DEVELOPMENT OF NEC I was one of the

DEVELOPMENT OF NEC I was one of the few people to tried the new science of project management in engineering construction projects… I found that the (traditional) contract is not just something which is indifferent to effectiveness of project management; it is positively hindering good project management. Background of NEC Martin Barnes – Author of NEC

Use of nec in hong kong Having been in the construction industry in Hong Kong for over 30 years I am determined to change the prevailing adversarial attitude. My message to fellow engineers in the Asia-Pacific is just one word: 'collaboration'. I think the construction industry, not only in Hong Kong, but also right across the world needs collaboration among all the parties involved, in particular as projects get more and more complex and increasingly difficult to deal with.

History of NEC • The 1 st NEC – then known as the “New Engineering Contract” – published by ICE in 1993. It was a radical departure from existing building and engineering contracts, being written in plain language and designed to stimulate good management. • The 2 nd edition, called the NEC Engineering and Construction Contract, or ECC, appeared two years later.

History of NEC • NEC Contract Suite (3 rd Edition) was launched in 2005 which included: ▫ ▫ ▫ ▫ Engineering and Construction Contract (ECC) Term Services Contract Framework Contract Professional Services Contract Supply Contract Subcontract etc

Black & Veatch 06 November 2020 Characteristics of NEC - Clarity • Plain English and present tense are used in the contract language, e. g. • Cl. 15. 1 The Employer and the Consultant give an early warning by notifying the other as soon as either becomes aware of any matter …. • Key contract specific information is contained in Contract Data and written in italics in the Contract. Defined terms have capital initials. • Cross-referencing of different clauses is minimized. 7

GCC 8 (1) The Engineer shall order any variation to any part of the Works that is necessary for the completion of the Works and shall have the power to order any variation that for any other reason shall in his opinion be desirable for or to achieve the satisfactory completion and functioning of the Works. Such variations may include: ◦ (a) additions, omissions, substitutions, alterations, changes in quality, form, character, kind, position, dimension, level or line; ◦ (b) changes to any sequence, method or timing of construction specified in the Contract; and ◦ (c) changes to the Site or entrance to and exit from the Site. (2) No variation shall be made by the Contractor without an order in writing by the Engineer. No variation shall in any way vitiate or invalidate the Contract but the value of all such variations shall be taken into account in ascertaining the Final Contract Sum.

NEC 9 The Project Manager gives an instruction changing the Works Information except • a change made in order to accept a Defect or • a change to the Works Information provided by the Contractor for his design which is made either at his request or to comply with other Works Information provided by the Employer.

Black & Veatch 06 November 2020 Characteristics of NEC - Flexibility • A number of main options with different payment mechanisms e. g. lump sum, remeasurement, reimbursable; • A number of pre-set secondary options for project proponents to “pick and mix”. 10

Black & Veatch 06 November 2020 Characteristics • Contract has formal requirements to enhance management • Partnering – Parties are expected to work collaboratively as part of the contract requirement • Early warning mechanism – either party is required to raise the early warning to the other if they are aware of any contractual matter arising • Time control – There are defined period for reply to drive communication and problem solving 11

Black & Veatch 06 November 2020 Characteristics • Contract has formal requirements to enhance management • Programme management – There are detailed requirements on programme. Employer shall respond with either acceptance or nonacceptance with reasons provided. • Change management – Change is valued based on what reasonably costs the Contractor to carry out the unexpected scope of work. Therefore, he will not get a windfall or suffer dramatically because of a change. 12

NEC 3 Contract

an st Co Pr ro ojec les t M es l ro ty ali Qu r’s iso rv pe Time Su ag er ’s THE PROJECT MANAGER AND SUPERVISOR

NEC 3 CONTRACTS AND OPTIONS Engineering and Construction Contract (ECC) 6 main pricing option clauses are: • Option A: priced contract with activity schedule • Option B: priced contract with bill of quantities • Option C: target contract with activity schedule • Option D: target contract with bill of quantities • Option E: cost reimbursable contract • Option F: management contract

