The Contractor's NEC3 ECC Handbook

By Steven C. Evans

Addresses the daily challenges faced by contractors who use the NEC3 ECC with clear, practical and useable advice on how to solve them

Written in plain English for contractors and their staff, this book explains how the NEC3 contract works and provides answers to common questions. It presents complicated concepts in a simple, straightforward and understandable way, focusing mainly on day-to-day use. Steven Evans, an expert with thirty years of experience in construction, considers all the provisions of the contract and explains the procedures, obligations, and liabilities contained within it. 

NEC3 ECC is a process-based contract based on project management best practices. The basic philosophy behind it differs radically from the more adversarial approaches embodied by traditional contracts. While the NEC3 ECC may appear quite simple on the surface, it is often misunderstood and mismanaged by its day-to-day users. Despite the clear and urgent need for expert guides for those who use the NEC3 ECC, or who are considering adopting this increasingly popular contract, available books on the subject are highly technical and written for lawyers and professional consultants—until now. Written specifically for contractors using the NEC3 ECC contract, this book is aimed specifically at a level consistent with the knowledge and experiences of contractors and their staff.

• A practical guide to the procedures in the NEC3 Engineering and Construction Contracts
• Written specifically for those using and administering the contracts—not for lawyers or professional consultants
• Considers all the provisions of the contract and explains the procedures, obligations and liabilities
• Covers all NEC3 ECC versions and variations created by the Main and Secondary Options
• Provides clear, concise, practical, and straightforward explanations of the NEC3 ECC form used by commercial and operational staff of main contractors

The Contractor's NEC3 EEC Handbook is a vital working resource for main contractors and their employees, including quantity surveyors, commercial managers, contracts managers, project managers, site managers, and estimators.  

• Language: English
• Publisher: Wiley
• Release date: Jul 10, 2017
• ISBN: 9781119137528

Book preview

About the Book

When delivering seminars on NEC3 contracts, it was clear that there existed a general lack of knowledge and understanding of how the contract worked and how the relevant personalities were supposed to act. The NEC3 suite differs from many other standard forms of contract and, for that reason, tends to cause misunderstanding and confusion.

Although there were books available about NEC3 contracts, including the NEC’s own Guidance Notes, what seemed to be missing was a hands‐on guide for those people who used the contract on a daily basis. A guide explaining what needs to be done, how various parts of the contract fit together and how to be aware of the risks and the pitfalls.

That is where this book comes in; it is not intended to be a legal guide to NEC3 ECC and it will rarely make reference to case law or statute. Instead, it is a clear, concise, nuts and bolts guide for those users of the contract who just want to get on with it and not be bogged down in theory or legalese.

That being said, due to the inherent ambiguity within some of the clauses, occasionally I have had to resort to presumptions about how a particular provision may operate in practice and how it may be interpreted in the courts. In those cases, I have sought to explain my reasoning.

All comments and narrative in this book apply to the version of the NEC3 ECC current at the date of publication – this being up to and including the April 2013 amendments.

I hope the book is found to be useful and I welcome any feedback or discussion.

Steven C. Evans BSc(Hons) LLB(Hons)

FCIArb FAMINZ(Arb) FFAVE(Master) FRICS FCIOB FCInstCES PRI

[e-mail]

About the Author

Steven C. Evans has worked in construction for almost 30 years. He started as an on‐site trainee quantity surveyor for a top‐tier multinational contractor, moved on to managing surveyor for a medium‐sized UK‐based contractor, and finally switched careers to work in dispute resolution and avoidance. Steven has a wealth of practical experience to supplement his legal knowledge and qualifications.

Steven is currently director of a construction consultancy in the UK and in Australia and divides his time between both countries.

Steven has represented a range of clients from the smallest builder to the largest multinational in dispute resolution forums such as adjudication, arbitration and mediation. He has acted as an adjudicator, arbitrator and expert witness and lectured on matters of contract, commercial management, dispute resolution and similar topics on hundreds of occasions both in the UK and internationally.

