Why NEC when
you can IChemE?
Gordon H Bateman CEng, FICE, FCIArb, AMIChemE
The Spinney, Upper Warren Avenue
Caversham, Reading, RG4 7EJ
+44 (0)118 334 1811 +44 (0)7792 504 690
gordon@ghbateman.com
Why NEC when you can IChemE?
Introduction
NEC ECC appropriate for all engineering &
construction projects?
OGC recommends “the use of NEC3 by public
sector construction procurers on their construction
contracts”
What sort of projects?
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Why NEC when you can IChemE
Examine use of NEC and IChemE forms
• Contract for a power station
• Also FIDIC Yellow Book (C of C for Plant &
Design-Build)
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Why NEC when you can IChemE
A gas-fired turbine generator power station
• Natural gas or LNG via associated plant
• Often used for peak-load demand
• Cost: eg £500M for Scottish Power 1,000
Megawatt project in Kent in 2009 (The Guardian online)
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Why NEC when you can IChemE
Technology is gas-fired turbine + generator
• Critically whole plant includes sophisticated
control systems, complete Plant is SYSTEMS
BASED
• Systems to operate & control the plant
• High level switching-on & synchronisation with grid
• Detailed level of opening valves, ignition of gas
• Operation and monitoring of performance
• Complex & sophisticated system & sub-system
based plant
• Patents, software and confidentiality issues
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Why NEC when you can IChemE
Basic requirements to be stated:
• Required power outputs
• Maximum CO2 emissions at various power
outputs
• Assumed calorific value of fuel gas
• Start-up response time
• Guaranteed efficiency to be stated (eg Cal/kWh)
• Etc etc
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Why NEC when you can IChemE
Contract to take fully into account complexity
of plant
• In the technical Specification
• In the Conditions of Contract and overall
‘structure’ of the Contract
• NEC ECC, FIDIC Yellow or IChemE?
•
(Not considering alternative payment mechanisms)
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Why NEC when you can IChemE
Key factors to consider:
1. What is the Contract?
2. What are the design obligations?
3. What provisions are there for dealing with
complex plant issues?
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Why NEC when you can IChemE
1. What is the Contract?
•
££M contract needs clarity
•
What is the Contract?
•
What documents form Contract?
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Why NEC when you can IChemE
1. What is the Contract cont’d
NEC ECC:
•
No statement as to what documents form Contract
•
Conditions of Contract refer to Contract Data, Works
Information, Site Information, Schedule of Cost Components
•
Contract Data specifies which clauses apply (plus ‘Z’
clauses) + data (eg dates, periods, LDs etc) + says where
other documents are
•
Do these five documents “form the contract”?
•
But no mention of Form of Tender / Acceptance Letter / Form
of Agreement
•
Conflict or ambiguity? Precedence / Contra proferentum
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Why NEC when you can IChemE
1.
What is the Contract cont’d
In contrast:
•
FIDIC & IChemE state documents forming the Contract
+ order of precedence
•
Contract includes Form of Agreement (provided)
•
FIDIC also includes Letter of Tender & Appendix
(provided)
Clarity of contract essential
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Why NEC when you can IChemE
2. Design liability
•
NEC: design parts which Works Info says to design (21.1)
•
FIDIC: in accordance with Laws of Country, the Contract, &
to Country’s technical standards etc (5.3, 5.4)
•
IChemE: fitness for purpose stated in Specification (3.4)
Fitness for intended purpose: IBA v EMI & BICC (1980)
(NEC: Option X15)
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Why NEC when you can IChemE
3. Construction / erection / testing provisions
Power station plants are sophisticated and complex
Testing requirements:
•
Off-Site & other pre-installation inspections & tests
•
On-Site construction/assembly completion inspections
& tests
•
On-Site put to work inspections & tests (pre-takeover)
•
On-Site post-takeover performance tests
Testing requirements much more than in a civil engineering
contract
© Gordon H Bateman 2010
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Why NEC when you can IChemE
Testing provisions in NEC ECC
•
Tests & inspections to be in Works Information (40.1)
•
Tests & inspections by Contractor or Supervisor (40.3)
•
Test failure = Defect; Contractor to correct & re-test
(40.4)
•
Contractor bears cost of repeat test (40.6)
•
31/3 lines re off-Site tests & inspections (41)
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Why NEC when you can IChemE
Testing provisions in NEC ECC
Contd
•
Searching & notifying Defects (42)
•
Defect correction (43)
•
Cost of Defects not corrected by defects date (44
& 45)
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Why NEC when you can IChemE
Testing provisions in NEC ECC
•
Contd
Low performance:
“If a Defect included in the Defects Certificate shows
low performance with respect to a performance level
stated in the Contract Data, the Contractor pays the
amount of low performance damages stated in the
Contract Data.” (X17)
•
Hence everything to be stated in Contract Data +
Works Information
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Why NEC when you can IChemE
Other provisions in NEC ECC
•
Takeover: not to be early; otherwise 2 wks after
Completion (35.1)
•
PM certifies Completion (30.2) and takeover (35.3)
•
Completion = single objective of Contractor
•
Takeover = passing of care & risk
•
Nothing in X17 re how low performance established,
who conducts tests, when tests done, evaluation of test
results etc.
