NEC Forum – Tale of Two Contracts Ir. Ir. PAUL LEE PAUL LEE, , Kai Kai-hung hung Assistant Managing Director Hsin Chong Construction Company Ltd. P. 1
NEC Forum – Tale of Two Contracts Ta Tale of two le of two co contra ntracts cts Two almost identical contracts are running side by side. One contract is a NEC under Engineering & Construction Contract (ECC) option B while the other contract is governed by GCC. Both contracts are installing new sewerage pipes within indigenous villages in Lam Tsuen area. Both contracts are also supervised by Arup. The main contractor for both contracts is Hsin Chong Tsun Yip Joint venture. The main contractor is deploying two independent operating teams. This presentation is about Hsin Chong Construction Company’s observations in three areas in comparison of contracts under NEC & GCC: (1) Manpower to run these two contacts (2) Time to resolve dispute (3) Compensation event (NEC) vs. V.O/EOT (GCC) With the inherent NEC advantages, we will share some of the benefits that cannot be achieved by the traditional contract. NEC also provides the key to open new chapter to resolve disputes. P. 2
NEC Forum – Tale of Two Contracts Contract Cont act NEC NEC contr contract act – GC GCC con contr tract act – DC/2012/07 DC /2012/07 DC/2 /2012 012/0 /08 Title Lam Tsuen Valley Lam Tsuen Valley Sewerage – Village Sewerage – Village Sewerage, Stage 2, Sewerage, Stage 2, Phase 1 Phase 2 (9.1 Km sewers & (9.1 Km sewers & rising mains + 2 rising mains + 2 Pump Stations) Pump Stations) Contract Sum $173M $171M Opti Option on B B – Priced Priced Schedule of Rates contr contract act wi with th bills bills of of with bills of quantities quantit ies quantities Duration 33 months + 40 months + 180days 180days Instruction to work By Works Order By Works Order P. 3
NEC Forum – Tale of Two Contracts (1) Manpower to run these two contracts - During 1 st 12 months construction period Type ype of of manp manpower er NEC NEC-DC/20 /2012 12/07 /07 GCC GCC-DC/20 /2012 12/08 /08 Quantity surveyor 30 man-months. 18 man-months. (Accounting staff) Manager/agent 36 man-months. 24 man-months. Office staff (or sub-agent) Supporting staff 144 man-months. 96 man-months. Site staff No difference between DC/2012/07 and DC/2012/08 P. 4
NEC Forum – Tale of Two Contracts (2) Time to resolve disputes Major causes of disputes NEC clauses (DC/2012/07) GCC clauses (DC/2012/08) Through early warning system and compensation event Dispute is often taken time to notifications, potential dispute can be discussed and resolve. 1) Interpretation of the resolved at early stage. Related matters can be resolved contract under compensation events within specified timeframe. Through early warning system and compensation event Dispute is often taken time to notifications, potential dispute can be discussed and resolve. 2) Interpretation of scope of resolved at early stage. Related matters can be resolved Usually contractor is asked to works under compensation events within specified timeframe. complete disputed works first and may not be able to receive full payment until, sometimes, completion of contract. Through early warning system and compensation event Dispute is often taken time to notifications, potential dispute can be discussed and resolve. 3) Method of measurement resolved at early stage. Related matters can be resolved Contractor usually receive partial and payment under compensation events within specified timeframe. payment. Through early warning system and compensation event Dispute is often taken time to notifications, potential dispute can be discussed and resolve. 4) Liability resolved at early stage. Related matters can be resolved under compensation events within specified timeframe. P. 5
NEC Forum – Tale of Two Contracts (2) Time to resolve disputes Issues raised & Situation updated in two contracts (during the 1 st 12 months) Issues Issues NEC NEC-DC/20 /2012 12/07 /07 GCC GCC-DC/20 /2012 12/08 /08 78 nos issued. 70 nos issued. Works Orders 30 nos completed. 26 nos completed. 12 nos raised. 3 nos via letter or Request for 8 nos responded to within Information (RFI). Early Warnings timeframe & settled with 3 nos are not yet settled because of no compensation event. time bar. Direct fee percentage Direct fee percentage is fixed O/H and profit is to be agreed. and OH/P in contract. 2 cases with the delays Utility compensated/mitigated by 3 cases. Time delay to be assessed. compensation event. P. 6
NEC Forum – Tale of Two Contracts (3) Compensation event vs V.O./EOT Item NEC contract (DC/2012/07) GCC contract (DC/2012/08) Clause 60.1 (cover 22 items that can trigger Clause 62 (main clause to cover V.O.). 1 compensation events). Clause 52 (cover EOT). Compensation event covers both time and V.O. usually covers the cost. Time is a separate issue cost. that will be settled under other GCC clause. 2 Quotation must be based on built-up 1) Quotation can be based on similar rate under cost by using current market value (labor, existing BQ items. materials, machines…etc..). 2) Quotation can be selected from three or more 3 individual pricings from suppliers/subcontractors. There is no loss scenario for contractor Quotation may not be fair to either the contractor or because compensation event is based on employer if the adopted similar rate from existing 4 current or fair market value. It is fair to all item is not fair market value. parties. Contractor is entitled to Time & Cost for EOT Contractor is entitled for Time compensation only for due to Inclement Weather, Unforeseen EOT due to Inclement Weather, Utility & unforeseen 5 Utilities and Unforeseen Circumstances. circumstances. P. 7
NEC Forum – Tale of Two Contracts (3) Compensation event vs V.O./EOT Compensation event, VO & EOT Situation Update in these two contracts - During 1 st 12 months construction period Issues Issues NEC-DC/20 NEC /2012 12/07 /07 GCC GCC-DC/20 /2012 12/08 /08 Compensation Events 18 nos identified. 6 nos issued. (DC/2012/07)/ V.O. 12 nos agreed. 0 nos assessed. (DC/2012/08) EOT claim (Inclement 5 nos submitted (monthly 5 nos submitted. Weather) assessments are done). 0 nos awarded. 8 nos are resolved quickly by means of compensation event Other Claims N/A with participation of the Project Manager. P. 8
NEC Forum – Tale of Two Contracts Conc Conclusion lusion NEC contract provides the following contractual conditions with advantages that tradition GCC contract cannot provide: A. Under the Spirit of co-operation in Core Clause 10.1 - The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this contract and in a spirit of mutual trust and co-operation. Hence, parties spend more time on engineering solutions rather than defending responsibilities. B. Time bars are set to restrict time to make submissions, replies, and decisions, therefore disputes or potential disputes can be resolved in a timely manner, especially when the Project Manager is actively involved in decision making process. Compensation events with subsequent payments can be settled much earlier when early agreement is obtained. Cash flow for the contractor will be greatly improved. P. 9
NEC Forum – Tale of Two Contracts C. Method of complying and assessing quotation Quotation must be based on built-up cost by using current market value (labor, materials, machines…etc..) D. Early warnings can be raised by all parties to alert any potential risks and to provide resolution in early stage. P. 10
NEC Forum – Tale of Two Contracts End of Presentation P. 11
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