15 BuildLaw | Dec 2017
In this article the NEC is referred to generally and references are also made to the following two contracts from within the NEC suite: the Engineering and Construction Contract (“ECC”) and the Professional Services Contract (“PSC”)
Five key errors are made either singly or more often together when NEC document packages are collated.
• Incorrect use of the main pricing options
• Misunderstanding the role of the Works Information, Site Information and Contract Data
• Structuring amendments to the core and optional clauses incorrectly
• Inconsistent language and drafting style to the NEC
• Incorrect incorporation of specification
Incorrect Use of the Main Pricing Options
The most common problem is that monthly interim payments can be made as if the activity schedule used in Option A (Priced contract with activity schedule) is merely a breakdown of work to be undertaken similar to a contract sum analysis. It is not. The activity schedule (within Option A only) is a pricing document and the contractor’s entitlement to interim payments arises only when the activities listed in the activity schedule are completed. The document used to describe the works is the Works Information under the ECC.
Consultants new to the NEC approach sometimes simply group the services they are to provide under Option A of the PSC as set out in the RIBA Plan of Work Stages with each stage representing an activity. Unless corrected this could have a hugely adverse impact on the consultant’s cash flow as some RIBA Work Stages take many months to complete on sizeable projects.
Confusion also arises when parties confuse the use of the activity schedule in Option C (Target contract with activity schedule) with its use under Option A. In Option C the Contractor is paid the Defined Cost plus the agreed Fee. In this Option the activity schedule is used to assess compensation events and as a management tool.
Misunderstanding the role of the Works Information and Site Information
The ECC Works Information Guidance is a good place to start to understand the different purposes of the Works Information, Site Information and Contract Data and the relationship between them. The information to be set out in the Works Information is defined in the ECC as information “which either
specifies and describes the works or
states any constraint on how the Contractor Provides the Works” (ECC3 Clause 11.2 (19))
Conversely, Site Information should only comprise objective information on the physical condition of the Site, its access points, subsoil conditions, service media and surroundings. The purpose of the Site Information document is to assist the Contractor in preparing his tender, his method of working, design and programming.
Why is this important? The only document which, if varied by the Project Manager, entitles the Contractor to a compensation event is the Works Information (ECC3 Clause 60.1 (1)). Additionally, in judging the physical conditions on site in order to assess a compensation event, the Contractor is assumed to have taken account of the information in the Site Information (ECC3 Clause 60.2). It is important for these reasons and others, therefore, that the content of both documents are distinct and as comprehensive as possible.
Natural Justice and Adjudications
The general principle of natural justice is that each party must be given a fair opportunity to present its case. The adjudicative process is short and sharp due to the tight 28-day timescale (subject to any agreed extension of time) in which parties require to present their case and the adjudicator issues his or her decision. However, Lord Tyre made clear in his opinion that adjudications’ distinguishing features do not negate the principles of natural justice. Further, while it is open to parties to overturn an adjudicator’s decision in litigation or arbitration, more often than not an adjudicator’s decision is the final word on the dispute and as such the principles of natural justice are integral to adjudications.
Allegation of Breach of Natural Justice
ACL contended that the Adjudicator had breached the principle of natural justice by denying it a fair opportunity to present its case or to respond to BBP’s case. It was ACL’s position throughout the adjudication that the Adjudicator was following an unfair process. ACL’s allegation of a breach of natural justice referenced two main issues:
1- ACL’s Contra-Charge for Rectification Works
ACL had a contra-charge claim for works required to rectify the car showroom. The Adjudicator requested that ACL provide additional documentation the day before his decision was due. ACL complained that this request did not afford it requisite time and as such was a breach of natural justice. There were a multitude of issues for the Adjudicator to determine and his last minute request of ACL did not, in the opinion of Lord Tyre, open him to criticism. There was no breach of natural justice is this respect.
2- BBP’s Loss and Expense Claim
The Adjudicator requested an opportunity to visit BBP’s offices to inspect documents which evidenced the loss sustained by BBP as a result of ACL’s contract termination. ACL accused the Adjudicator of building BBP’s case and refused to attend the visit to BBP’s offices. Making reference to the principle of natural justice, the Adjudicator declined to make the visit without ACL. As a result BBP produced
the documentation required and this was sent to the Adjudicator and to ACL’s solicitors, although received late by the latter. ACL complained that it was disadvantaged and would not be able to respond meaningfully in the timescales to the additional BBP documentation.
Lord Tyre opined that the time afforded to ACL to respond was adequate. ACL’s refusal to participate in the visit was unreasonable and was a major factor in the requirement for the additional BBP documentation. Further, the Adjudicator had suggested a two day extension of time and ACL failed to respond. As such Lord Tyre found that ACL could not now complain of unfairness. In other words, you can’t have your cake and eat it!
Severability
BBP’s secondary position depended on severability. If a breach of natural justice was determined, the vitiated part of the decision could be severed and an award could be made to BBP based on the remaining part of the decision. Although Lord Tyre did not need to go into detail on this point, he provided a view: precedent is set against severance and although there were a number of different issues to be determined the matter was a single dispute. Lord Tyre found that deducting an amount from the Adjudicator’s award would have effectively re-written his decision and this was not permissible.
Comment
Lord Tyre’s decision is another example of the Court of Session paying deference to adjudicators’ decisions and the adjudicative process. Natural justice is important in adjudications, however it is to be balanced with the need for expeditious resolution of disputes. An adjudicator requires to act fairly in all the circumstances, however parties must also be sure they have acted reasonably during the adjudicative process should they intend to rely on a breach of natural justice to challenge an adjudicator’s decision.
