Procurement Report - Northumberland...Northumberland County Council A1 – South East Northumberland...

August 11

Ian Drummond

Senior Project Manager

Turner & Townsend

Bede House

All Saints Business Centre

Newcastle upon Tyne

NE1 2ES

t: +44 (0)191 279 7200

e: [email protected]

w: turnerandtownsend.com

A1 – South East Northumberland Strategic Link Road - Morpeth Northern Bypass

Procurement Report

Northumberland County Council A1 – South East Northumberland Strategic Link Road

Contents

making the difference

1 EXECUTIVE SUMMARY 1

2 INTRODUCTION 2

3 PROJECT OBJECTIVES AND CONSTRAINTS 4

4 PROCUREMENT OPTIONS – CONSTRUCTION PHASE 5

5 FORM OF CONTRACT 6

6 CONCLUSION AND RECOMMENDATIONS 8

APPENDIX A: PROCUREMENT MEETIN RECORD OF DISCUSSION 9

APPENDIX B: NEC2/NEC3 TECHNICAL PAPER 13

Rev Originator Approved Date

0 Ian Drummond Steve Armitt 04/08/2011

1 Ian Drummond Steve Armitt 24/08/2011

© Turner & Townsend Project Management Ltd. All rights reserved December 08. This document is

expressly provided to and solely for the use of Northumberland County Council and must not be quoted

from, referred to, used by or distributed to any other party without the prior consent of Turner &

Townsend Project Management Ltd who accept no liability of whatsoever nature for any use by any other

party.

E:\PM20339\REPORTS\PROCUREMENT REPORT\PM20339 PROCUREMENT REPORT REV1 AUGUST 2011.DOC

Distribution Record Sheet:

Name Organisation

Ian Campbell Northumberland County Council, Spatial Planning Monitoring & Delivery

Caroline Bruce Northumberland County Council, Local Services

Mike Scott Northumberland County Council, Sustainable Transport


making the difference 1

1 Executive Summary

This report has been prepared by Turner and Townsend Project Management (TTPM)

for Northumberland County Council (NCC), in conjunction with NCC Highways and

Procurement Departments and outlines the objectives and constraints associated

with the construction of the A1 – South East Northumberland Strategic Link Road –

Morpeth Northern Bypass (A1-SENSLR-MNB) and provides an outline of the

procurement system that is to be employed on this project.

This report has been produced as part of the Best and Final Bid (BAFB) submission to

the Department of Transport (DfT) for government funding of up to 70% of A1-

SENSLR-MNB scheme costs.

Cost Headings Budget /

Cost Plan

Current

Forecast

Previous

Period

Current Cost estimate £32.02m £32.02m £38.12m

Key Parties to the Project

Client / Sponsor Northumberland County Council

Corporate Director of Local Services

Project Manager Turner & Townsend Project Management (TTPM)

Designer Northumberland County Council

Highways Department

Cost Manager Carillion Plc

CDM Co-ordinator Northumberland County Council

Transport Consultant AECOM



2 Introduction

The procurement system to be adopted by NCC is arguably the most important

factor governing the manner in which the project will be undertaken, its

administration and the total project duration. It also influences the project team's

ability to achieve a successful balance between the objectives of cost, time and

quality.

Any construction project has a trio of essential deliverables:

� Time taken to deliver the completed scheme from inception to completion;

Speed of construction would generally come at a loss of control over the design

and at a cost premium.

� Cost of delivering the total project; Cost certainty prior to the construction

commencing takes time to agree and will require NCC to retain a large amount of

risk over the final design solution.

� Quality of the completed project: Absolute control over the design and quality of

the building will extend the design development and come at an additional cost.

The choice of procurement system to adopt is a balance between which of these

three factors is of greatest concern to NCC. For example:

TIME

COST QUALITY



How these factors are weighed may be a matter of choice, but no procurement

strategy will avoid the need for Time, Cost and Quality issues to be managed and

their inevitable tensions balanced.

