an unpleasant journey through a poorly prepared contract without guiderails.
And wearing shorts in that situation will never keep you cool.
Reading Recommendations
To understand more about how to prepare and manage an NEC contract, the following guidance documents are available.
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