SECONDARY OPTION CLAUSES (OPTIONAL) • Option X 1 – Price adjustment for inflation • Option X 2 – Changes in Law Usually Adopted in HKSAR Government NEC Contract • Option X 3 – Multiple currencies • Option X 4 – Parent company guarantee • Option X 5 – Sectional Completion • Option X 6 – Bonus for early Completion • Option X 7 – Delay Damages Usually not used in HKSAR Government NEC Contract but there is an ACC with similar effect • Option X 12 – Partnering • Option X 13 – Performance Bond • Option X 14 – Advanced payment to the Contractor • Option X 15 – Limitation of Contractor’s liability for his design • Option X 16 – Retention • Option X 17 – Low Performance damages • Option X 18 – Limitation of liability • Option X 20 – Key Performance Indicators (not used with X 12)

OPTION Z (THE Z CLAUSES) • Used to incorporate bespoke clauses, i. e. security, Health and Safety etc; or • To amend the core and main option clauses.

CONTRACT DATA • Part 1 Employer, Part 2 Contractor • Important that contract data fully completed , affects operation of the contract • Defines the details of the contract, identified by italics

Engineering Construction Contract • Main Options ▫ ▫ ▫ Option A - Priced contract with activity schedule Option B - Priced contract with Bills of Quantities Option C – Target contract with activity schedule Option D – Target contract with Bills of Quantities Option E – Cost Reimbursable contract Option F – Management contract

Example of Milestone Schedule of Payment in GCC

What’s the difference between NEC’s AS and GCC’s Cost Centre?

Example of Activity Schedule Activities Price ($) Duration Commencement Activity 1 700, 000 Activity 2 200, 000 Activity 3 500, 000 Activity 4 600, 000 Activity 5 400, 000 … … Completion Date Float Critical path leads to completion

BQ, SMM, GP & PP

Example of BQ – Water Mains Laying Works Item Description Qty. Unit Rate (HK$) Total Amount (HK$) 1 Excavation 50 m 3 100 5, 000 2 3 inch Galvanized Iron Pipe 1, 000 m 300, 000 3 5 inch Galvanized Iron Pipe 200 m 500 100, 000 4 Trenchless Construction of 5 inch GIP 10 M 10, 000 100, 000 5 Connections 100 Nr 1, 000 100, 000 6 Concrete 30 m 3 1000 30, 000 7 Reinstatement 50 m 2 300 15, 000 Total Sum 650, 000

Example – Building Water Mains for Villagers Item Description Qty. Unit Rate (HK$) Total Amount (HK$) 5, 000 1 Excavation 50 Actual m 3 47. 5 100 2 3 inch Galvanized Iron Pipe 1, 000 m 1, 220 300, 000 3 5 inch Galvanized Iron Pipe 200 m 140 500 100, 000 4 Trenchless Construction of 5 inch GIP 10 M 8. 5 5 Connections 100 6 Concrete 30 7 Reinstatement 50 Nr 1, 000 4 m 3 1000 50 m 2 300 47. 5 Total Sum 10, 000 100, 000 30, 000 15, 000 650, 000

Option C&D : PWDD – Clause 11. 2 (23), (25), (29) + Other Amounts: Release of Retention, PFSPMS, etc +Payment to S/C + Cost Components in So. CC PWDD Amount Due Not justified by the accounts & records Defined Cost Should not have been paid to S/C Fee Incur b/c C did not follow WI (exclude MPF & expense on people) Incur b/c C did not give an E/W - Other Amounts: Retention, indemnity, delay damages, etc - Interim assessment of pain share - Disallowed Cost Correct Defects after Completion Correct Defects b/c C does not comply with a constraint Resources/ Plants/ Equip. not used to Provide the Works Preparation for and conduct of an adjudication

Understanding Target Cost PWDD lower than Target Price, , gain share! 100 90 80 70 60 50 40 30 20 10 0 Target Price PWDD (Interim Payments)