All the procurement options have risks. The various procurement strategies available

reflect fundamental differences in the allocation of these Risk and Responsibilities

between the parties, and the suitability of the different approaches have to be

considered in relation to the specific nature of the individual project, as there is no

one procurement route suitable for all circumstances.

The purpose of this report is to consider the alternative procurement options

available to NCC and based on the NCC’s objectives and constraints, formulate a

suitable recommendation.

It has been confirmed that since design of the road is to be undertaken in-house,

D&B procurement options were not under consideration. Furthermore, it was

confirmed that since previous infrastructure projects and the previous phase of this

road (Pegswood bypass) have been delivered successfully under the NEC, this form

of contract would again be adopted.

Therefore, the issues for consideration by this report are as follows:

Procurement – framework appointment versus competitive tender, and

Form of Contract – NEC2 or NEC3 and option selection



3 Project Objectives and Constraints

3.1 Objectives

The strategic objective of this project is to deliver the A1-SENSLR-MNB in accordance

with the BAFB (once approved) and all relevant NCC policy and procedures.

In addition the development is designed to respond to the following specific design,

cost and procedural objectives.

� High quality and robust highway design

� Cost certainty prior to commitment to build is understood to be a priority

3.2 Design Constraints

• Optimise strategic development and investment opportunities

• Value for Money (in line with TEMPRO)

• Comply with existing and emerging National and NCC Planning Policy

• Environmental Impact considerations

• Energy efficient design

• Procurement in accordance with NCC policy and public procurement regulations



4 Procurement Options – Construction Phase

A meeting to discuss procurement options was held on 20/06/2011, a copy of the

Record of Discussion of this meeting is included at Appendix A.

4.1 Framework Appointment

NCC has an existing Framework for the appointment of Contractors.

This existing framework will come to an end on 17/01/2012. Although the new

framework is likely to be a 3 Tier format rather than singe source, it is agreed that it

may be in place, or of a format that would be appropriate to the procurement of this

contract.

In conjunction with NCC Highways, Local Services Procurement & Asset Management

and Finance Administration & Transactional Services, it was agreed that it would not

be appropriate to procure this project by means of the new framework.

4.2 Competitive Tendering

Given the value of this project it is considered that a competitive tender undertaken

in accordance with Public Procurement Regulations, will offer the County Council the

opportunity to achieve best value.

It is anticipated that given the prevailing economic conditions and civil engineering

sector activity that such a tender will attract national civil engineering contractors

offering the benefits of wider supply chains, which in turn should provide for more

competitive pricing of the works.

These contractors will be familiar with the proposed form of contract and can offer

the management infrastructure that is essential to the successful delivery of the

project.

The following milestones apply to the proposed NCC Procurement Process.

� PIN or OJEU Notice issued via ‘MyTenders’ portal

� Pre-Tender Launch Workshop prior to PQQ publication

� Corporate Director of Local Services (as DfT SRO) to authorise tender action

� Tender action via NEPO portal

� NCC tender review and approval period to be 2 weeks minimum



5 Form of Contract

5.1 NEC Standard Form

The New Engineering Contract (NEC) 2nd Edition was adopted as the form of contract

to deliver the Pegswood Bypass section of the Strategic Link Road.

As such NCC Highways, who will be acting as NEC Project Manager for the delivery

contract, are familiar with the contract form and procedures and are satisfied it

represents the best option for this project.

5.2 NEC 2nd or 3rd Edition

Consideration should be given to the adoption of the 3rd Edition of the NEC.

Published four years ago, the new edition has been received positively. However, the

3rd Edition has introduced new contract forms and significant amendments to existing

contracting forms.

Key Changes between NEC2 and NEC3 include, but are not limited to the following.

� Drafting changes will affect the pricing level of work

� Lessons learnt from NEC2 results in increased perception of risk by both parties.

� NEC3 has modifications to change management - timeliness of CE response.

From our review of the key changes TTPM consider NEC3 is a change for good and

will improve the administration of the contract. The positive changes may be

summarised as follows.

