BXSURCOTraining a BiAsiaPacific@ © Presented by Dr. Brenda Yip PRO MHKIE MHKIS MRICS MCIOB MHKICM MCICES RPE Certified NEC®Professional Training Course > Day One | Module 1- Introduction, Roles, Responsibilities ‘Module 2 - Preparation and Project Set Up > DayTwo | Module 3 - Team Integration Module 4 - Projact Administration '» Day Three | Module 5 ~ Risk and Programming Module 6 - Lump Sum and Target Cost ay Four | Module 7 - Management of change Module 8 ~ Accounts and Project Closure 2 BeAsiaraciic@® CCertined NEC Professional Training Cours (CNPC-190712) Modes 5 6 (Oconto iw no a arp em aon ine ining seine y BK SURCO ta ‘dy my mtbr yy ol ny Sg woe wie pom of SURCO LaBXSURCOTraining MODULE 5 - RISK AND PROGRAMMING ‘ny yoann cy ne Suen pomasoneORSURD ome. ; Birsarct OS Module 5 - AGENDA : pensar OS (Ceried NEC Professional Training Course (CNPC-190712) Moves $6 ‘Oconee so ei te to eed eit fie eid BK SURCO La {iy may tbe an ay ted pb pay al tenon BE SURED EaBXSURCOTra ing » To review the importance of effective risk management in improving project outcomes, » To understand the mathods by which the NEC ECC allocates and manages risk + To understand the provisions for early warning register, ‘early warnings, and early warning meetings + To be aware of the financial risks catered for by the ECC Compensation Event procedure To be aware ofthe insured risks and associated insurance provisions BeAsiaraciic OF Certined NEC Profesional Training Course (CNPC-190712) Modes 5 6 Scope ei i ee ied rey BSEDBXSURCOTraining What is Construction Risk? » Definition + Fora rk t eis there needs to bea chance of an event which has Potential for adverse consequences Le. if the event happens it wil fuse harm itis Hazard = The extent to whieh a potenti recipient of harm is vulnerable te the hazard ie ite Exposure Therefore Risk = Hazard x Exposure i Bessiaroate OS “What is Construction | Risk perception depends on viewpoint of: + Client + PM/Consultant + Contractor + Sub-Contractor + Although perceptions of what constitutes risk may be different, consequences of failure to identify and adequately ‘manage risk will be a loss to the project whatever the viewpoint BkAsiaracte Certified NEC Professional Training Course (CNPC-190712) Modules 3&6 Cone fmt, in re i fe nie aoe ei et gl, eed yD SURCO Ln Se create a eee ec eae ner patra!BXSURCOTraining TT Identifying and Managing Risk 080 ontscing + Highly complex processes require good management + Inadequate or no management leads to + Delay, Disruption, Additional Costs + Project Insurances will be required for 3% party risks with significant downside . BiAsiareciic OF, Certied NEC Professional Training Course (CNPC-190712) Modes 5 6 ‘ofthe as ale rhe ining eed Wy BK SURCO LitBXSURCOTra when bret 1 truer conf te a iy my ms ing Lae aa Potential Consequences of Risk Events + Failure to complete on time or a all lure to meet performance and/or quality criteria + Cost overruns, Liquidated damages, Claims Insolvency of one or other party Damage and/or injury to people both on and off site Damage to property Criminal or civil actions (possibly leading to fines, imprisonment of individuals and compensation for damages) n BeAsiarace OS TT Identifying and Managing Risk + Importance of competent risk management to identify arly and minimize impact from isk events, '» Importance of comprehensive and updated programme to identify potential issues and to show potential risk impact » Importance of competent sub-contract management to avoid risk of non-performance » Risk of failure of contract administrators to act impartally/properly BeAsiaracic OE ining Course (CNPC-190712) Moss 5 6 the ie owe ow ein ae a ein BK SURCO el ay bid itt writen ere of BK SURED LatBXSURCOTraining +» Risks should be allocated to the party best placed and most ‘capable to ascertain/manage those particular risks » Why? Because this should represent the lowest cost to the project = Some examples + Unforeseen ground conditions ~ Client best placed to establish extent of risk prior to tender: should be Client risk. Lens i oun ob Co + Access Delays ~ Client manages/controls . Client risk + Labour Shortages ~ Contractor expertise and management Contractor risk ECC User Guide . BeAstraaticOE Cert NEC Profesio copy ofan ye {any mente reed ing Course (CNPC-190712) Modules 5 & 6 ht fe ahs angen 0 ng, rend by BK SIRO Lit > yard ay pa ey tt rn pon SURO LiBXSURCOTraining Default NEC Approach to Risk Allocation + Fairer allocation of Risks ~ no expectation of tend: taking on unknown risks ( eg ground conditions), takes more responsibilty » Longer lis of Client-culpable events 1» Separate definition of events leading to time and money impacts to the project (Core Clause 6) ‘= Separate definition of required insured risks leading to loss or damage to the works, or third party personal or property (Core Clause 8) +» Hlexibility in CD1 to add further Client Risks BeAsirann OS | [RP eS LSA SNE TU A Key NEC Features - Managing Risks Predictive Risk Management 1, Pre-contractRisk/Contingency Assessment = lel Contecior ley ai Correct Data for ping dented risks from te nial Early Warning Register 2, Early Waming meetings to