Understanding Target Cost PWDD higher than Target Price, pain share! 120 100 80 60 40 20 0 Target Price PWDD (Interim Payments)

How about this? Still 50% pain share!? 200 180 160 140 120 100 80 60 40 20 0 Target Price PWDD (Interim Payments)

100% C’s share Understanding Target Cost Compensation Events/ re-measurement 110% Target Price PWDD Time 50/50 Share Range Amount Tendered Total of the Price Completion For case of a share range of 50/50 share up to 110% of the Total of the Prices

Understanding Target Cost Employer’s Share % Compensation Events 0% 110% Amount Tendered Total of the Target Price PWDD 2 Time 50% Completion

ECC – Option Analysis Option A – Priced contract with Activity Schedule B – Priced contract with Bill of Quantities C – Target contract with Activity Schedule D – Target contract with Bill of Quantities E – Cost reimbursable contract F – Management Contract Payment Completed activity / group of completed Actual work done based on quantity x rate Risk Allocation Additional Quantity Risk Similar to GCC Reimbursable of Defined Additional Quantity Risk/ Overall project risk shared Cost plus fee to a certain extent Reimbursable of Defined Cost plus fee Overall project risk shared to a certain extent All risk borne by the Employer Risks of the works borne by Employer Remarks Price-based Certainty of price depends on accuracy of design Cost-based Parties incentivized to drive down cost Cost-based Profit is guaranteed Hybrid of Cost and Price based.

Client’s risk and Flexibility ECC – Option Analysis E, F - Reimbursable D – Target Bo. Q C – Target with Activity Schedule B Priced with Bo. Q A Priced with Activity Schedule Contractor’s incentive and Risk

NEC – Options Analysis • Activity Schedule Type – Less effort at Design Stage because no BQ is needed • Target Cost Type – Risks are being shared between the Employer and Contractor incentivize the two to work together towards the target cost • Price-based Contract – More cost certainty and risks are transferred to the Contractor • But in all case, compensation events are supposed to be based on market prices, not tender prices, unless there is agreement!

EARLY WARNINGS (Clause 16) Why give them? • Increase the total of the Prices • Delay Completion • Impair the performance of the works in use Promotes proactive management and minimises risk Who gives them? • Either the Contractor or PM, depending upon who becomes aware of the matter first.

EARLY WARNINGS (Clause 16) What to do after the EWN? • Risk is entered into the Risk Register • Either the Project Manager or the Contractor may instruct the other to attend the risk reduction meeting • Discussion will be held and decision made to resolve the risks • Actions will be recorded in the risk register • If a decision involves change to the Works Information, the Project Manager instructs the change and issue a compensation event if necessary

SANCTIONS – early warnings What if the Contractor did not give an early warning which an experienced Contractor could have given? Effect on the Prices (Target) & on Completion • Clause 63. 4 ▫ Assess the CE ‘as if an EW had been given’ �Amounts (money and time) that could have been avoided or reduced will not be included in the assessment of the compensation event.

SANCTIONS – early warnings Effect on Actual Cost • Clause 11. 2 (30) – Disallowed Cost (Option C) ▫ Cost is disallowed if the PM decides �Was incurred only because the Contractor did not give an early warning which he could have given. • Q: As no EWN is necessary for matters that could increase cost, which cost could be disallowed? • A: Cost unnecessarily incurred which could have been avoided. i. e. For ONLY those matters which an early warning is required to be given.

What if the PM did not give an early warning which he could have given?