1

Introduction

Ten Things You Need to Know

On the first reading of any of the contracts in the NEC3 suite it is readily apparent that there are noticeable differences between them and the many other, standard and more traditional, forms of contract available to the construction supply chain. Possibly because of these differences, the contents of the NEC3 contracts tend to be the cause of misunderstanding, which in turn leads to problems in their use.

By way of an introduction, and as an aid to understanding, listed below are, in the Author’s opinion, the top ten things you need to know before using the NEC3 ECC, and before reading this book:

The NEC3 ECC is not a Partnering contract. It can be made into a Partnering contract by the inclusion of secondary Option X12; without X12, it is simply a contract that promotes and requires collaborative working.

Collaboration is not optional; there are real and effective sanctions in place to ensure the Parties work together to minimise risk and maximise efficient construction. The Parties, the Project Manager and the Supervisor must collaborate…or else.

Whilst collaboration will naturally reduce disputes, the NEC3 ECC recognises that they will occur and actively encourages early submission to adjudication any disagreement that may arise between the Parties. This effectively means that disputes will not perpetuate and the Parties can quickly resolve their issues and move on. Main Option W1, in particular, provides strict timescales within which disagreements must be referred to adjudication.

Adjudication is compulsory for dispute resolution in the first instance. The Parties are prevented from submitting a dispute to a tribunal (i.e. court or arbitration) unless and until it has first been referred to, and decided in, adjudication. Indeed, at least under main Option W1, it would seem a dispute does not exist until it is referred to adjudication.

As adjudication is compulsory in the first instance, very few NEC3 ECC disputes arrive in court and so very little court guidance exists as to how the various contractual provisions should be interpreted. When the courts have considered disputes under NEC3, one judge made the comment that the contract was a triumph of form over substance. This is not exactly a resounding endorsement.

The terms and conditions are not as clear or as simple as they claim to be. The short sentences and simple phraseology often lead to ambiguity, complexity and confusion where none should exist. It can be a difficult contract to understand and apply.

Changes and variations, or compensation events as they are called in NEC3 ECC, are assessed on the basis of the effect of the event on both the cost and the date the Contractor planned to complete the works. If there is a Bill of Quantities or an Activity Schedule, those documents are ignored when making an assessment. Terminal float is owned by the Contractor.

Compensation events can go down as well as up. Their name is a misnomer as it suggests there will always be a positive payment to the Contractor in compensation for a change or some other effect of an event. That is not the case; some compensation events will also result in a reduction in Prices.

There is no separate design and build form; if the Contractor is to design any of the works, the Works Information simply has to state that. If that is the case, then secondary Option X15 must be incorporated, otherwise the design by the Contractor must be fit for purpose.

It is a contract that is often misunderstood and misapplied, which is unfortunate as, despite some of the criticism above, it is a fundamentally worthy contract filled with provisions that focus on fairness, reasonableness and the effective and efficient completion of the project to the benefit of the Parties.

Author’s Note

Those familiar with the NEC3 suite of contracts will know that terms with a specific meaning either have Capitalised Initials or are in italics. Those with Capitalised Initials are defined terms and are generally (but not always) defined in clause 11.2. Those in italics are identified in the Contract Data (either part 1 or part 2).

Throughout this book I have continued that theme.

On occasion, I have directly quoted parts of the NEC3 ECC where it will aid comprehension, but generally I assume that readers will have a copy of the contract to hand for reference. When explaining a particular provision, I refer to the relevant clause number, sometimes in brackets, to aid that reference.

Generally, I devote an entire chapter to a Section of the NEC3 ECC; this makes some chapters much longer than others, but, I hope, will assist in easy reference for those readers who simply want to dip in to read about a particular part of the contract.

Throughout, I have referred to the Project Manager, the Employer, the Contractor, the Supervisor etc. as he. This follows the convention within the NEC3 suite of contracts and to quote the NEC3:

…words in the singular also mean in the plural and the other way around and words in the masculine also mean in the feminine and neuter.

