I’m developing a procurement strategy for the procurement of items in France, which will then be shipped to the UK. The strategy as it currently sits is to do this via the NEC Supply Contract. The scope can be split into two parts.
Manufacture the items in Supplier’s factory (France).
The Supplier pre-assembles the items in another location (France) ready for shipping.
The idea has been floated of having a Supply Contract for the first element of Scope, and an ECC Target Cost contract for the second element of Scope. The reason being there will be considerable interfaces with the second Scope element, which “could” be better managed through a Target Cost arrangement.
My question is – Do you see any issues with awarding an NEC ECC Option C in France, but being managed from the UK?
The negatives as I see them.
• Multiple contract arrangement with the Supplier providing items to themselves.
• Potential for cost under the Supply Contract being claimed under the Target Cost.
• Requirement for additional contract management / auditing
There is obviously a lot more detail to this, but would just like to test with NEC users what challenges / issues spring to mind.
Hi Ben, NEC3 or NEC4?
My question is how can the interfaces be better managed through an Option C - who thinks so and why?
The Supply contract is effectively an Option A type contract and is designed exactly for the purpose of manufacturing and fabricating items and delivering them, Delivery is a defined term and is effectively the same as Completion but there is no installation involved only delivery and possibly assembly.
With regards to your other questions, I see no problem with using Option C in France and managing it from the UK provided you don’t mean only from the UK i.e. never going to France. I would suggest that all contracts require some amount of face to face engagement along with physical checks in the areas where the work is being done, e.g. the factory.
Multiple contracts for the same thing are not a good idea for the reasons you have stated, i.e. the blurring of costs between the two contracts, the blurring of responsibilities and liabilities across the two contracts as well as possible payment issues, etc.
I would test the concept that “there will be considerable interfaces which could be better managed” - what are they and why?
The Option C will also place a much higher administration burden on the PM and require a Supervisor, also are all the provisions of the ECC relevant to a supply contract, probably not, i.e. look at the differences between the Accepted Programmes.
Hi Ben. I recently had a similar scenario in Australia. As the supplier is only supplying and assembing and not installing, there is no reason why you cannot just use an NEC4 Supply Contract for the entirity of the supply (including assembly). This avoids the complexity of multiple contracts interfacing with each other and the specific information about the supply and assembly, including locations, can be included in the Scope and the Supply Requirements. From my experience you also have to carefully consider things like insurance (during assembly, transportation between locations in France, transportation to the ferry, on the ferry, time sitting waiting for customs clearance, delivery to site, storage on site until installation), inspection at each location to ensure there is no damage, maintaining the items in storage until needed, liabilty for damage during installation and various defects liability periods.
Steve