1 st Exercise– early warnings Are early warning notices required is the following situations, and if so who should issue it, why should it be given and what steps / actions should follow Q Scenario 1 PM is aware that the WI contains an error and that a PMI is needed to change the WI 2 An item of the Contractor’s owned Equipment intended for use on the project is unavailable and alternative Equipment will need to be hired in at a premium rate – so increasing the overall cost. 3 Contractor has knowingly installed Plant which does not meet the Specification in the WI 4 Contractor is experiencing major financial difficulties and is considering voluntary administration. EWN Y/N Issue By Why Next Step

EXERCISE 1 – early warnings Are early warning notices required is the following situations, and if so who should issue it, why should it be given and what steps / actions should follow Q Scenario EWN Y/N Issue By 1 Why PM is aware that the WI contains an error and that a PMI is needed to change the WI Yes PM 2 An item of the Contractor’s owned Equipment intended for use on the project is unavailable and alternative Equipment will need to be hired in at a premium rate – so increasing the overall cost. No * 3 Contractor has knowingly installed Plant which does not meet the Specification in the WI Yes C May impair the Also a Defect – C to performance of correct (Cl. 43. 1) the works & delay Completion 4 Contractor is experiencing major financial difficulties and is considering voluntary administration. Yes C Delay Completion Consider alternative Contractors & termination (Cl. 94. 2) Could increase Prices or delay Completion etc Next Step Issue PMI and CEN and request Quotation n/a - * unless this could delay Completion

4 th Question– early warnings (10 marks) • LSP Builders place concrete to a new ground slab which on completion of the final pour it realises that the laboratory did not carry out the testing according to the contract standards. • The ground slab sits on the critical path of the approved programme. When cured, LSP continues to build blockwork walls off of the concrete slab. • The PM then becomes aware of the incorrect testing results and instructs the Contractor to take down the walls , break up the slab, and undertake the work to the correct specification.

4 th Questions – early warnings Under Option C, what is the position with regards to: The Prices & the Completion Date Will the Prices. . . increase decrease Will the rectification work cause a delay yes no Is LSP entitled to an extension of time yes no Does the rectification work constitute a CE yes no the initial concrete slab yes no the initial block walls yes no The demolition of the concrete slab yes no The rectification work in replacing the walls yes no Actual Cost Should LSP be paid for: - not change

4 th Questions – early warnings (10 marks) Under Option C, what is the position with regards to: - The Prices & the Completion Date Answer Reason no change Not a compensation event As it is on the critical path yes Will the Prices. . . Will the rectification work cause a delay Is LSP entitled to an extension of time no Does the rectification work constitute a CE no Actual Cost Not a compensation event Answer Reason Should LSP be paid for: the initial concrete slab yes Albeit defective, the work was done before completion, and before knowledge of the Defect the initial block walls no If an EWN had been served the cost could have been avoided The demolition of the concrete slab yes The rectification work in replacing the walls yes Risk of Defects prior to Completion are shared. Thus Prices unchanged but paid as AC As above The walls will need to paid for once, as always envisaged.

Risk Register • 11. 2(14) The Risk Register is a register of the risks which are listed in the Contract Data and the risks which the Project Manager or the Contractor has notified as an early warning matter. It includes a description of the risk and a description of the actions which are to be taken to avoid or reduce the risks.

Risk Register - Example

Compensation Events (CE) • NEC Compensation Events are like traditional variations and claims in traditional GCC • The fundamental difference is that CE is valued based on the principle that the Contractor will not better or worse off due to the compensation event.

Compensation Events (CE) • One regime for claims for time and money Examples of Clause 60. 1 CE’s ▫ PM’s instruction to change to Work Information ▫ Failure to give possession ▫ Failure to work within times (Others) ▫ Weather events Clause 61: PM or Contractor to notify (note NEC 3 8 week period) Clause 62: Quotations Clause 63: Assessment

27 January 2011 B&V QUOTATIONS FOR COMPENSATION EVENTS • The Project Manager has to instruct the Contractor to submit quotations for all compensation events • Quotation for compensation events proposes changes to the Prices and Completion Date assessed by the Contractor