discuss/manage/eiminate potential sues 3. Early Waming procedure for identifying further post- contract risks a they arise and updating Register 4. Sanctions for Contractor not providing arly warnings ; Beware oS CCerifed NEC Professional Training Course (CNPC-190712) Maes 3&6 ih fae es nn ef taf i tinge ted yD SURCO Ln ‘dy uy ern mn ay pb ey a etn porn of BE SURO LiBXSURCOTraining ee Early Warning Register + The Early Warning Register isa defined term + Description of isk + Description of how to manage te sk + Tis nat a contract document and dacs not allocate i Instead client and Contractor initially identity risks in Contact Data Ports Land 2 + "The following matters willbe included in the Early Warning Register. = The responsibiliy for any time, money consequences are defined inthe Contract CE procedure = The EW Register isa post contract risk management tool 5 BeniarectcO& Risk Profiling — Likelihood of Occurrence A BersnraicOE i Course (CNPC-190712) Modules 5 4 6 ios poe hee tila dy BK SURCO Lid Certified NEC Professions! Tra ‘OCinip oe sas nsBXSURCOTraining ET Risk Profiling - Potential Impact A Bensaract OF Risk Profiling - Rating and Action Priority Risk Priority Matrix: 4 M | H | H+) Three level scale Teel aw] sed to prortize risks ae High, impact [ote] e fm | m| medium ortow tfefelele Likelihood : Besar Certified NEC Profesional Training Course (CNPC-190712) Modules $6 {Scop oa ne a he i ft aon noel ine ting, edb SURCO Lk ‘eit may tpn yy olny pe dig wit he we emi 0 BE SURED EaBXSURCOTraining ‘Sample Early Warning Register - Breer OE Loner SC rasan Risk Management - Early Warnings Early warning (Clause 15 [16NSC3]) -a vital part of ECC “Contractor and PM have a duty to notify the other as soon as they are aware of a matter which could + Increase the total ofthe Prices + delay Completion, + delay meeting a Key Date or + Impair the performance ofthe work in wee (16.1) » Contractor may give an early warning by notifying the PM of ‘any other matter which could increase his total cost » PM enters early warning matters in Early Warning Register asa) » Early Warning Meeting convened * Linked to but not always a pre-compensation event process BKAsiarctic OS CCertited NEC Profesional Training Course (CNPC-190712) Modules 5 6 ip ttt ati ton ors enw tings rte y SCOBXSURCOTraining Risk Management - Early warning Meetings + ither party may at any time instruct the othe to attend early ‘warning meeting (15.2) * those attending co-operate in making and considering proposals ‘0 avoid or reduce risk, seeking solutions, deciding actions, Updating Early Warning Register (15.3) * PM ress Ey Warning Register to record desons and isues Failure by Contractor to notify can reduce payments / ‘compensation event claims ~ assessed as if early watning was siven Clause 61.5) W's encourages collaboration, innovation and ability to adust ‘to circumstances during the contract . BeAsiaract- OF CCetied NEC Professional Training Course (CNPC-190712) Modes $& 6 [con ft me a et i oft seo ee ini, tne B SURO La ety ay tpi ay way edn ay ple ay wae en emison 6B SUREO LaBXSURCOTraining . BeAsiaFacticl ing Course (CNPC-190712) Modules 5 8 6 fe ata ei rt ne, iby BK SERCO La ‘nh mnt eeednyway o in ay ue gy wl wie min fK SURCO LaBXSURCOTraining ECC structure - Core Clauses =e Mandatory Clauses set out in NEC Conditions comprising 1. General 2.The Contractor's main responsibilities 3.Time {Testing and Defects S5.Payment 6.Compensation events 7Tile .Risks and insurance 9.Termination SE Compensation events - Definition = » Compensation events are » They are therefore Client risks for time and money. «Since compensation event claims deal with both time ‘and money there are no separate disruption/global prolongation claims » Remedies for CE are restricted to entitlements to changes in Prices, Completion date and Key Dates Bendre OF Certified NEC Profesional Training Course (CNPC-190712) Modules S& 6 ‘copyleft tas ace a en tine BK SURCO LaBXSURCOTraining Pinar oan) Compensation Events > Where are compensation events identified in the ECC? + 21 (19 NEC3) in Clause 60.1 + 3 relating to use of Re-measurable 6Q’s (Quantities Risks) in main Options B & D (Clause 60.4 to 60.6) + Also in secondary Options X2, X12.3(6) & (7), X14.2, and X15.2 ‘+ Additional compensation events may be stated in D1 or in Z Clauses : Binsarai OS Compensation Events - Clause 60.1 4PM gives instruction changing Scope (but nate there are ‘exceptions which wil nt be Compensation Events) 2. Client doesnot allow access to and use ofa part of the Site by later of access date or date required by Accepted Programme 5. Client doesnot provide “something” by date required on ‘Accepted Programme nae 4. PM gives an instruction to stop or not start work of to change a ey Date 5 Client or “Others” do not work within times shown on Accepted Programme, the condtions sated inthe Scope, o carr out Wok fn the site that i not stated in the Scope {6 The PM or Supervisor do not reply toa communication from the Contractor within the period required by the contract. . Birches OG Certified NEC Professional Training Course (CNPC-199712) Moduler 5 & 6 [©Canigh tee mat ns te igh othe mars led arin ae