2

The Contract

About the NEC Contract

Construction contracts are complex, adversarial and onerous. This has always been the case. But, in 1986 the Institute of Civil Engineers sought to change that by commissioning the development of a new form of contract that had clearer language, better allocation of risk and responsibility, an increase in collaboration and reduced opportunities for claims.

From that commission, in 1993 the New Engineering Contract was first issued and from the outset it was clearly different in style, content and risk allocation to other standard forms.

Its characteristics were claimed to be:

Clarity and Simplicity

The contracts are written using short sentences, with clear objectives. Typical construction terminology such as ‘extension of time’ is missing; vague notions such as ‘practical completion’ give way to a defined state of Completion. The contract is short and to the point.

But there is a downside to this; fewer words equate to greater ambiguity. Legal interpretation has been difficult because guidance from the courts is almost non‐existent, not least because adjudication is compulsory in the first instance, so very few disputes arrive at court. When they have arrived, the courts have tended to be critical.

There are extensive, officially produced Guidance Notes and Flow Charts, but these are expressly excluded from being used to assist in legal interpretation. Also, to a casual or first‐time user of the contracts, the Guidance Notes and Flow Charts are often as confusing as the contract itself, sometimes saying nothing more than the clause they seek to provide guidance on, but using more words.

Many say it is more a procedure manual than a contract.

Flexibility

The contracts are designed for use internationally with little or no amendment, for a wide range of projects from the smallest to the largest and for a wide range of pricing mechanisms from lump sum to cost plus. The secondary Options allow an Employer to construct a near bespoke contract to suit his needs from a menu of standard clauses and then add additional conditions of contract as ‘Z clauses’ that are specific to his requirements.

Stimulus to Good Management

One of the cornerstones of the NEC philosophy is that the contracts should be an aid to good management, to effective and efficient construction, rather than a barrier to it.

The NEC suite of contracts places a great deal of emphasis upon early and effective communication, risk management and project management to the extent that it introduces, occasionally significant, sanctions against those Parties who ignore these requirements.

When used properly, there are many reports that it successfully achieves those aims.

Collaborate…or Else!

The NEC suite ensures collaboration by the existence of real and effective sanctions against the Parties should they fail to comply with the various obligations under the contracts that are deemed to be the cornerstone of good and effective management. It is not just a question of the Parties wanting to work together; the NEC suite ensures the Parties do work together.

The Latham Report

It is often thought that the NEC suite of contracts was born out of the Latham Report; that is not the case, the Latham Report was published in 1994, one year after the first edition of the NEC.

The Report, called Constructing the Team, identified key issues that Latham believed should be adopted in all construction contracts, as follows:

A specific duty for all parties to deal fairly with each other, and with their subcontractors, specialists and suppliers, in an atmosphere of mutual cooperation.

Firm duties of teamwork, with shared financial motivation to pursue those objectives. These should involve a general presumption to achieve ‘win–win’ solutions to problems which may arise during the course of the project.

A wholly interrelated package of documents which clearly defines the roles and duties of all involved, and which is suitable for all types of project and for any procurement route.

Easily comprehensible language and with guidance notes attached.

Separation of the roles of contract administrator, project or lead manager and adjudicator. The project or lead manager should be clearly defined as the client’s representative.

A choice of allocation of risks, to be decided as appropriate to each project but then allocated to the party best able to manage, estimate and carry the risk.

Taking all reasonable steps to avoid changes to pre‐planned works information. However, where variations do occur, they should be priced in advance, with provision for independent adjudication if agreement cannot be reached.

Express provision for assessing interim payments by methods other than monthly valuation; that is, milestones, activity schedules or payment schedules. Such arrangements must also be reflected in the related subcontract documentation. The eventual aim should be to phase out the traditional system of monthly measurement or remeasurement, but meanwhile provision should still be made for it.

Clearly setting out the period within which interim payments must be made to all participants in the process, failing which they will have an automatic right to compensation, involving payment of interest at a sufficiently heavy rate to deter slow payment.