NOTIFICATION PROCESS The PM The Contractor Instruction issued CE Notified (Cl. 61. 3) (Cl. 61. 1) Notes CE must be notified before the defects date (Cl. 61. 7) CE Notified C notify CE within 8 weeks of the event. Quotation Requested (Cl. 61. 3) (Cl. 61. 1 or 61. 4) Gives notice if no EWN was issued (Cl. 61. 5) Quotation accepted, or revision instructed or PM assesses (Cl. 62. 3) 3 weeks Quotation(s) Submitted (Cl. 62. 3) 2 weeks See Notes on Assessing CEs PM replies within 1 week and may instructs C to submit quotation unless the event is the C’s fault … etc (Cl. 61. 4) PM may make assumptions (Cl. 61. 6) PM must give reasons for requesting a revised quotation (Cl. 62. 4)

CE - QUOTATION & ASSESSMENT The Assessment • Changes to Prices - consider the effect of the CE upon � The actual Defined Cost of the work already done � The forecast Defined Cost of the work not yet done � The resulting Fee • Delay to Completion Date � the delay on planned Completion caused by the CE. • Contractor’s cost and time risks included � that have a significant chance of occurring are included. • Basis of Assessment � Contractor reacts competently and promptly to the CE; additional cost and time that are reasonably incurred & the Accepted Programme can be changed. • Assessed as if Contractor had given an EWN • The PM assesses a CE in certain circumstances (Cl. 64. 1 & 2) • PM implements the CE and notifies the Contractor of the changes to the Prices and the Completion Date.

52 Compensation Events - Sanctions Time Bar 61. 3 Contractor notification tests – 8 week time bar Default Acceptances 61. 4 Default acceptance of compensation event if no response from the Project Manager within the correct timescales (1 week + 2 weeks) 62. 6 Default acceptance of quotation if no response from the Project Manger within the correct timescales (2 weeks + 2 weeks)

What if the C does not provide the quotation/ revised quotations within 3 weeks?

PM’s assessments (Cl. 64. 1) • The PM assesses a compensation event ▫ If the C has not submitted a quotation … within the time allowed ▫ If the PM decides that the C has not assessed the compensation event correctly … ▫ If C submits the quotation without a programme which this contract requires him to submit; or ▫ If, when the C submits the quotations, the PM has not accepted the C’s latest programme

27 January 2011 B&V DEFINED COST (52. 1) Principle – Defined Cost includes only amounts calculated using rates and percentages stated in the Contract Data and other amounts at open market or competitively tendered prices with deductions for all discounts, rebates and taxes which can be recovered

Quotation for CE: Build-up from People, Equipment, Plant and Materials …? Or by quotations of Subcontractors?

27 January 2011 B&V DEFINED COST Defined Cost under Options A & B is (Cl. 1. 2(22)): ▫ The cost of the components in the Shorter Schedule of Cost Components whether work is subcontracted or not excluding the cost of preparing quotations for CEs Less Disallowed Cost. But in some HK NEC Contract, S/C’s quotations can also be used. Defined Cost under Options C & D is the same as what used for Payment. If PM and C agree, the SSCC can be used for assessment.

Assessing compensation events • Assessment of the effect of a compensation events includes risk allowance for cost and time for matters which have a significant chance of occurring and are at the C’s risk under the contract (Cl. 63. 6) • The assessment of a compensation event is not revised if a forecast upon which it is based is shown by later recorded information to have been wrong (Cl. 65. 2)

Discussion – Addition of Works § Can the price stated under the Activity Schedule/ BQ be adopted as a basis for valuing additional works?

Discussion – Addition of Works • The valuation should be based upon what it will cost the Contractor to do, called Defined Cost (Cl. 63. 11). • The amount added is not based upon what the Contractor has in the Activity Schedule for the additional works. • However, if the PM and the C agree, rates and lump sums may be used to assess a compensation event. (Cl. 63. 14)

Discussion – Review of Project Manager’s Assessment § For a instruction issued by the Project Manager which is considered as a compensation event, the Project Manager has provided his own assessment after rejecting the Contractor’s quotation. § Can the Contractor reject the Project Manager’s assessment and provide a revised quotation? Or can the Contractor refuse to carry out the instruction unless the price is agreed?