agin y OK SURCO Lad hy myst morsel ayy of i ye payBXSURCOTraining ‘Compensation Events ~Clause 60.1 Instruction for dealing with an object of value or of rest found within the site |. PM or Supervisor changes a decision previously communicated, 9. The PM withholds an acceptance fora reason not stated in “Contract (except in relation to Beceleration or for not correcting & ‘defect 10, Supervisor instructs Contractor to search and no Defect found, 1. Testor inspection by Supervisor causes unnecessary delay 12. Unforeseeable site conditions 1, Weather occurs that i shown to occur less frequently than every overs 1. An event which san lent’ ability stated in the Contract occurs PM certifies take over of apart ofthe works before both Completion and the Completion Date & : Bens OS Compensation Events 16, lient does not provide materials, acities and samples for tests as stated in the Scope 117, The PM notifies a correction to an assumption which he has stated about a compensation event 48, A breach of contract by the Client or act of prevention which is, ‘not one of the other compensation events inthis contract 19, An event which prevents completion and which nether party ‘ould prevent and was not foreseeable and is not one of the ‘ther Compensation events in this contract 20. PM notifes the Contractor that a quotation fora proposed Instructions not accepted 21, Additional compensation events stated in CD Part One. 5 Bisslaractc OS Certified NEC Professional Training Course (CNPC-190712) Modules $6 Scope ot ns eft th ms lee or tii end BK SURCO Ld yy erp ay wa fein ay se pay mt he ites amino SURED La 16BXSURCOTraining NEC PPX ey aene . Payment Termination C4 ECC Core Clauses General ‘The Contractor's main responsibilities Time Quality management (Testing and defects - NEC3) Compensation events Title Liabilities and insurance (Risks and insurance - NEC3) Bena OF Se ECC Liabilities and Insurance Clauses 80-Clent’s Liabilities 81 Contractor's Libilties 82 — Recovery of Costs £83 —Insurance Cover '84~Insurance Policies £85 Contractor not Insuring £86 — Insurance by Client X1S - Limitation ofthe Contractor's lability for design and reasonable sill and care X18 - Limitation of Labilty Bensiapactic OE [NEC Professional Training Course (CNPC-190712) Modules 5 6 ov bei othe es soe i ign ei by SORCDL 7BXSURCOTraining Clause 8 - Insured Risks » NEC distinguishes between risk of loss or physical damage ‘to property or of personal injury or death which are usualy insurable risks, from general, legal or financial sks * Clause 8 identifies the general, legal and insurable risks of loss, damage, injury or death for which the Client is. responsible and insurances required to cover these + Risks which are not expressly stated to be Client risks are Contractors risks » Additional Client risks can be added in Contract Data » Contractor has to carry out repairs to Works arising from an Client's risk event, which will be a Compensation Event (01.14) : Besar OS Risks & Insurance » Clause 80 Clients risks » Damages arising from + Use/Construction of the works + Negligence/interference by Client/ Client's staff + Fault of Client orin Clients design Loss of Client's materials not received by Contractor Loss or damage to works du to war, ot, trikes ete Loss or damage to works taken over Loss or damage to Contractors plant/equipment after termination Any additional Risks stated in CDI : BersarOS CCerifed NEC Professional Training Course (CNPC-190712) Moves $6 ah es, re a tn ah shone Gain me tag ridBXSURCOTraining isk Allocation and Insurance under NEC Section 8 » Clause 81, the Contractor's risks, states: The following are Contractor's Liabilities unless they are stated as being Client's abilities. + Claims and proceedings from Others and compensation and costs payable to others which arise from or in connection with the Contractor providing the Werks. Loss or damage tothe works, Plant and Materials and Equipment Loss or damage to property owned or occupied by the Client ‘other than the works, hich arises from or in connection with the Contractor Providing the Works Death or bodily injury to the employees ofthe Contractor fe BkAsiaPacic OS Risk Insurances » 88.1 Contractor to provide insurances in joint names as. stated in Insurance table with coverage as stated in CD1 ‘rom the starting date tothe defects da = 842 Insurancetypes + Loss or damage to Works, Plant and materials + Loss or damage to Equipment + ibility for 3* party property and personal injury + Liability for workers personal injury * Insurance poles o be reviewed and accepted by the » 851f Contractor does not insure as required Client Ingures at Contractor's cost 7 Birsaacc OG | (Certined NEC Profesional Training Course (CNPC-190712) Mader 5 & 6 (copys a ale no fre i he tn one an et ange tin yD SURCO La {ny mented ny way or ny yw ewe esac FR SURED Lak 19BXSURCOTraining ETT Risks, Insurance and Secondary Options '» X15 - Limitation of the Contractor's liability for design, to reasonable skill and care + X45 reduces Contractor liability (and risk) for design ‘faults and his insurance costs + not included then liability would be in accordance ith the Scope which would