•
Lot of detail left to Works Information authors
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Why NEC when you can IChemE
Testing provisions in FIDIC Yellow Book
•
Takeover follows satisfactory completion (10.1)
•
exceptions at 9.4
•
Taking-Over Certificate records when Works
complete (10.1(a))
•
Unlike ECC FIDIC has just one certificate re
completion & takeover
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Why NEC when you can IChemE
Testing provisions in FIDIC Yellow Book Cont’d
Tests after Completion (12):
•
Carried out by Employer (12.1(b))
•
Non-performance damages for failure payable (12.4)
•
Payment of non-performance damages  Works deemed
to have passed Tests after Completion (12.4)
•
Failed tests: Contractor to have access to remedy (12.4)
•
If no access by end of Defects Notification Period, Works
deemed to have passed Tests after Completion (12.2)
•
No certificate to record position
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Why NEC when you can IChemE
Testing provisions in IChemE forms
Off-Site and pre-installation tests (22 + Sch 13)
•
Notices of carrying out of tests (22.3)
•
Provision re non-specified tests (22.4)
•
Consequences of test failure (22.6)
•
PM can pass rights to duly authorised nominee (22.7)
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Why NEC when you can IChemE
Testing provisions in IChemE forms
Cont’d
Completion of construction tests (32 + Sch 14)
•
Clearly defined milestone in contract
•
Every element to be inspected/tested (32.2)
•
Certificate of Completion of Construction (32.3)
• Both for every element or part + whole Plant (32.3
& .5)
•
“Does this element of the Plant work such that it is
likely that the Plant will work?”
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Why NEC when you can IChemE
Testing provisions in IChemE forms
Cont’d
Takeover tests & takeover (33 + Sch 15)
•
Contractor puts plant to work (33.2)
•
Takeover tests and procedures (33.2)
•
“Does the Plant work?”
•
Output, CO2 emissions, etc
•
Success + O&M Manuals  Take Over Certificate
(33.7 & 21.9)
•
Failure  Contractor has to put it right (33.5)
•
TOC = Purchaser has beneficial use + care etc of Plant
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Why NEC when you can IChemE
Testing provisions in IChemE forms
Cont’d
Performance tests (35 + Sch 16 &17)
How well does the Plant work?
•
Only if specific guarantees in contract (35.1)
•
Power station: overall Plant efficiency: Calories of
input fuel / kWhr of electricity output
•
Complete approach: who does tests; when tests done;
evaluation of results; re-testing; Contractor to adjust
Plant; (35.3 - .8)
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Why NEC when you can IChemE
Testing provisions in IChemE forms
Cont’d
Performance tests (35 + Sch 16 &17) Cont’d
•
LDs only apply up to stated limit; if results outside limit
general damages or abatement to apply (35.9)
•
Limit re LDs can be a degree of deviation or can be
failure of another factor – eg quality of output
•
Acceptance Certificate (36)
•
•
•
When performance tests passed or LDs/general
damages assessed/agreed
No later than end of Defects Liability Period
Deemed passing of tests if not done, unless Plant
incapable of passing test by reason of C’s default
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Why NEC when you can IChemE
Comparing testing provisions
•
IChemE separation of Completion of Construction
and T/O very different from ECC & FIDIC
•
IChemE: many activities (putting to work &
commissioning) between Completion of
Construction and T/O
•
Is difference important?
•
IChemE Completion of Construction very
important milestone in complex plant contract
•
Major milestones as in IChemE each need
certificates
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Why NEC when you can IChemE
Certificates: a Conditions of Contract matter
• What is importance of a certificate?
• Statement by Contract Administrator acting as certifier
• Certificate of Completion of Construction: clearly
defined statement that Plant constructed such that likely
it will work
• Take Over Certificate: Plant does work + O&M Manuals,
hence takeover
• Sophisticated complex systems-based Plant needs two
events (Completion of Construction and Takeover) each
with certificate
© Gordon H Batemanof
2010Conditions of Contract
• Hence must be requirement
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Why NEC when you can IChemE
The comparison: a summary
ECC:
Completion Certificate: practical milestone
Take Over Certificate: transfer of liability
FIDIC:
TOC (on transfer of liability) following Completion
IChemE: Completion of Construction Certificate: practical
milestone
Take Over Certificate: practical milestone +
transfer of liability
Acceptance Certificate: practical milestone +
clarity of liability re damages
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Why NEC when you can IChemE
The comparison: other factors – IPRs etc
ECC:
Very limited copyright provision re use of
Contractor’s design (22.1)
No confidentiality or IPRs/patents provision
FIDIC:
Very limited confidentiality provision (1.12);
Copyright etc of parties’ documents & their use
(1.10; 1.11)
Mutual indemnities re IPRs/patents (17.5)
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Why NEC when you can IChemE
The comparison: other factors – IPRs etc
IChemE: Full confidentiality clause (20)
Mutual indemnities & detailed provisions re
copyright & IPRs/patents, licences (software
etc), including Subcontractors’ IPRs (8)
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Why NEC when you can IChemE
The comparison: some conclusions
ECC:
use for civil engineering works with/without
minor plant items
FIDIC:
use for non-complex plant, not complex plant
IChemE: use for complex systems-based plant (+ process
plant)
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Why NEC when you can IChemE
The IChemE forms – some other details
• Main contract forms:
• Red Book – lump sum
• Green Book – cost reimbursable
• Burgundy Book – target cost
• Subcontract forms:
• Yellow Book – process/M&E
• Brown Book – civil engineering & building
• UK and International versions
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Why NEC when you can IChemE
IChemE contracts – the documents
•
Agreement
•
Conditions of Contract
• Part I – General Conditions
• Part II – Special Conditions (if any)
•
Specification
•
Schedules (19 or 20)
In International forms Part II is Particular Conditions which
are essential part of C of C
Books contain detailed guide notes.
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