Discussion – Review of Project Manager’s Assessment • The Contractor is obliged to put that instruction into effect and cannot “consent” to anything other than that (Cl. 14. 3, 27. 3 and 61. 1). In other words the Contractor cannot refuse to do the work until the price has been agreed. • Once the Project Manager has notified the Contractor of his assessment then the compensation event is implemented (Cl. 65. 1) and that is the end of the matter (Cl. 65. 2). If the Contractor is not happy he can only go to the Adjudicator.

Discussion – Staff Cost in Compensation Event § The C employs a number of full time management staff (QS, construction manager, etc) on site on fixed salary without OT. On preparing the quotation of a compensation event, the C includes 1) the costs of these staff on preparing the quotation and 2) management the new workload. Can he do that? § Can PM argue that these costs shall not be included in the quotation because the staff are there anyway regardless of the CE?

Discussion – Staff Cost in Compensation Event §The Defined Cost is the cost of the components in the (Shorter) Schedule of Cost Components whether work is subcontracted or not excluding the cost of preparing quotations for CE. §Since, because of the CE, there is extra management work to be carried out by the staff and their costs falls within the definition of “People” in SSCC, the C is entitled to include their costs in the quotation.

Discussion – Determine the likely effect of variations Can the PM do anything to determine the likely effect on the Prices and Completion Date of a change to the WI which he is considering but has not yet instructed. If so, what?

Discussion – Determine the likely effect of variations Yes. The PM may instruct the Contractor to submit quotations for a proposed instruction pursuant to clause 61. 2.

Discussion – CE Quotation Preparation and Assessment § There is a CE notified by the PM on the road re- construction work where design is changed due to latest comments from the DC members. It is a major part of the works and the C agrees that works will be proceeded during quotation preparation and assessment to avoid lengthening contract duration. § As works progresses, some of the risk allowance such as number of TTAs that was originally allowed in the quotation has been clarified, i. e. C allows for 4 TTA schemes in the original quotation, turns out the Police was lenient and allowed 3 longer TTA schemes. § Should the quotation be revised to include the price of 3 TTA schemes only?

Discussion – CE Quotation Preparation and Assessment § Cl. 63. 1 The changes to the Prices are assessed as the effect of the compensation event upon § The actual Defined Cost of the work already done, § The forecast Defined Cost of the work not yet done and § The resulting Fee § (Cont’d) If the CE arose from the PM or the S giving an § instruction, …. , the date which divides the work already done from the work not yet done is the date of that communication. In all other cases, the date is the date of the notification of the CE. However, in reality it is very difficult to resist the temptation of using actual cost.

5 th Questions – CEs & Assessments (5 marks + 5 marks) • In an Option C Contract, the Contractor has stated a price for 8 Nr specific DI couplings in the Activity Schedule as $800, i. e. $100 each. The Fee stated in the Contract Data Pt 1 is 25%. The true market price to purchase such a coupling is currently $500. A PMI is issued which changes the type of couplings to ones which costs $600 each. Assuming this does not delay planned Completion, how is the CE assessed, and what is the change in the Prices? No work has started yet. a) $1, 000 to be added to the Price b) $5, 000 to be added to the Price c) $6, 000 to be added to the Price

5 th Questions – CEs & Assessments (5 marks + 5 marks) Changes to the Prices are assessed as the effect of the CE upon the forecast Actual Cost. Therefore, the tender /AS prices etc are of no relevance. The FAC of the original couplings at the time of the CE = $500 x 8. The CE alters this to $600 x 8, being an additional $800 in total. Plus a Fee of 25% and the Prices are increased by $1, 000.