amount to fitness-for stated-purpose or reasonably inferred, which is @ higher standard + Ifa design defect becomes apparent and the Contractor can show he used reasonable skill and care in designing that part of the Works then rectification ‘would become a compensation event 5 BeAsiaracic OS oe sr RRC AL EAE Risks, Insurance and Secondary Options » X1B-- Limitation of liability * Reduces Contractor Risk and Costs + Establishes limitations of Contractor liability (and therefore required insurance thresholds) for losses. arising from the project including + Client indirect or consequential loss + Loss or damage to Client property + Latent Defects + Total Liability under contract + Required Amounts included in Contract Data at CD1p89 + End of liability date to be expressed in CD1p89 . BeAsiaractc OS (Ceried NEC Professional Training Course (CNPC-199712) Moduler 5 & 6 ‘Scan fie es nef sie a awed a esi oie BK SURCO Lat ny my boa ny 0 Fo aye py wi he wpm ef BK SURED LiBXSURCOTraining En Module 5 - AGENDA AP ycneeeces D> Soe eens « BeAsiaracic OS Essential Elements of Programming » Accurate statement in advance of how, when and with what the Works will be cartied out + With such information, lien will know: + when design information tobe issued + when specialists to be appointed + when necessary changes an be introduced to minimize effect + Tikely impact of unnecessary changes + Programme is a too for planning future works and if properly updated a key document for pre-ascertaning effects of changes on time and cost BeAsiaPactc CCeried NEC Professional Training Course (CNPC-190712) Modules 3 & 6 {copie es nora bei the te ogee ng ei SRC ‘ety en inary yl ay us py wee win prin af BK SURED LnBXSURCOTraining NEC Approach to Time Management (1) » Programme is important tool for managing time and progress under any contract (see earlier sections) » Under NEC, updated programme also essential to enable proper administration of contract » NEC requires contemporaneous assessment of cost and ‘ime effects of changes which necessitates regular programme updates » Enables Project Manager and Contractor to monitor progress and to assess prospectively the time effects of ‘compensation events, including changes to Completion Date » Facilitates accurate time and cost forecasting, reduces disputes and shortens final accounts . Basic NEC Approach to Time Management (2) >» NEC requires pro-active management of the project with contemporaneous Risk Tine and Cost management » Active Risk Management of Project issues affecting Tane and Cost » An accepted and comprehensive Programme with shared understanding of float and time-rsk allowances » Regular Programme updates to reflect delays and CE schedule revisions » Programme expertise from both Contractor and PM » Rapid Assessment and Agreement of Time and Cost impacts of Compensation Events (changes) » Speedy Reviews of Disputes By Independent 3" Party Binsin OF 2) Moduler $& 6BXSURCOTraining | Time - Clause 31 Programme » 25% of payments withheld (50.5unti frst compliant ‘programme (31.2bp8) submitted for acceptance (NB 2 week ‘acceptance period) » Can be submitted with tender (CD2) or post contract (31.1) » Programme to be accepted by PM and includes (31.2) + Contac dates, ining sce Key Osta, competion et *Plnned Compton Order and ming of operations incding Clint’ work and Others Provisions or flout ar timer allowances, eth a safety no * reaches tment oho Contactors fo wok Other no scope Phen an ous » Clear reasons to be given for not accepting (31.3) »» Deemed acceptance if PM inaction, (31.3) 5 Bensarectic OS NEC Programme Terminology Dates 1 Binsiaractc | CCertied NEC Profesional Training Course (CNPC-190712) Modules 5. 6 {cop tse es no ara hei the es ove ee aged ay BE SOREL ‘nt ye eel na yee ny te py one wn prion of BK SURED LdBXSURCOTraining “Famed Het 1 con mot he CE) Fecamne 74 oned ty Corbncten Fine. 1th, sien N ha ZB Certified NEC Professional Tein NEC Programme Requirements » Planned Completion + Avery important distinction between an NEC programme and atypical programme isthe concept of a contractor plan for ‘completion which includes an open statement as tothe Contractors project contingency + This elference between planned and contractual Completion ‘generates terminal float which will be maintained or progressively consumed during the course of the project Independenty of compensation events ‘NEC Programme Terminology Dates 2 : BeAsiaPaciic OE Course (CNPC-190712) Modules $8 6 ‘Coptic axa, sn te ihe acon! ri sh igi SURCO tl ‘yy tev ay ay a ny pb lay mao en pin of URC Lad. m4BXSURCOTraining EY NEC Programme Terminology - Terms (1) ® ‘Accepted Programme 11.2.1 = The programme identified in the Contract Data or the latest accepted programme » Completion 12.2.2 -When the Contractor has completed all of the work required by the Scope and corrected defects that would have prevented the Client or Others in ‘completing their works or if not specified in the Scope when the Contractor has done all work necessary for the Client to use the works and Others to do their work » delay to Completion Date 63.3 — Length of time that due to a compensation event planned