� Greater focus on the management of risk

� Improved terminology and definitions provide for a clearer and better understood

contract

� Changes to Schedule/Shorter Schedule of Cost Component simplifies and

quickens CE evaluation

The following changes may be more beneficial to contractors and increase dispute

and administration burden.



� Main Options B & D changes to BoQ clauses will involve more CEs and increased

re-measurement (Option D) and associated administration

� Two stage Fee Percentage could attract increase in overall Fees against NEC3

� Increased obligations on the Project Manager in the management of CE that may

benefit contractors who abuse the process

� Inclusion of additional CE and the drafting overall encouraging more CE provides

an increased risk of change.

It is considered that overall there is a strong case for adoption of NEC3 for Main

Options A, B, C, E and F provided clients understand and make the necessary

amendments to the areas of risk as identified above.

There is less of a case for NEC3 where Main Option D is adopted, which brings in an

onerous requirement for a full re-measure of the quantities.



6 Conclusion and Recommendations

6.1 Conclusions

The adoption of Option D does not offer risk transfer with respect to measurement

errors to the contractor, this risk would be retained by NCC. However, Option C

would provide such risk transfer and NEC3 now includes a schedule of cost

comparables designed to facilitate cost assessment of Compensation Events.

Other projects under TTPM management are translating an NEC3 Option C into a

Guaranteed Maximum Price (GMP), which achieves the necessary risk transfer and

where gain share is set to zero provides greatest cost certainty.

Given the increase in administration of CEs and the potential for abuse, the County

Council should consider ICT based NEC Contract Administration system e.g.

4Projects or BIW. The cost of which could be borne by the contractor, but would

provide detailed audit trail of CA activities and requires duty holders to perform in

accordance with the contract and it’s timetable.

6.2 Recommendation

In light of previous discussions with interested County Council departments, together

with the NCC Highways preference, it is recommended that NEC3 Option C be

adopted for delivery of this contract and that consideration be given to the

translation of the tender return into a GMP for these reasons stated above.



Appendix A

Procurement Meeting Record of Discussion 20/06/11



Client: Northumberland County Council

Meeting Title: Procurement Meeting

Meeting Date: 11.00am 20/06/2011

Meeting Location: County Hall, Highways Department

Meeting No: 1

Attendees

Name Company Copies

Ian Drummond Turner and Townsend Project Management ID

1

Paul Laybourne Turner and Townsend Project Management PL

1

Gary Mills Highways GM 1

Chris Rush Local Services Procurement & Asset Mgt CR 1

Chris Baty Finance Admin & Transactional Services CB 1

Additional Distribution:

Ian Campbell Spatial Planning Monitoring & Delivery IC

1

Mike Scott Sustainable Transport MS

1



1 INTRODUCTIONS

1.1 ID and PL as employees of Turner and Townsend Project Management (TTPM)

retained by NCC to provide project management support to the Council in their

preparation of the Best and Final Bid (BAFB) to the Department of Transport (DfT)

for funding of the project.

1.2 GM is NCC Highways Engineer in charge of the project and the BAFB production.

1.3 CR is Senior Category Specialist, Local Services, Procurement and Asset

Management.

1.4 CB is Senior Procurement Officer, Finance, Administration and Transactional

Services.

2 PURPOSE

2.1 ID stated that the purpose of the meeting is to discuss the procurement options for

consideration with respect to procurement of a main contractor for the A1-SE

Northumberland Strategic Link Road-Morpeth Northern Bypass.

3 DISCUSSION

3.1 ID stated that in previous discussions with GM it has become clear that rather than

procure this project as part of the existing framework, it is agreed that it should be

subject to separate competitive tender exercise.

3.2 CR advised that the existing framework will end on 17/01/12. The new framework

will not be single source, but is likely to be a 3 tier system.

3.3 ID stated that as competitive tender is to be adopted and given the value of the

project it would be subject to OJEU procedure and timescales.

