Expert advice in minutes not days. Register it's free and ask your first question now.
  • Register
ReachBack is our free community help desk for construction professionals. A library of high-quality questions from real users with answers delivered and curated by a panel of industry experts.

4,087 questions

4,242 answers

450 comments

33,755 users

Register its Free

Download here

NEC ECC: Collaborative working/mutual trust & co-operation

+1 vote
59 views
There is a fully integrated team between the Employer & the Contractor. The Contract is Option "C" but pain/gain & target was removed, without LD's and includes a fixed fee payable on milestone achievement. The Employer has instigated a continuous exercise of identifying and raising opportunities which are reviewed weekly. These largely seek to mitigate the Contractor's risks and identify time and cost savings which will undoubtedly reduce programme duration and lead to an early completion. (Large Employer benefit.)
The Contractor is now trying to seek instruction to implement these opportunities although the Employer will not succumb to this as there is no change to the Works Information. The Contractor may simply stick to his original plan of work as it doesn't benefit him to finish early, only on time as he has guaranteed recovery of his defined cost.

What contractual obligation can the Employer rely on that means the Contractor has to take part in these discussions and implement the opportunity?
Clause 10.1 appears to be the only recourse however this can be taken out of context or used too meaningfully thereby overriding its intent. The problem seems to be that if too great a meaning is attached to it or relied upon above its intent, then what is the real use of it?

The Employer could incentivise the Contractor by introducing "gain" in order to realise opportunity (pay the Contractor a percentage of the saving for e.g.) or accelerate, however the latter is not ideal.
asked May 4 in NEC3 General by APW (420 points)  
   

1 Answer

+1 vote
I don't have the contract to hand in order to cite the correct clause references however I can explain the principle that underpins all Option C NEC3 contracts. It's quite simple really, the Party who's idea is implemented benefits the most. So if the Employer (through the PM) suggests an idea that saves time and/or money the target cost is reduced, however if the Contractor suggests and idea that saves time and/or money the target isn't reduced.

In the first scenario the target is reduced due because it was the Employer / PM who came up with the idea, however the Contractor still gets paid for the work. This payment maybe less than what he would have been paid before the idea was suggested, but he still gets paid the Defined Cost plus Fee of the work that he does and hence still makes a profit on those works.

In the second scenario the target isn't reduced because it was the Contractor who came up with the idea, however the Employer still saves money as the Defined Cost plus Fee is less than it would have been which creates more of a saving against target cost which the Employer benefits from in accordance with the share ranges and percentages stated in CD pt 1. The Contractor makes more profit than he would have as he still recovers profit from the Defined Cost plus Fee of the work done, but also recovers additional profit through a greater saving as the target cost isn't reduced this time.

Note that you can't rely on clause 10.1 to resolve every problem "in a spirit of mutual trust and co-operation". The clause says "act in accordance with the contract AND in a spirit of mutual trust and cooperation. You seem to be suggesting that mutual trust and co-operation trumps the written word in the contract when in actual fact it doesn't. You have to follow the contract AND do it in a spirit of mutual trust and co-operation.

I recently wrote an article on just this theme which can be found at http://www.neconsult.co.uk/mutual-trust-and-co-operation-walking-the-line/.

In my experience it's one area that integrated teams can overlook, they go too far over the line and the boundary between Employer and Contractor becomes blurred which leads to commercial confusion.
answered May 11 by Neil Earnshaw (5,550 points)