Completion is later than planned Completion on the Accepted Programme : BeAsiarochic OS Doers as NEC Programme Terminology ~ Terms (2) » 31.2 - Includes float and time risk allowances: Float ~The amount of time an a delaying a subsequent activity Time risk allowances ~ The time difference between ‘optimum and probable duration of an activity taking into account likely activty-levelrsks/delays/Inefficiencies Terminal float ~The period between planned Completion and Completion Date ity can be delayed before A Basiaractic OS Certined NEC Profesional Training C Modules $6 conre-190712BXSURCOTraining 1 +k Management 2 + Conc Rk and Irsronces > yee A BeAsiapacic OF Prog) Pe ene Beaseracic OS, Certined NEC Professional Training Course (CNPC-190712) Madaler 4.5 hos a ihe i fe ma ged a eat ila nd BK SURO 1 ‘ny my eroded ny od ay pl py wow he wen prison of BK SURCO LiBXSURCOTraining Contract Requirements - Clause 31.2 (bullets 6 to 7) + Time by which an activity may be delayed or extended without affecting the start of any succeeding activity. Is available to accommodate: + The time effects of a compensation event + Lack of progress by the Contractor * Float is shared (between Client & Contractor) BeAcieracic OE Certined NEC Professional Training Course (CNPC-190712) Modules 5 & 6 ‘Ocipyh ofte em is hep em ole an nine td by BE SURCO Ld ty mnt! nay yal abe py woe wi pemion BK SURED Lo Fa]BXSURCOTraining NEC Programme Requirements » Time Risk Allowances + Time rsk allowances a Contractor made and owned by the + They are part ofthe Contractors realistic planning to cover convacting sts and wil be retained in any "sessment of compensation events (Cs) + Thesimis to show that appropriate allowances have been Provided foreach operation + Wil also identity potential early fish of actives for planning purposes + snot availabe to anyone other than the Contactor Le saat be used to mitigete the affect of CE . Bensiaract: OF, a NEC Programme Requirements, » ‘Terminal Float: + Difference between planned Completion and ‘Completion Date + Owned by the Contractor ‘Completion Date moves out the amount that planned Completion moves out due to the effects event - Can only be brought back by acceleration! . Bensirect OG Ceried NEC Professional Training Course (CNPC-190712) Modules 5 4 6 ‘copy ft ae fh te aac ee nig ci BK SURCO ta ‘ey mney ye iy pe pay brn prin of BK RED La.BXSURCOTraining 1 of site availabilty and information to be provided by the Client and Others, including + Site Access where later than contract dates + Acceptance of submissions made + Plant and materials provided by the Client + Information from Others : Besar OS Contract Requirements - Clause 31.2 (bullets 8 to 9) ° BeAsiaracc OS, Cert NEC Profesio 1 Course (CNPC-199712) Mes $6 ‘cipro ry ns fw i he ts nate ein a in ei by BK SURCO a ty my nt mcd yao yay wi wien rsa FBR SURED Lak» (Method) Statements and Resource Schedules + Level of detail needs to be set out in Scope. + Statement required for each operation + Resource schedules suggest fully resourced programme but needs to be supplemented in Scope with detailed requirements aS a cS Preparing an NEC Programme (3) "Contract Requirements - Clause 31.2 (bullets 8 to 9) e BeAsroceOE Certified NEC Professional Trxning Course (CNPC-190712) Modules 6 (Scop of te a eh of he as mle Grin ining eed A SURCO Lit ‘yy ep awa edie pe play ne ie eno SURCO Li 30BXSURCOTraining NEC Programme Requirements Other Information Such as + Programme format and Software + Duration of Activities + Method of presenting TRA'S + Method Statement format + Extent of resourcing information required + Correlation with other documents : Benson OF Programme and Activity Schedule » For Options: + APriced contract with activity schedule + CTarget contract with activity schedule » Activities on Activity Schedule and operations on programme ‘should be compatible in accordance with 31.4 » Sections in 89 (for Options B80) should for pricing accuracy purposes also be compatible with operations on programme FE pensrsct OF CCertied NEC Professional Training Course (CNPC-199712) Modes $6 [Copies a ee thes ee Binge ein y BK SRC ta ‘ty oy nse nay yd ay ie py ioe wn prin of SURED LdBXSURCOTraining » The Contractor has to provide a first programme in ‘accordance with the requirements of the Contract within the ‘timeframe set out at COL . BeAsiaracic OE, ‘Programme and Compensation Events + There is an obligation on the PM to assess compensation events where the Contractor has failed to provide a contact peda 5 Bissett OE Certified NEC Profesional Tralning Coutse (CNPC-190712) Modules $ ‘copie ny nn it ft ss sneer we ing dy BK SURO Ll ‘yy epi nay way a a ay iin i he wien ono SUREO LiBXSURCOTraining = In these circumstances the PM is obliged to prepare its own Updated programme and impact any compensation event ‘delays on that programme as part of the CE assessment. . Bersinsctc OF NEC Approach to Programme Preparation » Clause 31.2 is far more comprehensive than normally required » Further requirements must be stipulated in Scope » Standard has to be maintained for all subsequent programmes, and potentially be more detailed » Should be integrated with tender