3.4 CB stated that the OJEU notice would be published using ‘MyTenders’ and that all

aspect of tender action would be via the NEPO portal.

3.5 ID queried NCC position with respect to mid-tender interviews. PL suggested that a

mid-tender clarification process may better suit current procurement thinking.

3.6 CB suggested that prior to issue of the PQQ it may be beneficial to hold a pre-Tender

launch workshop.

3.7 CR stated that there would need to be NCC ‘sign-off’ prior to commencement of

procurement. GM stated that as ‘Senior Responsible Officer’ with regard to the BAFB

to DfT, it would seem likely that Caroline Bruce should undertake this duty.

3.8 ID stated that the indicative master programme now being developed from NCC and

other programmes will incorporate a 2 week NCC approval period.

3.9 ID is to include CR and CB is issue of draft programme for their comment. ID



3.10 CB suggested that a PIN notice could be issued in conjunction with the pre-Tender

launch workshop; this should only be issued once funding has been approved.

3.11 GM stated that NEC is the preferred form of contract for project delivery. PL queried

whether NCC prefers to use NEC2 or NEC3 and undertook to provide copy of TTPM

Technical Paper comparing contract options. GM/CR/CB will review and provide

feedback. PL/GM/CR/CB

3.12 GM stated that the two NEC options under consideration are, Target Cost with

Activity Schedule (C), and Target Cost with Bills of Quantities (D). GM stated that

current preference is for Option D as bills of quantities provides more information

with which to monitor cost of change during the course of the works.

3.13 PL commented that adoption of Option D does not transfer risk arising from

measurement errors to the contractor, this risk would be retained by NCC. Whereas,

Option C would offer such risk transfer and NEC3 now includes a schedule of cost

comparables designed to facilitate cost assessment of compensation events.

3.14 PL stated that other schemes under TTPM management are translating an NEC3

Option C into a Guaranteed Maximum Price (GMP), which achieves the necessary risk

transfer and where gain share is set to zero provides greatest cost certainty.

3.15 ID suggested that NCC give consideration to an ICT based NEC contract

administration system e.g. 4Projects or BIW. The cost of which could be borne by the

contractor, but would provide detailed audit trail of CA activities and requires duty

holders to perform in accordance with the contract and it’s timetable.

3.16 ID stated that the Procurement Paper to be drawn-up by TTPM for the project must

record reasons for discounting other forms of contract; in this case they are OGC

recommendation to adopt NEC and NCC preference for the form.

4 ANY OTHER BUSINESS

4.1 Nothing further at this time.

5 NEXT MEETINGS

5.1 The date and time of Procurement Team Meetings are to be confirmed and will be

set-out in the table below in future meetings.



Appendix B

TTPM Technical Paper on NEC2/NEC3

Water Sector

Why Change from NEC2 v NEC3?


C:\DOCUME~1\LAYBOPAU\LOCALS~1\TEMP\NOTES6030C8\NEC2 TO NEC3_TECHNICALPAPER_FINAL_V.1.DOC

© Turner & Townsend Cost Management. All rights reserved November 09. This document is expressly provided to and solely for the use of client and must not be quoted from, referred to, used by or distributed to any other party without the prior consent of

Turner & Townsend insert company who accept no liability of whatsoever nature for any use by any other party.

1 Introduction

The introduction of the New Engineering Contract (NEC) 2nd edition and its approach to

partnering and collaborations coupled with a suit of contracts saw a large proportion of the

water companies take up the NEC as the contract of choice. Since then it has become even

more widely accepted with water companies seeking to adopt the NEC 3rd Edition within the

next regulatory period.

The 3rd edition of the NEC was published some four years ago and has, in the main, been

positively received. However, care must be taken as this latest edition has not only introduced a

number of new contract forms but also made significant amendments to the existing contracting

forms.

The third edition of the NEC suite of contracts was published some four years ago and just now

the impact of this change is hitting the water sector due to the timing of the sectors

procurement cycle around the five year AMP Periods with the new AMP commencing in April

2010. This third edition comprises a completely updated suite of contracts and introduced a

number of new contract forms with significant amendments to the existing contracting forms. In

this article we consider the most widely used NEC form, namely, the Engineering and

Construction Contract (ECC).

