Under NEC3 ECC, we are Contractor and have been told to stop works on site and demobilise. We have received a PMI to have all plant and materials that is available to be delivered to site rather than store off site. There is a Z clause stating that the Contractor is responsible for all damage to works on site, can this be applied whilst we have no presence on site? There is insurance in place to cover this but this is additional and unforeseen risk to Contract.
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If I understand correctly, you have received a written instruction to stop works, demobilise, and to deliver to site all plant & materials purchased. No mention has been made in relation to termination.
Notwithstanding the z-clause, in accordance with the standard clauses the Contractor is still liable for damages to plant and materials on site (save for some exceptions such as war etc.) unless the Employer has taken over the works or after termination - again with some exceptions (see clauses 80.1 to 82.1).
Once the materials and plant are on site (or they have been marked for payment by the Supervisor), specifically within the Working Areas as defined in CD Part 2, their title passes to the Employer; they can only be removed afterwards with the PM’s permission or when they are no longer needed. See relevant details in core clause 7 (Title).
Therefore, I think that it would be prudent from your side to insist that the Employer formally takes over the works - if they refuse, you still have a case if they start using the works (unless there is such a provision in the Works Information); within 1 week of the take over, the PM has to certify accordingly. (clauses 35.1 to 35.3 refer).
Apart from the concerns regarding the materials, I think you should be wary of your responsibility as the Principal Contractor under the CDM rules - just because you are instructed to demobilise, you are not relieved from your liability for H&S on site etc. Make sure that you have arrangements in place and include the relevant costs in the CE for the instruction to demobilise.
I hope this helps.
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In addition to Peter’s answer, a few points regarding the instruction to stop work.
I presume that the instruction was from the Project Manager and formally given under the contract, otherwise you could be acting in repudiatory breach.
I would give an early warning and request a prompt risk reduction meeting. A few issues to discuss would be;
- confirm the reason for the instruction (see sub-clause 91.6) and ask that the PM includes this in their CE notification,
- confirm exactly what ‘work’ is suspended as there may be administrative actions which are required to continue, such as submission of a programme, etc.
- obtain an assumption from the PM as to how long the period of suspension is to continue for so you can assess the corresponding CE quotation,
- If it is a main option C, D or E, confirm what resources are required to be retained so that the matter of Disallowed Cost is not an issue.
I would also advise your insurers of the situation and comply with any particular direction to ensure that any insurance policy conditions are complied with.
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It is only works on site which we have formally been instructed to stop, all other works i.e. design is continuing. We are no longer the Principal Contractor on site at present but will be when we return to site.
Regarding Clause 35, what mechanism is in place upon return to site to complete works, as this is seems more to do with Completion?
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Andrew’s response above, answers your query about the mechanism (CE) for the period(s) you are away from site (save for the first bullet point regarding termination which is not your case); this is a CE arising from an instruction to stop work (cl. 60.1 (4) refers) and there should be an assumption stated by the PM about the duration (CE period).
Upon expiry of the CE period you are to return to site and resume works; if, however, the PM notifies that you are to stay away longer, that would be a correction to the assumption stated and therefore another CE under cl. 60.1 (17) (with a new assumption for the extended period).
I’m not sure if the above provides with with enough guidance to move forward. You will need to assess carefully all cost and time/programme implications (mainly on a forecast basis, including price increases etc.), and if the suspension pertains to substantial work and lasts for more than 13 weeks, you may be entitled to terminate; so make sure you get proper professional advice.
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