price build-up and Payment BeAsiaPaciic@ SE Certned NEC Profesional Training Course (CNPC-190712) Moduler 5 & 6 [cinnamon arin ae tage in y BK SURCO LA anh othe tidy way in ay ua wi ie wile rae BK SURED LaBXSURCOTraining Time-ECCClause3000 » Starting, Completion and Key Dates (Clause 30) = Contractor does not start work on Site unt frst access date (G01) & does work s0 that Completion ison or before Completion Date + PM decides date of Completion & certifies (30.2) + Contractor does work so that Conlon stated foreach Key Date is met by Key Date (303) * Completion Date can only be changed by PM as a result of compensation events, or acceleration (69 and 36) 7 Beasirsct Programme Submission > Programme can either be + Submitted by Contractor with Tender as part of Contact Data part 2,0r ‘+ Submitted by Contractor after Contract signed, within period stated in Contract Data part 1 p80 5 Beret OF Certified NEC Profesional Training Course (CNPC-I90712) Modules 6 ‘copy en wit ee an ini te DK SURCO at ‘yy erp yy a nay ps iy iit nen emiion 0K SURO LiBXSURCOTraining GE Time - Revising the Programme os » Programme has oe updated regularly (Clause 22) » Shows a number of things including the actual progress achieved on each operation &its effect on remaining work @y » How frequent? + on instruction by PM + when Contractor chooses * interval stated in Contract Data (32.2) 5 BeAsiaracic OF 4 Besar O& Cert NEC Protesion 1 Course (CNPC-190712) Modules 3&6 ‘cong ote na ne ws nonin in a ‘thy my stb nc yw lay ida we ee jemi CO SURED taBXSURCOTraining Revisions to Programme ~ ECC 32.2 » Clause 32 (contd) 322 The Contractor submits 2 revised programme to the Project Manager for acceptance + within the period for reply after the Project ‘Manager has instructed him t, + when the Contractor chooses to and, in any case, + at no longer interval than the interval stated in the Contract Data from the starting date unt! Completion ofthe whole ofthe works.” ; Brnsarctc OS [POL Sd ECC Programme Acceptance » dlause 31.3 states Within v0 weeks of the Contractor submitting 2 programme to him for acceptance, the Project Manager either accepts the programme or notifies the Contractor of his reasons for ‘not accepting it A reason for not accepting a programme is thot + the Contractor's plans which it shows are not practicable, + itdoes not show the information which this contract requires, + ites not represent the Contractors plans realisticely or + ttdoes not comply withthe Scope 5 BeAsiaPacic OS sz Course (CNPC-190712) Modules 5. 6 36BXSURCOTraining aT ECC Programme Acceptance + Bepressly stated reasons forthe PM to reject the Contractor's programme » Ifthe Project Manager withholds acceptance fora reason nat stated in the contract, itis grounds for a compensation event + Acceptance of a programme by the Project Manager is NOT a ‘condition precedent tothe Contractor proceeding with the ‘worke . Brtsarectc OS EE) Clause 31.3 Acceptance/ Non-Acceptance ‘PM has to accept programme within two weeks unless + Contractors plans are not practicable + Tt does not show the information which the contract requires + Ih oes not present the Contractors plans realistically or + It does not comply withthe Scope + IFPM doss not either acceptor notify non acceptance within the period allowed and having been given a further one week's notice of such non-response by the Contractor then programme will be treated as being accepted. : BiAstaracnc OS, 37BXSURCOTraining '» ‘Anew culture: both parties have to work proactively to achiave ‘succes onthe project "= Adetiled programme from the outset (31) Regular updates and accoptanee of programmes gives clearer vy (2) » Programme isthe core management tol and commercial ool "Payment activity schedule direct linked to programme (certain ‘main options) ~ monthly valuations erect from the programme «An end toa ‘aims programme’ at the end ofthe projet comparing {35 ult tothe orginal contact programme » Goth PM and Contractor need to commit ufficent resources to propery administer te contrat = BiAsiaPacitc OE BiAsiaPacific@ © Module Five Thank you for Attending CCerifed NEC Professional Tesining Course (CNPC-190712) Moles $6 ‘copie nt eis et aed ee ng, ei DK URC La ‘elt yt bern any ay ed any pble playa ets pm of URC LasNEC Po Certified Training ~ Case Studies Workshop Exercises ~ Day 3 ‘Module 5~ Risk Management Bombs ‘A PM responsible for the constraction of nfrastrcure tunnels ina mixed business and urban ares is made aware of the rsk of wartime bombs that could be encountered in the course of ‘excavations However, the PM doesnot want to slow down progress, since completion of the project on time is crucial for the Client. A) How importants this potential risk and who under an NEC contnet is responsible? B) How should the PM deal with this when tendering? ©) What measures if any should be taken dusing the project to manage this ik? only possbili A) Although the likelihood of the risk materalizing consequences ina worse-case scenatio could potentially be very significant including ‘personal injury and/or property loss or damage. It should therefere be given a high priority for risk management. If discovered, dealing