BK SURCO TRAINING. The Challenge of Transition from Traditional Contract to NEC Forms of Contract in Hong Kong. Dr. Brenda Yip

Transcription

1 BK SURCO TRAINING The Challenge of Transition from Traditional Contract to NEC Forms of Contract in Hong Kong Dr. Brenda Yip

2 Content 1. Updates on NEC projects 2. Setting up NEC contracts 3. Choosing NEC partners 4. Implementing NEC projects 5. Q&A 2

3 NEC Public Projects in Hong Kong 3

4 NEC Public Projects in Hong Kong 4

5 The Hong Kong Government has mandated the use of the New Engineering Contract (NEC) Engineering and Construction Contract (ECC) for all public works projects supervised by the Development Bureau s Works Departments with contract sums of more than HK$300M from January 2018 unless there is a good reason not to do so (Mr. John Kwong - Head of Project Cost Management Office, Development Bureau on 3 rd August 2017). 5

6 NEC Suite of Contracts Engineering and Construction Contract (ECC) Professional Services Contract (PSC) Term Service Contract (TSC) 6

7 Benefits of NEC 1. Cultivation of partnering culture 2. Stronger driver for contracting parties to pursue common goals 3. Good risk management mechanism 4. Reduction of disputes 7

8 Challenges of NEC 1. Setting up NEC Contracts Mobilisation, Contract Strategy, Z-clause 2. Choosing NEC Partners Main Contractors, Consultants, Subcontractor 3. Implementing NEC Projects Tight Schedule for Responses, Extra Resources for Contract Administration and Project Management, Open Book Account 8

9 Mobilisation Lack of knowledge and experience among the organisation of the Employer. Difficult to adjust to NEC philosophy - mutual trust and co-operation. 9

10 Contact Strategy Selection of a main option depends on pricing tools/ payment mechanism and financial risk/ reward sharing. Selection of a series of secondary options depends on project specific requirements. Improper usage of Z-clause. 10

11 Main Options Selection (ECC) 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) 11

12 12

13 13

14 Secondary Options Selection (ECC) 14

15 Z-Clauses (1) Additional conditions of contact Main / secondary clauses do not cover Same status as main/ secondary clauses 15

16 Z-Clauses (2) Clause 10.1 The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in the contract and in a spirit of mutual trust and co-operation. 16

17 Z Clause ECC Guidance Notes (1) This Option should be used where the Employer wishes to include additional conditions. These should be carefully drafted in the same style as the core and optional clauses, using the same defined terms and other terminology. They should be carefully checked for consistency with the other conditions. 17

18 Z Clause ECC Guidance Notes (2) Additional conditions should be used only when absolutely necessary to accommodate special needs, such as those peculiar to the country in which the work is to be done. The flexibility of the ECC main and secondary Options minimises the need for additional conditions. 18

19 Z-Clause (3) Z-Clauses Library for Public NEC Works Contracts Case study MTR WIL Contract 713 CIC Guidance note on drafting Z-Clause (in progress) 19

20 Choosing NEC Partners Project Manager, Supervisor, Consultant (PSC) Contractor (ECC) Subcontractor (ECS) Supplier (SC) Service Manager (TSC) Adjudicator (AC) 20

21 Tight Schedule for Responses Time Bar 61.3 Contractor s notification 8 weeks 62.3 Contractor s submission of quotations 3 weeks 21

22 Tight Schedule for Responses Default Acceptances 61.4 Default acceptance of Compensation Event if no response from the PM - 1 week + 2 weeks 62.3 & 62.6 Default acceptance of quotation if no response from the PM - 2 weeks + 2 weeks 22

23 More Human Resource is required in administrating NEC Contracts Procedures driven, require quick and intensive administration Formal communication by writing Comprehensive requirement on programme Demand on human resource diminishes towards the end of contract Initial increase in resource is paid off by improved efficiency and effectiveness 23

24 Open Book Account for Target Contract 52.2 The Contractor keeps records of: Accounts of payments to defined cost Proof that the payments have been made Communications about the assessment of compensation events for Subcontractors 52.3 The Contractor allows the Project Manager to inspect at any time within working hours the accounts and records which he is required to keep. 24

25 Concluding Remarks More and more Government s NEC projects to come There are challenges in the use of NEC contracts during mobilisation, setting up NEC contracts, choosing NEC partners and implementing NEC projects. Nevertheless, if the challenges can be overcome, NEC contracts are generally positive. 25

26 BK SURCO TRAINING The Challenge of the Use of NEC Forms of Contract in Hong Kong Q&A

27 NEC in United Kingdom 27

28 NEC in Other Countries 28

29 NEC in Government s Public Works Contracts 29

30 NEC in Hong Kong Private Sector 30