The new edition of the New Engineering Contract (“NEC”) suite of contracts was launched this June: the NEC4. Rather than comment on the new contracts and changes introduced by NEC4 the purpose of this article is to address key failings often seen in the preparation and amendment of these standard forms of contract, whether the NEC3 or NEC4.
In this article the NEC is referred to generally and references are also made to the following two contracts from within the NEC suite: the Engineering and Construction Contract (“ECC”) and the Professional Services Contract (“PSC”)
Five key errors are made either singly or more often together when NEC document packages are collated.
Incorrect use of the main pricing options
Misunderstanding the role of the Works Information, Site Information and Contract Data
Structuring amendments to the core and optional clauses incorrectly
Inconsistent language and drafting style to the NEC
Incorrect incorporation of specification
Incorrect Use of the Main Pricing Options
The most common problem is that monthly interim payments can be made as if the activity schedule used in Option A (Priced contract with activity schedule) is merely a breakdown of work to be undertaken similar to a contract sum analysis. It is not. The activity schedule (within Option A only) is a pricing document and the contractor’s entitlement to interim payments arises only when the activities listed in the activity schedule are completed. The document used to describe the works is the Works Information under the ECC.
Consultants new to the NEC approach sometimes simply group the services they are to provide under Option A of the PSC as set out in the RIBA Plan of Work Stages with each stage representing an activity. Unless corrected this could have a hugely adverse impact on the consultant’s cash flow as some RIBA Work Stages take many months to complete on sizeable projects.
Confusion also arises when parties confuse the use of the activity schedule in Option C (Target contract with activity schedule) with its use under Option A. In Option C the Contractor is paid the Defined Cost plus the agreed Fee. In this Option the activity schedule is used to assess compensation events and as a management tool.
Misunderstanding the role of the Works Information and Site Information
The ECC Works Information Guidance is a good place to start to understand the different purposes of the Works Information, Site Information and Contract Data and the relationship between them . The information to be set out in the Works Information is defined in the ECC as information “which either
specifies and describes the works or
states any constraint on how the Contractor Provides the Works” (ECC3 Clause 11.2 (19))
Conversely, Site Information should only comprise objective information on the physical condition of the Site, its access points, subsoil conditions, service media and surroundings. The purpose of the Site Information document is to assist the Contractor in preparing his tender, his method of working, design and programming.
Why is this important? The only document which, if varied by the Project Manager, entitles the Contractor to a compensation event is the Works Information (ECC3 Clause 60.1 (1)). Additionally, in judging the physical conditions on site in order to assess a compensation event, the Contractor is assumed to have taken account of the information in the Site Information (ECC3 Clause 60.2). It is important for these reasons and others, therefore, that the content of both documents are distinct and as comprehensive as possible.
Ian Griffiths
NEC Contracts: How Not To Amend Them
UNITED KINGDOM
AUSTRALIAN CONTEXT
As detailed in the Interim Report; the Grenfell Tower fire has highlighted the need to hasten the momentum for regulatory reforms which were set in motion following the Lacrosse building fire in 2014.13
Evidence was given during the Inquiry that:
● There has been an apparent lack of movement by regulators' since the Lacrosse fire in 201414
● There have been 19 fires involving cladding worldwide since 200515
● There has been some remedial action in various jurisdictions worldwide ranging from the removal of cladding and changes to evacuation policy to changes to fire service doctrine16
● the Grenfell Tower fire tragedy was not only preventable but foreseeable17
● prior to the 2014 Lacrosse building fire, there were at least seven international fire events involving external facades constructed of highly combustible PE core ACP panels.18
GOVERNMENT RESPONSE FOLLOWING THE GRENFELL FIRE
The Interim Report has noted that government response to the Grenfell Fire has included:
● A request by the Hon Craig Laundy MP to the Committee to report its findings as early as possible to 'ensure we can protect and retain confidence in Australia's built environment and building and construction industries'.19
● Appointment of taskforces and audits by state governments into ACP cladding.
● The appointment by the Building Minister’s Forum (BMF) of an expert review to examine compliance and enforcement problems within the building and construction systems affecting the implementation of the NCC.20 An initial report to the BMF is expected in October 2017.
● The establishment of the Building Regulators' Forum (BRF) which met for the first time on 13 July 2017 to share, collaborate and consider best practice, coordinated response and escalation points for issues requiring consideration.21
● The implementation of a one stop shop website on 1 July 2017 by the BMF that provides general information on non-conforming and not compliant building products and a complaints platform.22
● Steps being taken by the Australian Building Codes Board to expedite and completing and adopt actions involving changes to the NCC from a comprehensive package of measures for fire safety in high rise buildings, developed following the Lacrosse Apartments fire in Melbourne.23
● Amendments to the NCC including a new Verification Method that adopts the external wall testing standard AS 5113 24
RECOMMENDATIONS BY INQUIRY
The Inquiry made eight recommendations including:
1. The implementation of a total ban on the importation, sale and use of Polyethylene core aluminium composite panels as a matter of urgency.
2. That Commonwealth Government work with state and territory governments to establish a national licensing scheme, with requirements for continued professional development for all building practitioners.
3. Imposing a penalties regime for non-compliance with the National Construction Code such as revocation of accreditation or a ban from tendering for Commonwealth funded construction work and substantial financial penalties.
4. Commonwealth government ensure the Federal Safety Commissioner is adequately resourced to ensure the office is able to carry out its duties in line with the new audit function and projected work flow
5.
6.
A full copy of the Inquiry Report appears at http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/
Economics/Non-conforming45th/Interim_report_cladding
David Glinatsis is the Director of Kreisson.
RELEASE OF INTERIM SENATE REPORT INTO NON CONFORMING CLADDING
CONT. -