with a wartime bomb found on the site would be the Client’s responsibility in accordance with Clause 60:1(7) and/or Clause 60:1(12. The PM would be responsible for issuing instructions for dealing with the matter in accordance with Clause 731 B) The PM should seok to ascertain all relevant information about the likely location of, ‘such hazards and include this in the tender documents, Notwithstanding he potential effects on progress, He should also specify precautionary measures to be taken including ground search detection surveys, safe excavations -neasures, neting, barriers ete. He could also request in the tender submissions for the Contractor's proposed method statement for managing this potential risk, although this would remain as an Employer risk. Additionally, the PM should ensure that this mater is {neluded the tender as one ofthe list of matters to be included in the Farly Warning. [Register at Contract Data Part One (P79). ©The PM should ensure that as soon as practicable, an in any event within two weeks of the staring date he convenes an extly warning meeting in aeconlance with Clause 152 to address this and any other isues that have been included inthe tender Early ‘Warning Register. The means of managing the sk including any ofthe precautionary ‘measures listed above willbe agreed between the parties, detailed on the revised Early ‘Warning Register and, if this results in a Compensation Event, then the PM should initiate Une CE process by instructing the Contractor to provide a quotation for the change. The Supervisor should be responsible for ensuring compliance with any ‘additional tests or inspections that are required. BtAsiaPacific @&| NEC Pro Certified Training — Case Studies Workshop Exercises - Day 3 ‘Module 5 ~ Risk Management ‘APM responsible fr the constuction of infrastructure tunnels ina mixed busiess and urban area {is made aware ofthe ssk of wartime bombs that could be encountered in the course of cexeavations, However, the PM does not want to slow down progress since completion ofthe ject on time is crucial forthe Client. A) How important is this potential risk and who under an NEC contrat i responsible? 1B) How should the PM deal with this when tendering? © What measures if any should be taken dusing the project to manage this sk? CBlbatV) = only warn) le girte BeAsiaPacitic @&[NEC Pro Certified Training ~ Case Studies ‘Workshop Exercises ~ Day 3 M ‘The Contractor's work is delayed because a subcontractor he employs is unable to carry out any work, and it takes 3 weeks to find a new subcontractor to start work. Following that delay the Contractor issues a revised programme to the Project Manager for acceptance. ‘This does not reflect any ofthe delays incurred because of this problem, and therefore when itis issued it shows the works as being 3 weeks ahead than they actually are. ‘The Contractor submitted the programme to the Project Manager two week ago but the Project Manager does not respond. What the Project Manager and the Contractor should do in this case and what would be their consequences on the assessment of future compensation events? Suggested Points to Consider + If the Project Manager does not notify acceptance or non-acceptance within the time allowed, the Contractor may notify the Project Manager of that failure. Ifthe failure continues for a further one week after the Contractor's notification, it is, treated as acceptance by the Project Manager in accordance with Clause 51.3. “+A revised programme must show the actual progress achieved on each operation and its effect upon the timing of the remaining work Clause 82.1bp1. It must also show how the Contractor intends to deal with any delays 32bp2. This programme appears to fail both of these test, ‘+ The PM can therefore reject this programme in accordance with Clause 31.3 because it does not show the information required by the contract (3.3bp2). He could also reject it because it daes not represent the Contractor's plans realistically (@1.3bp3). Since both of these are reasons given in the contract for rejection that rejection would not be a compensation event + If, when the Contractor submits a quotation for a compensation event, the PM has not accepted his latest programme, then the PM may reject the quotation in accordance with Clause 62.3 and make his own assessment using his assessment ‘of what the programme should be in accordance with clause 64.1 bp4, BkAsiaPacific @&NEC Pro Certified Training ~ Case Studies Workshop Exercises ~ Day 3 ‘The Contractor's workis delayed because a subcontractor he employs is unable to carry out any work, and it takes 3 weeks to find a new subcontractor to start work. Following that delay the Contractor issues a revised piogramme to the Project Manager for acceptance. ‘This does not reflect any ofthe delays incurred because of tis problem, and therefore when itis issued it shows the works as being S weeks ahead than they actually ae, ‘The Contractor submitted the programme to the Project Manager two week ago but the Project Manager does nat respond. What the Project Manager and the Contractor should do in this case and what would be their consequences