Providing for secure trust fund routes of payment.

While taking all possible steps to avoid conflict on site, providing for speedy dispute resolution if any conflict arises, by a pre‐determined impartial adjudicator/referee/expert.

Providing for incentives for exceptional performance.

Making provision where appropriate for advance mobilisation payments (if necessary, bonded) to contractors and subcontractors, including in respect of off‐site prefabricated materials provided by part of the construction team.

The NEC contract current at the time of the report included eight of the above and the publication of NEC2 in 1995 encompassed all 13.

The growth of NEC3 has been significant; it is now the ‘go‐to’ contract for many publicly funded projects in the UK, generally due to its adoption by the Government.

It is used in over 60 countries worldwide and there is little doubt that its popularity and use will continue to rise.

The NEC3 Suite

NEC3 contains a suite of contracts, of which the Engineering and Construction Contract (ECC) (the subject of this book) is just one. There are also forms of contract for subcontractors, suppliers, professionals, adjudicators and so on.

The contracts follow the same style and section numbering and contain similar section headings, differing only in respect of their specific application, for example Section 2 in the Engineering and Construction Subcontract, the ECS, is titled ‘The Subcontractor’s Main Responsibilities’, whereas in the ECC it is ‘The Contractor’s Main Responsibilities’.

Contracts

The contracts comprising the NEC3 suite are as follows:

NEC3 Engineering and Construction Contract (ECC);

NEC3 Engineering and Construction Contract Option A: Priced contract with Activity Schedule;

NEC3 Engineering and Construction Contract Option B: Priced contract with Bill of Quantities;

NEC3 Engineering and Construction Contract Option C: Target contract with Activity Schedule;

NEC3 Engineering and Construction Contract Option D: Target contract with Bill of Quantities;

NEC3 Engineering and Construction Contract Option E: Cost reimbursable contract;

NEC3 Engineering and Construction Contract Option F: Management contract;

NEC3 Engineering and Construction Subcontract (ECS);

NEC3 Engineering and Construction Short Contract (ECSC);

NEC3 Engineering and Construction Short Subcontract (ECSS);

NEC3 Professional Services Contract (PSC);

NEC3 Professional Services Short Contract (PSSC);

NEC3 Term Service Contract (TSC);

NEC3 Term Service Short Contract (TSSC);

NEC3 Supply Contract (SC);

NEC3 Supply Short Contract (SSC);

NEC3 Framework Contract (FC);

NEC3 Adjudicator’s Contract (AC).

This book deals exclusively with the NEC3 Engineering and Construction Contract (ECC), although, as many provisions are common across all the contracts in the suite, this book may also prove useful for those other contracts.

Flow Charts and Guidance Notes

The NEC also produces flow charts, guidance notes and strategies to assist in the understanding and use of the suite of contracts, as follows:

NEC3 Engineering and Construction Contract Guidance Notes;

NEC3 Engineering and Construction Contract Flow Charts;

NEC3 Engineering and Construction Short Contract Guidance Notes and Flow Charts;

NEC3 Professional Services Contract Guidance Notes and Flow Charts;

NEC3 Professional Services Short Contract Guidance Notes and Flow Charts;

NEC3 Term Service Contract Guidance Notes;

NEC3 Term Service Contract Flow Charts;

NEC3 Term Service Short Contract Guidance Notes and Flow Charts;

NEC3 Supply Contract Guidance Notes;

NEC3 Supply Contract Flow Charts;

NEC3 Supply Short Contract Guidance Notes and Flow Charts;

NEC3 Framework Contract Guidance Notes and Flow Charts;

NEC3 Adjudicator’s Contract Guidance Notes and Flow Charts;

NEC3 Procurement and Contract Strategies;

NEC3 How to write the ECC Works Information;

NEC3 How to use the ECC communication forms;

NEC3 How to write the PSC Scope;

NEC3 How to use the PSC communication forms;

NEC3 How to write the TSC Service Information;

NEC3 How to use the TSC communication forms;

NEC3 How to use BIM with NEC3 Contracts.

