NEC USERS GROUP NEWSLETTER
In 2019, our article highlighted why the NEC4 contract was a good fit for the pharmaceuticals industry: NEC4: Good Fit for Pharmaceuticals
NEC USERS GROUP SILVER MEMBER
Palm Commercial Services are Silver Members of the NEC Users Group. The NEC Users' Group is an international community of NEC users, with more than 450 members, representing and connecting organisations from across the supply chain.
Palm Commercial Services can offer advice with regards to how the Schedule of Cost Components shall be used. Palm Commercial Services can ensure that the clause 31 programme contains sufficient information to ensure that it is accepted. Palm Commercial Services has experience in working on disputes involving the NEC3 contract and can help with advice and management throughout the dispute resolution process (adjudication, arbitration, etc.)
The NEC3 and NEC4 conditions of contract facilitates recovery of additional costs associated with weather in an objective way. Firstly, the party has to calculate if and how much of the adverse weather occurring in each calendar month is a Compensation Event. A Compensation Event occurs when a weather measurement is recorded that exceeds the average 1 in 10 year value. It is only the difference between the actual and average 1 in 10 year value that is used in the assessment of the Compensation Event. The NEC3 conditions of contract sets out how the difference should be calculated. Once it has been calculated that a Compensation Event has occured its effect on the programme and any entitlement to additional time and money is assessed.
Does the adverse weather event constitute a Compensation Event?
The NEC3 and NEC4 core clauses are identical for weather Compensation Events and set out Compensation Events at clause 60.1. The Compensation Event for weather is defined at clause 60.1(13) as occurring when:
“(13) A weather measurement is recorded
within a calendar month,
before the Completion Date for the whole of the works and
at the place stated in the Contract Data
the value of which, by comparison with the weather data, is shown to occur on average less frequently than once in ten years.
Only the difference between the weather measurement and the weather which the weather data show to occur on average less frequently than once in ten years is taken into account in assessing a compensation event."
It is only the difference between the actual weather recorded and the average 1 in 10 year value that is considered when assessing the Compensation Event.
The NEC3 and NEC4 conditions of contract explains how the difference is calculated.
The Contract Data, if properly completed, will state which weather station the historical weather data is to be taken from and which weather service is to provide the data (for example the Met Office or Meteo Group). The weather data should be obtained from the weather service and weather station that are defined in the Contract Data.
The NEC3 Guidance Notes explain that the provisions for weather in the ECC were developed in consultation with the Met Office so it would be difficult for anyone to disagree with the Met Office’s method of calculating the average 1 in 10 year value.
Weather Measurements Recorded (The actual weather during each calendar month of the project)
The Contract Data sets out the weather measurements that are to be recorded during the project and specifies the location where the recordings are to be taken. The default weather measurements are:
“The cumulative rainfall (mm)
The number of days with rainfall more than 5 mm
The number of days with minimum air temperature less than 0 degrees Celsius
The number of days with snow lying at …. Hours GMT”
Several weather services provide monthly summary sheets that show, for each of the default weather measurements, the amount recorded during that particular month of the project and the average 1 in 10 year figure. From this weather service, a comparison of figures is established to determine if a Compensation Event has occurred during the calendar month.
If the recorded weather during the calendar month is not worse than the average 1 in 10 year value then, in that case, there is no Compensation Event.
NEC3 & NEC4 CONTRACT EXPERIENCE
NEC3 & NEC4 CONTRACT EXPERIENCE
In the past twelve months we have administered contracts on the following types of projects, please contact us to discuss how we can help.
Scottish Branch Webinar
How NEC4 can support collaborative contracting in the Oil and Gas industry
This was a joint webinar in December 2020 between the Pipeline Industries Guild and NEC, hosted by our Scottish Branch Chair John Richardson, to providing an introduction to the NEC4 suite of contracts for the Oil and Gas industry and how these support collaborative contracting. The session also looked at issues to consider in their application within the industry and how these can be addressed.
The webinar started with a presentation followed by an open forum for questions.
The webinar covered:
Background to NEC4
NEC contracts and structure
Key provisions that support collaboration
Flexibility in risk allocation
Considerations when using NEC4 in the Oil and Gas Industry
The webinar was delivered by Ian Heaphy and John Richardson of SGN and Scottish Branch Chair for The Pipeline Industries Guild. Ian is a member of the NEC4 Contract Board has been directly involved in drafting and shaping the fourth generation of NEC contracts.
Ian was supported by Sean Kennelly FRICS FCIArb LLM from Palm Commercial Services Ltd. Sean is a Chartered Quantity Surveyor and works on NEC3/NEC4 projects in Oil & Gas, Pharmaceuticals, Nuclear, Civils and HS2. Palm currently supports projects in Europe, Dubai, Australia and Israel.
John is Head of Innovation and current Chair of PIG Scottish Branch, and has experience of negotiating and delivering NEC projects within the Oil & Gas, Petrochemical and Pharmaceutical industries.