6 th Question (5 marks + 5 marks) • What would be the valuation of variation order if this is under GCC? a) The Contractor will gain extra $160 due to this change b) The Contractor will gain extra $800 due to this change c) The Contractor will gain extra $4, 800 due to this change

GCC Clause 61 • (1) The Engineer shall determine the sum which … shall be added to or deducted from the Contract Sum as a result of an order given … in accordance with the following principles: ▫ (a) Any item of work omitted shall be valued at the rate set out in the Contract …. ▫ (b) Any work … which is the same as or similar in character to … any item of work priced in the Contract shall be valued at the rate set out in the Contract … ▫ (c) Any work carried out which is not the same as or similar in character to any item of work priced in the Contract shall be valued at a rate based on the rates in the Contract so far as may be reasonable, failing which, at a rate agreed between the Engineer and the Contractor.

6 th Question (5 marks + 5 marks) • What would be the valuation of variation order if this is under GCC? • Answer is A • The BQ rate is $100/nr. BQ rate is supposed to include overhead and profit already • The difference in market price of the item is (600 -500)/500 = 20%. So the BQ rate should increase by 20% = $120/nr. • For 8 couplings, the additional gain = $20 x 8 =$160.

7 th Question (5 + 5 marks) • In Option B contract, the works include the construction of 10 manholes but the drawings only show 8. The Project Manager gives an instruction revising the construction drawings to add the 2 manholes back. These 2 manholes should be paid based on: a) BQ rates upon re-measurement b) Defined Cost c) Depends on whether same or similar BQ rate is available in the Contract

7 th Question (5 + 5 marks) • In Option B contract, the works include the construction of 10 manholes but the drawings only show 8. The Project Manager gives an instruction revising the construction drawings to add the 2 manholes back. These 2 manholes should be paid based on B) Defined Cost • Drawing is part of the Works Information. To add 2 missing manholes in the drawing is a change of Works Information so it is a compensation event and its valuation should be based on Defined Cost.

8 th Question (5 + 5 marks) • In Option A Contract, if the Contractor mistakenly entered an activity in the Activity Schedule that is not related to the works, what should he do? a) He cannot revise the Activity Schedule for this genuine mistake and will not be paid for the amount of that activity. b) Revise the Activity Schedule by deleting the irrelevant activity, re-distribute the amount to other relevant activities and submit for Project Manager’s acceptance. c) Apply for payment for that amount anyway at the time of completing all the works.

8 th Question (5 + 5 marks) • In Option A Contract, if the Contractor mistakenly entered an activity in the Activity Schedule that is not related to the works, what should he do? a) He cannot revise the Activity Schedule for this genuine mistake and will not be paid for the amount of that activity.

OPTION A – LUMP SUM WITH ACTIVITY SCHEDULE • Clause 11. 2 (27) The Price for Work Done to Date is the total of the Prices for • Each group of completed activities and • Each completed activity which is not in a group A completed activity is one which is without Defects which would either delay or be covered by immediately following work. 78

9 th Question (5 + 5 marks) • Which of the following situations will not change the Target Prices? a) Project Manager instruct a change to the Works Information b) Re-measurement of quantity in Option D c) The Contractor proposes an alternative design to the construction of foundation and later accepted by the Project Manager.

9 th Question (5 + 5 marks) • Which of the following situations will not change the Target Prices? c) The Contractor proposes an alternative design to the construction of foundation and later accepted by the Project Manager. Cl. 60. 1 The following are compensation events. ▫ The Project Manager gives an instruction changing the Works Information except �a change made in order to accept a Defect or �a change to the Works Information provided by the Contractor for his design which is made either at his request or to comply with other Works Information provided by the Employer.

10 th Question (10 marks) • In a construction contract, the C has completed the works and the PM has certified completion. The works are handed over to the Government. The works are later found to be defective. Is the C liable for the defect? a) Yes b) No c) Depends on whether the defect liability period is over yet.

10 th Question (10 marks) • In a construction contract, the C has completed the works and the PM has certified completion. The works are handed over to the Government. The works are later found to be defective. Is the C liable for the defect? a) Yes Based on common law, C is always liable for the defect of the works. Nevertheless, it would be difficult to prove C’s liability upon commissioning. There is also a general limitation of 12 years to raise civil proceedings under the law.

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