2 Use of the ECC

During AMP4 the ECC 2nd Edition was adopted by a number of water companies who were

seeking to develop more relationship based working with their suppliers and the current

evidence for the position in AMP5 is that the use of the ECC will be extended with it being

adopted by a further four of the major water companies for at least part of their investment

programmes. This means that almost all of major water companies in England & Wales (as well

as Scottish Water) will be using the ECC contract and therefore will be the most widely used

contract form in the water sector.

3 Why Change?

Is there a need for an organisation to change? Or is it simply a trend to follow on the basis that

there is a new contract edition and therefore it must be an improvement on the previous. Well

certainly there are changes how they affect you will depend on whether you act as an Employer

or a Contractor. Within the changes there are clarifications and improvements in definitions

which will make the new contract easier to understand and administer, so these are welcomed,

but there are also subtle changes in the risk balance and these should be clearly understood

before any organisation adopts the new edition of the contract.

In the Appendix we have analysed the key changes to the contract and provided Turner &

Townsend views on whether these changes are good or bad for our clients (typically the

Technical Paper 2


Employer under the contract). Once these have been fully considered a client will be in a better

position to consider the business case for changing to the 3rd Edition.

4 Key Changes between ECC2 and ECC3

Overview

The drafting changes between 2nd and 3rd edition will undoubtedly affect the pricing level of

work. Similarly as the contract is now better understood and the lessons learnt from the 2nd

edition are well documented the perception of risk by both parties has increased. This is most

likely to manifest itself in increases to the Contractors Fee. Care should therefore be taken when

benchmarking between the 2nd and 3rd editions.

ECC3 has made significant modifications to the way change is managed and in particular the

mechanism and timeliness of response of Compensation Events. Before adopting the ECC3 it is

important for clients to have gained an appreciation of the changes and their impact. Reviews of

client documentation should be undertaken to ensure that clause numbers, terminology and the

mechanics of the contract align with the new forms.

The Changes

The ECC3 has extensive changes from the EEC2, the majority of which are simply there to

improve the clarity of the documents. However, there are some more important changes and

these have been highlighted in outline in the Appendix, the table in the Appendix is not an

exhaustive list but provides a sufficient level of analysis to be able to inform a good decision

making process.

5 The Case for Change from ECC2 to ECC3

From the review of the key changes tabled in Appendix A, we consider overall, the ECC3 is a

change for good and will improve the administration of the contract. In summary the positive

changes are,

� It provides a greater focus on the management of risk

� Terminology changes make for a clearer and better understood contract

� Changes to and the use of the Schedule of Cost Component (SoCC) and Shorter

Schedule of Cost Components (SSoCC) will simplify and quicken up the

evaluation of Compensation Events

� Improved definitions of ECC terms providing for a clearer contract which will

reduce the level of disputes

There are some changes which whilst seeking to improve the ECC, these may well be more

beneficial to contractors and increase dispute and administration burden, these are,

Technical Paper 3


� Within Main Options B & D changes to the Bill of Quantities clauses will lead to

more Compensation Events and greater administration through re-measurement

of the works (Option D)

� Introduction of a two stage Fee Percentage could well lead to an overall increase

in the level of Fee against ECC3 contracts

� Increased obligations on the Project Manager in the management of

Compensation Events, which on the face of it can be construed as a positive, but

are more likely to benefit contractors who abuse the process for their advantage

to gain higher level of agreements for Compensation Events

� Overall, with the inclusion of an additional Compensation Event and the drafting

overall encouraging more Compensation Events, there is a greater risk of

change.

Overall, there is a strong case for change to the ECC3 for Main Options A, B, C, E and F

provided clients understand and make the necessary amendments to the areas of risk as

identified above. There is less of a case in terms of the Main Option D which brings in an

onerous requirement for a full re-measure the of the quantities.

