Clause X16 - Take over and its impact on retention

NEC3 and NEC4 Contracts Payment
1

Under clause X16 of our NEC4 ECC (Option C) contract it states retention of 5% of our defined cost is to be held until:

X16.1 – The earlier of either: Completion of the whole of the works, or the date on which the Client takes over the whole of the works. In this case the Contract Data states our Client is willing to take over the works.

Following this, under X16.2, half of the amount retained is released.

My query here is on the definition of ‘take over’.

The Client is a water company. We believe once the final connection has been completed and they have use of the new asset, they have taken it over and should release half of the amount retained in the next assessment.

Often we have remaining activities which need to be undertaken before we achieve Completion. We are of the opinion that these remaining activities should not impact the release of the first half of retention, as the asset is being used for its primary function.

Is there any guidance on the definition of take over or does this need to be something which is agreed between the parties?

Many thanks.

2

Clause 35.2 states that take over is when the Client begins to use it however the release of retention is conditional on the take over being of the whole of the works, if the Client only takes over part of the works then no retention is released. The
meaning of the term works should be identified in Contract Data part one, you need to look at the meaning of this to determine whether take over has happened or not.

I suggest that in order to prevent an argument down the line you start this discussion with your Project Manager ASAP to clarify what the Completion requirements are as they should be either stated in the Scope or if not then the test at clause 11.2(2) would apply.