NEC Forum Tale of Two Contracts Ir. Ir. PAUL LEE PAUL LEE, , Kai - - PowerPoint PPT Presentation

NEC Forum – Tale of Two Contracts

Ir.

• Ir. PAUL LEE

PAUL LEE, , Kai Kai-hung hung

Assistant Managing Director

Hsin Chong Construction Company Ltd.

• P. 1

NEC Forum – Tale of Two Contracts

Ta Tale of two le of two co contra ntracts cts



Two almost identical contracts are running side by side. One contract is a NEC under Engineering & Construction Contract (ECC) option B while the other contract is governed by GCC. Both contracts are installing new sewerage pipes within indigenous villages in Lam Tsuen area. Both contracts are also supervised by Arup. The main contractor for both contracts is Hsin Chong Tsun Yip Joint venture. The main contractor is deploying two independent operating teams.



This presentation is about Hsin Chong Construction Company’s observations in three areas in comparison of contracts under NEC & GCC: (1) Manpower to run these two contacts (2) Time to resolve dispute (3) Compensation event (NEC) vs. V.O/EOT (GCC)



With the inherent NEC advantages, we will share some of the benefits that cannot be achieved by the traditional contract. NEC also provides the key to open new chapter to resolve disputes.

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NEC Forum – Tale of Two Contracts

Cont Contract act NEC NEC contr contract act – DC DC/2012/07 /2012/07 GC GCC con contr tract act – DC/2 /2012 012/0 /08 Title Lam Tsuen Valley Sewerage – Village Sewerage, Stage 2, Phase 1 (9.1 Km sewers & rising mains + 2 Pump Stations) Lam Tsuen Valley Sewerage – Village Sewerage, Stage 2, Phase 2 (9.1 Km sewers & rising mains + 2 Pump Stations) Contract Sum $173M Opti Option

• n B

B – Priced Priced contr contract act wi with th bills bills of

• f

quantit quantities ies $171M Schedule of Rates with bills of quantities Duration 33 months + 180days 40 months + 180days Instruction to work By Works Order By Works Order

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(1) Manpower to run these two contracts -

 During 1st 12 months construction period

NEC Forum – Tale of Two Contracts

Type ype of

• f manp

manpower er NEC NEC-DC/20 /2012 12/07 /07 GCC GCC-DC/20 /2012 12/08 /08 Office staff

Quantity surveyor (Accounting staff) 30 man-months. 18 man-months. Manager/agent (or sub-agent) 36 man-months. 24 man-months. Supporting staff 144 man-months. 96 man-months.

Site staff

No difference between DC/2012/07 and DC/2012/08

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NEC Forum – Tale of Two Contracts

(2) Time to resolve disputes

Major causes of disputes NEC clauses (DC/2012/07) GCC clauses (DC/2012/08) 1) Interpretation of the contract

Through early warning system and compensation event notifications, potential dispute can be discussed and resolved at early stage. Related matters can be resolved under compensation events within specified timeframe. Dispute is often taken time to resolve.

2) Interpretation of scope of works

Through early warning system and compensation event notifications, potential dispute can be discussed and resolved at early stage. Related matters can be resolved under compensation events within specified timeframe. Dispute is often taken time to resolve. Usually contractor is asked to complete disputed works first and may not be able to receive full payment until, sometimes, completion of contract.

3) Method of measurement and payment

Through early warning system and compensation event notifications, potential dispute can be discussed and resolved at early stage. Related matters can be resolved under compensation events within specified timeframe. Dispute is often taken time to resolve. Contractor usually receive partial payment.

4) Liability

Through early warning system and compensation event notifications, potential dispute can be discussed and resolved at early stage. Related matters can be resolved under compensation events within specified timeframe. Dispute is often taken time to resolve.

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(2) Time to resolve disputes

Issues raised & Situation updated in two contracts (during the 1st 12 months)

NEC Forum – Tale of Two Contracts

Issues Issues NEC NEC-DC/20 /2012 12/07 /07 GCC GCC-DC/20 /2012 12/08 /08

Works Orders 78 nos issued. 30 nos completed. 70 nos issued. 26 nos completed. Early Warnings 12 nos raised. 8 nos responded to within timeframe & settled with compensation event. 3 nos via letter or Request for Information (RFI). 3 nos are not yet settled because of no time bar. Direct fee percentage and OH/P Direct fee percentage is fixed in contract. O/H and profit is to be agreed. Utility 2 cases with the delays compensated/mitigated by compensation event. 3 cases. Time delay to be assessed.

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(3) Compensation event vs V.O./EOT

NEC Forum – Tale of Two Contracts

Item NEC contract (DC/2012/07) GCC contract (DC/2012/08)

1

Clause 60.1 (cover 22 items that can trigger compensation events). Clause 62 (main clause to cover V.O.). Clause 52 (cover EOT).

2

Compensation event covers both time and cost. V.O. usually covers the cost. Time is a separate issue that will be settled under other GCC clause.

3

Quotation must be based on built-up cost by using current market value (labor, materials, machines…etc..). 1) Quotation can be based on similar rate under existing BQ items. 2) Quotation can be selected from three or more individual pricings from suppliers/subcontractors.

4

There is no loss scenario for contractor because compensation event is based on current or fair market value. It is fair to all parties. Quotation may not be fair to either the contractor or employer if the adopted similar rate from existing item is not fair market value.

5

Contractor is entitled to Time & Cost for EOT due to Inclement Weather, Unforeseen Utilities and Unforeseen Circumstances. Contractor is entitled for Time compensation only for EOT due to Inclement Weather, Utility & unforeseen circumstances.

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(3) Compensation event vs V.O./EOT

Compensation event, VO & EOT Situation Update in these two contracts -

 During 1st 12 months construction period

NEC Forum – Tale of Two Contracts

Issues Issues NEC NEC-DC/20 /2012 12/07 /07 GCC GCC-DC/20 /2012 12/08 /08

Compensation Events (DC/2012/07)/ V.O. (DC/2012/08) 18 nos identified. 12 nos agreed. 6 nos issued. 0 nos assessed. EOT claim (Inclement Weather) 5 nos submitted (monthly assessments are done). 5 nos submitted. 0 nos awarded. Other Claims 8 nos are resolved quickly by means of compensation event with participation of the Project Manager. N/A

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NEC Forum – Tale of Two Contracts

Conc Conclusion lusion

NEC contract provides the following contractual conditions with advantages that tradition GCC contract cannot provide: A. Under the Spirit of co-operation in Core Clause 10.1 - The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this contract and in a spirit of mutual trust and co-operation. Hence, parties spend more time on engineering solutions rather than defending responsibilities. B. Time bars are set to restrict time to make submissions, replies, and decisions, therefore disputes or potential disputes can be resolved in a timely manner, especially when the Project Manager is actively involved in decision making

• process. Compensation events with subsequent payments can be settled much

earlier when early agreement is obtained. Cash flow for the contractor will be greatly improved.

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NEC Forum – Tale of Two Contracts

C. Method of complying and assessing quotation

 Quotation must be based on built-up cost by using current market value (labor,

materials, machines…etc..)

• D. Early warnings can be raised by all parties to alert any potential

risks and to provide resolution in early stage.

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NEC Forum – Tale of Two Contracts

End of Presentation

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