Technical Paper 4


Appendix A

Details of Changes Comment Good/Bad

Definitions

A Risk Register has been introduced and is incorporated in the Contract Data Part 1 and updated through the life of the project (11.3(14))

This provides for a greater focus the ongoing management of risk throughout the project life cycle. This addresses common failure points in the management of change and reinforces the intent that early warnings are there to proactively manage the contract and not simply act as a precursor to a Compensation Event.

��

In light of the above, early warning meetings have been re-entitled risk reduction meetings. Generally the intent remains largely unchanged from 2

nd edition. (16.3)

The name change clearly sets out the objective of the meeting to all stakeholders to the contract i.e. risk reduction not change confirmation. ��

Key Dates have been introduced which allows the employer to identify key dates in the programme to which the Contractor must adhere to. (11.2(9), 25.3)

This provides the PM with a greater ability to manage the programme for the project and provides greater flexibility and easier administration. There is an increased onus upon the Employer to provide information and access in order for the Contractor to fulfil his obligations in meeting Key Dates.

��

The definition of Actual Cost has been changed to Defined Cost (11.2(22) Option A & B or (23) Option C, D & E of (24) Option F)

This avoids the confusion of the ECC definition of ‘Actual Cost’ being different to the general definition of actual cost.

�� The definition of Working Area has been extensively overhauled, to avoid abuse of Working Area Overhead definition to cover head office or regional offices (11.2(18))

The tightening of the definition of ‘Working Area’ provides for more rigour and thus less abuse by contractor’s of the contracts intention. ��

Fee Percentage

Two Fee Percentages have been introduced (11.2(8) & Contract Data Part 2)

• Direct fee percentage

• Subcontract fee percentage

This has been introduced as a result of contractor’s difficulty of pricing a single fee %.

Our experience has been that contractor’s had generally taken this risk on under the ECC2 and this change could well encourage higher overall fee percentages.

��

General Limitation of liability for Contractors design under ECC2 Clause 21.5 has been replaced by secondary

This now provides an Option for the Client to inlcude this or not. ��

Technical Paper 5



option X18 Limitation of liability. Time

Programmes – the requirement to provide a method statement for each operation has been deleted and replaced with a requirement for the Contractor to provide a statement of the Contractor plans to do the work.

Whilst this lessens the contractor’s obligation, it will encourage the provision of the critical data that the PM will require. ��

Testing and Defects The Employer does not need to provide access to allow a Defect to be corrected. In such circumstances this will be treated as an uncorrected Defect and the cost of rectification deducted from the Contractor (45.2)

This provide the PM and therefore the Client with more flexibility in terms of managing the correction of defects. ��

The defects correction period begins when the necessary access has been provided and not when the defect has been notified if access is required (43.4)

This makes the contract fairer in terms of providing the Contractor with a reasonable period within which to correct defects. ��

Payment Clarified that assessment interval continue until 4 weeks after the issues of the Defects Certificate (50)

Clarification only. �� Compensation Events An additional compensation event head for Prevention has been introduced. The Project Manager to instruct for events that neither Party could prevent and that stop the Contractor completing the work (either on time or at all). This will attract both a potential extension of time and costs. (19.1)

The need for an additional compensation event has never been robustly established. In our opinion this type of event is very rare and the contract could still have managed without it. It will only encourage more change.

��

Additional clarity around how the cost effect of physical condition and weather are assessed (60.1(12) & (13))

Clarification only.

�� The Contractor is time barred in claiming a compensation event if they have failed to notify within 8 weeks of becoming aware of the event (61.3)

This will encourage contractors to better manage change and will reduce the occurrence of change being raised late in the project. ��

If the Project Manager does not notify his decision over the validity of a compensation event within 1 week of the Contractor’s notification (or a longer period to which the Contractor has agreed) then this will be treated as acceptance of the compensation event and an instruction to submit quotations. (61.4)

This provides for a tighter obligation on the Project Manager than previously existed, whilst this is initially a change for good the one week time limit could potentially lead to abuse by contractors or a greater level of adjudication, especially where there are complex events to consider. We recommend the initial period of time should be extended to two weeks.