It must be remembered that both the Flow Charts and the Guidance Notes expressly state within their contents that they are not legal documents and neither should they be used for the legal interpretation of the meaning of the NEC3 ECC.

In other words, whilst the documents can help in users’ understanding of the contracts’ provisions, an adjudicator or court may take a completely different view, and they very often do.

The ECC Form

As stated on its front cover, the Engineering and Construction Contract should be used for the appointment of a contractor for engineering and construction work, including any level of design responsibility, from none to fully contractor designed.

On that last point, the NEC3 suite does not contain a separate design and build form; the ECC can be made into a design and build contract simply by adding the obligation to design all or parts of the works to the Works Information.

The contract is constructed by first selecting one of the main Option clauses, A to F, which provides the core clauses. To that is added a dispute resolution Option, either W1 or W2, and any number of the X or Y secondary Option clauses. Finally, bespoke clauses can be written and included as additional conditions of contract at secondary Option Z.

The Employer completes the Contract Data part 1 and sends that, along with any other documents such as the Works Information and the Site Information, to the tendering contractors. Those contractors complete the Contract Data part 2 and return it, as their tender, to the Employer. Upon the Employer communicating its acceptance of a tender to the successful Contractor, the contract is made.

A contract can also be made by the execution by deed or signature on a form of agreement. None of the contracts in the NEC3 suite contains a form of agreement, but a sample form is included in the NEC3 ECC Guidance Notes.

The Core Clauses

The core clauses are common across all main Options and can be found in nine sections, as follows:

General;

Contractor’s Main Responsibilities;

Time;

Testing and Defects;

Payment;

Compensation Events;

Title;

Risks and Insurance;

Termination.

The Main Options

The main Options, from which the Employer selects only one when preparing the Contract Data part 1, differ primarily in their payment provisions and their allocation of financial risk.

Generally, Option A provides a greater risk for the Contractor and a lesser risk for the Employer. The Contractor is required to compile the activity schedule and provide fixed lump‐sum Prices for each item. The responsibility for compilation of the schedule and the accuracy of the prices is therefore the Contractor’s.

At the other end of the scale, generally Option E provides a lesser risk for the Contractor and a greater risk for the Employer. The Contractor is generally reimbursed his cost providing it falls under the definition of Defined Cost and is not Disallowed. Clearly, most of the financial risk will lie with the Employer. The only financial risk carried by the Contractor is the sufficiency of the Fee.

There is no main Option for design and build. If the Employer requires the Contractor to design all or part of the works, or, more precisely, to be responsible for the design of all or part of the works, then it is stated in the Works Information. It is also prudent to incorporate secondary Option X15 which reduces the Contractor’s liability to using ‘reasonable skill and care’ in designing the works. A failure to incorporate X15 will result in the Contractor’s liability for his design being ‘fit for purpose’. This is unlikely to be helpful for either Party.

Each main Option has its own clauses that apply in addition to the core clauses. NEC publishes separate and stand‐alone NEC3 ECC contracts for each main Option, and in those documents the main Option clauses are incorporated into the core clauses and highlighted in bold.

NEC also publishes a ‘black book’ ECC which includes all of the main Option clauses. In that document, the main Option clauses are separate to the core clauses.

The characteristics of each of the main Options are summarised below. Details of each of the main Options’ operative provisions are dealt with in later chapters.

Option A – Priced Contract with Activity Schedule

Option A contains an Activity Schedule prepared by the Contractor and which divides the work into as many discrete activities as the Contractor wishes. The Contractor is paid for an activity when he completes that activity and is reimbursed for compensation events based on the effect of the compensation event on his Defined Cost and to which is added the Fee. The Activity Schedule is not used to assess compensation events unless the Contractor and the Project Manager agree.

There is no contract price as such (the total of the Prices is simply the sum of all the items in the activity schedule); the Contractor simply Provides the Works in accordance with the Works Information and is paid in accordance with the Activity Schedule.

