Acceptance of Activity Schedule by the Main Contractor

NEC3 and NEC4 Contracts
#1

If an Activity Schedule does not form part of the Contract documentation and is subsequently produced by the Subcontractor, what should the sequence of events be in respect to its agreement? I.e. an Activity Schedule has been produced and issued to the Main Contractor but has not been formally agreed nor rejected, does this document take precedence? Are there any defined timescales that should be adhered to with regard to agreement?

I understand the reasons as to why it may or may not be accepted but if it’s not formally rejected and/or an alternative proposal put forward by the Main Contractor, does the initial document produced by the Subcontractor prevail?

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#2

The ECS only provides for submission of a revised Activity Schedule in limited circumstances, it does not contain any rights or obligations in respect of not having an Activity Schedule in the first place, the contract assumes that it has been included by reference in Contract Data part two. I assume this hasn’t taken place as you say that it doesn’t form part of the contract documentation but it might be worth a quick look to confirm.

Assuming Y(UK)2 Housing Grants Construction and Regeneration Act 1996 (as amended) applies the Subcontractor has a right to interim / stage payments unless the contract duration is less than 45 days. Given the contradiction between the contract and legislation the Parties clearly need to find a way resolve this:

  1. Agree a contract variation (exchange of letters may be sufficient but if high risk / value a formal deed of variation or similar provided it complies with clause 12.3).

  2. Agree that the Activity Schedule can be submitted for acceptance under clause 55.3.

Failing this I’d advise the Subcontractor to submit an application for payment based on a reasonable valuation of the works completed. If the Contractor refuses to pay the amount applied for (or some other such some as they determine acting reasonably) it may be possible to adjudicate based on the fact the Contractor is not complying with the Act. The Act will imply certain terms into a construction contract that does not comply with it.

If it’s NEC4 you may want to consider escalation to Senior Representatives to get this resolved to avoid the expense of adjudication in the short term.

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#3

Thanks for your response Neil. In this instance it is a slightly unique scenario in that the Subcontractor is in effect still working from an ‘LOI’ (letter of intent) whilst the final Contract (NEC 3 Opt A) is agreed. There is a set value on the LOI which has since been exceeded (both in application and payment). The Subcontractor has been submitting interim applications and has received several payments to date exceeding the LOI as noted above. However they are now in a position where their most recent application(s) have been met with zero payment notices, the Main Contractors reason being that (1) the Subcontractor has not provided full evidence of cost (they have up to the value of the LOI but not thereafter) and (2) the Subcontractor has not provided an activity schedule (which they have as noted above it has just not been accepted by the Main Contractor). The Main Contractor has stipulated that they intend to value the works under the NEC Contract and make their own assessment of the stage works executed to date. My view is that this is incorrect for the following reasons:

  1. The Subcontractor has already provided an Activity Schedule
  2. The LOI has not been updated/extended to allow for the current works completed to date
  3. Evidence of cost to date should not have to provided as the Main Contract is NEC Opt A lump sum and since the LOI has been exceeded one would assume the Subcontractor is therefore working to the Contract albeit unfinalised.
#4

There could almost be a supplementary question off the back of this of this topic regarding Letters of Intent. If they are not updated to allow for the value of works applied for/completed to date, is a Subcontractor bound to obide by the terms and conditions set out in the letter or would the Main Contract prevail (even if it is yet to be agreed and signed by both parties)?