��

Technical Paper 6



If Project Manager fails to reply to a quotation, then Contractor gives notice and the quotation will be deemed accepted after two weeks (62.6)

This provides for a tighter obligation on the Project Manager than previously existed and could lead to potential abuse by contractors.

��

However, the additional text has been added which stated the date when the Project Manager instructed or should have instructed the Contractor to submit quotations divides the work already one from the work not yet done (63.1)

This provides for a useful clarification which will improve the management of Compensation Events

��

Main Option A Defined Cost is by reference to the Shorter Schedule of Cost Components only. Contractor must relate Activity Schedule to operations on the programme (31.4, 54.2) If the Project Manager and the Contractor agree you may use rates and lump sums to price Compensation Events (63.14)

The use of the SSoCC will simplify the assessment of Compensation Events and is a positive change.

��

Main Option B Defined Cost is by reference to the Shorter Schedule of Cost Components only (11.2 (22))

The use of the SSoCC will simplify the assessment of Compensation Events and is a positive change.

��

The threshold for changes to quantities in the Bill of Quantities becoming a Compensation Event has been increased from 0.1% to 0.5% of the total of the Prices (60.4)

This will reduce the number of Compensation

Events under this Option reducing the extent of

admeasure. ��

Compensation Events for items needing clarification or different from the method of measurement, item descriptions and division of work (60.6)

This provides a greater onus on the Bill of

Quantities being in strict compliance with the

method of measurement. This change will create

more challenges and thus Compensation Events in

respect of the bill of quantities.

��

Bill of Quantities has precedence over other documents in respect of corrections and inconsistencies (60.7)

This clarifies that the Bill of quantities takes

precedence in terms of pricing over any other

contract document. This change will create more

challenges and thus Compensation Events in

respect of the bill of quantities.

��

Introduction of measurement rules for the evaluation of Compensation Events. If the Project Manager

This is a positive change which will improve the

management and timely agreement of ��

Technical Paper 7



and the Contractor agree you may use rates and lump sum to price Compensation Events (63.13)

Compensation Events.

Main Option C Detailed and revised definition of Defined Cost and Disallowed Cost (11.2(23), 11.2 (25)) The assessment of the Price for Work Done To Date is no longer on a cash negative basis but is now based on the total Defined Cost the Project Manager forecasts will have been paid by the next assessment date plus the Fee (11.2 (29)).

This recognises a common amendment made to the ECC2 to turn it from a cash negative contract to a cash neutral contract for contractors. This is a positive move which recognises common practice within the industry and negates the need for a Z-clause.

��

Programme operations must relate to the Activity Schedule (54.2).

This is a positive change and will aid the forecasting of costs against the programme. ��

Main Option D Detailed and revised definition of Defined Cost and Disallowed Cost (11.2(23), 11.2 (25)) The assessment of the Price for Work Done To Date is no longer on a cash negative basis but is now based on the total Defined Cost the Project Manager forecast will have been paid by the next assessment date plus the Fee (11.2(29)).


��

Confirmation that the Target Cost should be re-measured based on the actual quantities (11.2(33)).

This turns this Option into a full re-measurement contract which will add to the administration of the contract and delay agreement of final accounts.

��

The threshold for changes to quantities in the Bill of Quantities becoming a Compensation Event has been increased from 0.1% to 0.5% of the total of the Prices (60.4)

This will reduce the number of Compensation Events under this Option reducing the extent of admeasure ��

Compensation Events for items needing clarification or different from the method of measurement, item descriptions and division of work (60.6)

This provides a greater onus on the Bill of

Quantities being in strict compliance with the

method of measurement. This change will create

more challenges and thus Compensation Events in

respect of the Bill of quantities.