The contract does not offer a definition of Activity Schedule other than to point to a location as to where it can be found. The contract does, helpfully, say what the Activity Schedule is not: it is not Works Information and it is not Site Information (54.1). Accordingly, if the Employer happens to include the Activity Schedule within the Works Information document (which happens a lot), it will have no effect as ‘it is not Works Information’.

A further point, as the Contractor is only paid for an activity when that activity is completed, it is to the benefit of the Contractor’s cash flow that he produces as detailed an Activity Schedule as possible. A single activity covering a multitude of time‐consuming works would result in the Contractor having to wait until all those works were done before he received any payment.

This has resulted in Activity Schedules being so long as to make them akin to material lists. The downside for the Contractor in doing this can be found in clause 31.4, which requires him to provide information showing how each activity on the Activity Schedule relates to the operations on each programme which he submits for acceptance.

This can lead to unwieldy programmes, resulting in time‐consuming programme updates and compensation event assessments.

Accordingly, Employers have resorted to including Z clauses that seek to limit the Activity Schedule to a set number of pages, or even to producing the Activity Schedule themselves (presumably at risk if it is proved to be wrong).

A more realistic option may be to include a Z clause that permits payment to the Contractor for part completion of activities on the Activity Schedule.

Option B – Priced Contract with Bill of Quantities

Option B contains a Bill of Quantities prepared by the Employer in accordance with a stated (in the Contract Data part 1) standard method of measurement and priced by the Contractor. The Contractor is paid for the quantity of work he carries out at the rate in the Bill of Quantities. He is reimbursed for compensation events based on the effect of the compensation event on his Defined Cost and to which is added the Fee. The Bill of Quantities is not used to assess compensation events unless the Contractor and the Project Manager agree.

There is a school of thought that the Bill of Quantities is not actually remeasurable, as the NEC3 ECC is missing a clause expressly making such a statement. Whilst the Price for Work Done to Date, in clause 11.2(28) states that it is the total quantity of work completed for each item in the Bill of Quantities multiplied by the rate, it can be argued that ‘total quantity’ deals with apportionment of the quantities in the bill for that particular item rather than remeasurement, as this clause deals with interim payments rather than ascertaining a final value of the work.

This does seem to be a somewhat strained interpretation and would be contrary to clause 60.4, which makes a compensation event out of a significant difference between the final total quantity of an item and the originally stated quantity. If remeasurement was not possible, this clause would have no meaning.

Accordingly, it would seem that, by reference to clause 60.4, the intent of the contract is that of remeasurement and any ambiguity in clause 11.2(28) would be resolved in that direction.

Option C – Target Contract with Activity Schedule

Option C contains an Activity Schedule prepared by the Contractor which divides the work into as many discrete activities as the Contractor wishes. The Contractor is paid by reimbursement of his Defined Cost, to which is added the Fee. A compensation event is assessed as the effect on the Defined Cost, to which is added the Fee, and which then adjusts the total of the Prices on the Activity Schedule.

The Activity Schedule is not used to assess compensation events unless the Contractor and the Project Manager agree.

The final total of Defined Cost plus the Fee is compared to the final total of the Prices on the Activity Schedule. If the final Defined Cost plus the Fee is higher, the Contractor pays a share of the overspend to the Employer. If the total of the Prices is higher, the Employer pays a share of the saving to the Contractor. This is called the Contractor’s share (clause 53).

As is quite clear, the Parties are only concerned with the total of the Prices on the Activity Schedule (for the assessment of the Contractor’s share); unlike main Option A, the number of items within the Activity Schedule is largely irrelevant (unless the Parties agree to value compensation events using the Activity Schedule).

As will be seen later, this Option creates a significant administrative burden, particularly on the Project Manager. He is tasked with forecasting the costs the Contractor will incur before the next assessment date in order to assess the amount due to the Contractor in interim valuations. He must then check that forecast against the actual cost incurred by the Contractor by checking the records the Contractor makes available to him.