��

Bill of Quantities has precedence over other documents in respect of corrections and inconsistencies (60.7)

This clarifies that the Bill of quantities takes

precedence in terms of pricing over any other

contract document. This change will create more

challenges and thus Compensation Events in

respect of the Bill of quantities.

��

Technical Paper 8



Introduction of measurement rules for the evaluation of Compensation Events. If the Project Manager and the Contractor agree you may use rates and lump sum to price Compensation Events (63.13)

This is a positive change which will improve the

management of Compensation Events. ��

Main Option E Detailed and revised definition of Defined Cost and Disallowed Cost (11.2(23), 11.2 (25)) The assessment of the Price for Work Done To Date is no longer on a cash negative basis but is now based on the total Defined Cost the Project Manager forecasts will have been paid by the next assessment date plus the Fee (11.2(29))


��

Main Option F Detailed and revised definition of Defined Cost and Disallowed Cost (11.2, (24), 11.2 (26)) Management Contractors own costs form part of the Defined Cost Provision of Site Services and the Contractor’s management responsibilities are clarified (20.2)

Provides for a more robust definition of these terms.

��

Dispute Resolution There is a choice of dispute resolution process depending on the governing law of the contract.

• Option W1 Dispute Resolution procedure (used unless the United Kingdom Housing Grants, Construction and Regeneration Act 1996 applies)

• Option W2 Dispute Resolution procedure (used in the United Kingdom when the Housing Grants, Construction and Regeneration Act 1996 applies)

This improves the flexibility of the contract for use with all construction and process contracts i.e. allowing for those contracts that full within and without the Housing Grants, Construction and Regeneration Act 1996.

��

Secondary Options

The numbering system for the Secondary Option Clauses has changed from alphabetical to numbers proceeded by an X

Clarification only. ��

New Secondary Option Clauses � X12 Partnering Options Introduces a multi-partner set of contract clauses

which seeks to establish legal partnership between the parties to the contract only. We do not believe contracting to partnering is the right approach to managing multi-partner behaviours.

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Technical Paper 9



� X18 Limitation of Liability Clause This introduces an optional clause which will allow the contractor to limit his liability to the client and therefore if selected will limit the clients ability to recover his full costs.

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� X20 Key Performance Indicators Introduces generic clauses for the management and incentive arrangements for KPI’s. KPI’s and how they are managed is very client specific, as such if used they should be subject to specific drafting through the use of appropriate z-clauses.

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Deleted Secondary Option Clauses � Option U: CDM This is a superfluous clause as a result of the

introduction of the additional compensation event under Clause 60.1(19)

�� Option V: Trust Fund A little used option and therefore has been deleted.

This removes some superfluous contract conditions from the contract options.

�� Schedule of Components People The requirement for People to be on site for a minimum of 1 week before they can be recovered as Defined Cost has to be deleted. People can now be recovered for any time they can spend working within the Working Area. The definition of what is included in People has been clarified / extended to cover � Vehicles

� Safety training

This provides clarification around the people component and will simplify the assessment of Defined Cost.

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Equipment Equipment owned by the Contractor is now charged at either the rates listed in the Contract Data or “at open market rates”. Unless the Equipment is bought specifically for the contract, if so then a depreciation and maintenance calculation will still apply. Accommodation costs have been moved out of the Working Area Overhead and into Equipment

This simplifies the assessment of the equipment component for all contractors owned plant except for that which is bought for specifically for the contract. This will aid the reduction in the time for the assessment of Compensation Events. ��

Charges Utilities limited to water, gas and electricity Consumables for PM and Supervisor now allowed.

This provides for clarification in the definition of the Charges Component. ��

Technical Paper 10



Shorter Schedule of Cost Components Note that Shorter schedule of Cost Components is now the only schedule used in Option A and B for the assessment of Compensation Events

SSoCC is now the elected schedule for Options A & B and simplifies the assessment of Defined Cost ��

Procurement Report - Northumberland...Northumberland County Council A1 – South East Northumberland...

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Transcript of Procurement Report - Northumberland...Northumberland County Council A1 – South East Northumberland...