This contract is often referred to as a pain/gain; the Parties share the pain in the event of an overspend and share in the gain in the event of an underspend. The amount of pain or gain shared by the Parties is set out in a reasonably complicated calculation within the Contract Data part 1.

It is possible to set up the contract such that the Contractor takes 100% of the pain and 0% of the gain; this effectively makes the contract into one with a guaranteed maximum price. It is likely that such a set‐up would be contrary to the general philosophy of the NEC3 suite, but not unenforceable.

Option D – Target Contract with Bill of Quantities

Option D contains a Bill of Quantities prepared by the Employer in accordance with a stated (in the Contract Data part 1) standard method of measurement and priced by the Contractor. The Contractor is paid by reimbursement of his Defined Cost, to which is added the Fee. A compensation event is assessed as the effect on Defined Cost, to which is added the Fee, and this adjusts the Total of the Prices on the Bill of Quantities. The work the Contractor carries out is measured and multiplied by the rate. The total of these items is called the Total of the Prices.

Bills of Quantities are not used to assess compensation events unless the Contractor and the Project Manager agree.

The final Defined Cost plus the Fee is compared to the final Total of the Prices; if the final Defined Cost is higher, the Contractor pays a share of the overspend to the Employer. If the Total of the Prices is higher, the Employer pays a share of the saving to the Contractor. This is called the Contractor’s share (clause 53).

Unlike the Activity Schedule in Option C, the detail of the Bill of Quantities remains as relevant as in Option B, as the works must be remeasured. This creates a greater administrative burden, as not only does the Project Manager have to undertake the assessment of the payment due to the Contractor at each assessment date as in Option C above, he also has to measure all the works.

This contract is often referred to as a pain/gain; the Parties share the pain in the event of an overspend and share in the gain in the event of an underspend. The amount of pain or gain shared by the Parties is set out in a reasonably complicated calculation within the Contract Data part 1.

It is possible to set up the contract such that the Contractor takes 100% of the pain and 0% of the gain; this effectively makes the contract into one with a guaranteed maximum price. It is likely that such a set‐up would be contrary to the general philosophy of the NEC3 suite, but not unenforceable.

Option E – Cost Reimbursable Contract

Option E contains neither an Activity Schedule nor a Bill of Quantities. The Contractor is paid by reimbursement of his Defined Cost, to which is added the Fee including compensation events.

There is no incentive for the Contractor to minimise his cost, indeed, on the basis that he is paid a Fee percentage on top of the Defined Cost, it can be argued that this contract encourages expenditure.

For that reason, this main Option is often used only as a last resort.

Option F – Management Contract

Option F contains neither an Activity Schedule nor a Bill of Quantities. The Contractor engages and manages Subcontractors to do all of the works apart from those stated in the Contract Data part 2 that he will do himself. He is paid by reimbursement of his Defined Cost plus the Fee including compensation events plus for his own work at the amounts stated in the Contract Data.

W Clauses

The dispute resolution clauses are further main Option clauses. Option W contains two dispute resolution procedures named W1 and W2. They are mutually exclusive; either can apply but (generally) not both.

In its heading, it is stated that W1 is used unless the United Kingdom Housing Grants, Construction and Regeneration Act 1996 (and its amendments) (‘the Act’) applies.

Immediately, there seems to be a problem. Whilst the above‐mentioned Act is UK‐wide, the part dealing with construction contracts applies only to England, Wales and Scotland, not Northern Ireland, which has its own, equivalent, legislation.

On that basis, it is unclear whether W1 should be used in Northern Ireland, as, whilst the Act applies in whole, the provisions relating to adjudication do not. However, as the equivalent Northern Ireland legislation also makes void any adjudication procedure which is non‐compliant with its provisions, any attempt to use W1 would simply result in its failure.

On that basis, and notwithstanding what it says in the contract, W2 would be most appropriate to use in Northern Ireland.

A greater difficulty would arise in