on the assessment of future compensation events? QO se gle an. A = payers BéAsiaPacific @&| Day One: > Day Two + Day Three ‘Module 6 - Lump Sum and Target Cost ( » Day Four | Module 7 - Management of Change ‘Module 8 ~ Accounts and Project Closure BeAsiaPactic OF LUMP SUM AND TARGET COST oot ce ean ar sw ah ot se erg at th pony SLI Lid nd yy ‘Ste cary exten mason sae Se 7 BessiaracticOE, 190712) Moles $6 eed hi tg eid BK SURCO ‘shy myth mcd yo nay Say wi rien esac 8 SURED LakBXSURCOTraining Buserd OS Module 6- AGENDA Bison OGBXSURCOTraining NEC3/4 ECC Contract Structure and O| Main Contract Options of ECC ‘Option A: Priced Contract with Activity ‘Schedule + Lump Sum + Breakdown ~ Activity Schedule ~ smaller lump sums + Contractor at risk on quantities of work + Contractor at risk on pricing/breakdowm of Activity Schedule + Interim Payments according to completed ‘activties/groups of activities + Changes valued at cost-plus by BK RCO Ld "Since 41BXSURCOTraining Piece tae naa ECC Option A - Lump Sum Uses where = Scope is well-defined and fixed » Firm outturn costs required Where low Client Price-Riskis important = BQ cost, preparation and complesity not required » United Change is anticipated ‘AS can make CE pricing complex » For Design and Build where Design is Secondary to Function/Cost : Basar OS i Main Contract Options of ECC Option B: Priced Contract with Bill of Quantities + Re-measurable Lump Sum + Contractor paid on basis of actual quantities Errors in quantities ~ Client’ isk + Contractor at risk on pricing BQ items (rates) Changes valued at Cost Plus 7 Besar OS (Certified NEC Professional Training Course (CNPC-199712) Modes 5.4 6 ‘Oconyh ft ne ne iho tanned ht nig tied y BK RCO LaBXSURCOTraining ECC Option B Uses where » Client wishes to retain control of design development » Traditional competitive procurement required with visibility on tender differences » Firm price is required but some design-development {quantity changes are anticipated » Relatively low risk projects with limited change » Client requires a BQ for tender comparison/cost control/forecasting purposes » Not recommended where extensive design change is anticipated 5 BkAsiaPactic OE a Bill of Quantities What isit used for in Option 8 » ‘The method of measurement used is set out in the Contract Data Part 1 (0.82), = PWD adjusts automatically to take account of revised quants| » There ae additional compensation events in Options B & D to cover errors inthe Bill of Quantities Risk of accuracy of Bill of Quantities is withthe Client » The Client should therefore produce Bill of Quantities, not the Contractor in order to ensure accuracy » BQ preparation and remeasurement costs and time » Detailed bass for tender comparison ‘Shopping list for change costs where parties agree : Bersarasnc OS CCertied NEC Protesslonal Training Course (CNPC-190712) Modes 56 cite nnn ea vg ewer i rey BCSBXSURCOTraining Value Engineering » Value engineering isthe ongoing process of crtcally appraising components and processes to determine whether better value alternatives or solutions are available. >» Requires Cent commitment for both design and construction service provider contracts both pre and post-contract >» Early contractor involvement can assist > No mandatory requirement for VE in NEC but Contractor incentivised to offer up ideas by provisions in Options “CAID and in NECS also for Options ABB BeAsiaPactc Certified NEC Professional Training Course (CNPC-190712) Modules $6 {yh tse mn, ne ih 0 ar wn! ising ied BK SURCO Lo lth yt brn any a red abe apy it tn prin of SURCO LiBXSURCOTraining Value Engineering Options A&B NECA See also UG4p65. >» Assessments made at assessment interval(CD1p80) (usually ‘monthi) » Amount due is Price for Work Done to Date (PWDD) plus/less ‘other amounts eg. retention, damages, KPIs if applicable (503) 1/4 PWOD retained if no fist programme submitted (50.5) There are no pro » Retention, Delay Damages, Early Completion Bonus - Optional nal sums or PC sums : BeAsioraic OE Certned NEC Profesional Training Course (CNPC-190712) Moder 5. 6 [copying ane nig i by BK SURCO La ty nbn yoy py whe en remo of BK SURED LaBXSURCOTraining = Besson OF Cerined NEC Professional Training Course (CNPC-190712) Modules $6 ‘copy tise nf tens eran ign eine BK SURCO LA iy mye bees iy ay re ye yh ern prin of SURO iBXSURCOTraining Payment Amounts Due - PWDD. Option B Besiarctc OS ) Payment - Assessing Amount Due PWDD for each NEC4 Main Contract Option I CCertined NEC Profesional Training Course (CNPC-190712) Modules 3 & 6 [Oconto ora heri othees ooee en nige ei yD SURCD ‘sy my eed nay yc ye py wis hewn prison of BK SURCD La aBXSURCOTraining Payment Timing ~All Options fen Me Not later than the assessment intervafater stating date PM certifies a payment within one week of assessment date Each certified payment is made within three weeks (or as stated in the CD) ~ often adjusted to four weeks Further payments certified in accordance with the assessment inter If payment i ate, interest added to next assessment BeAsiaracie Certified NEC Professional Training Course (CNPC-I90712) Modules $8 6 Cone fio oe, se rn i fe ut aol ea ge, ad WB SURCO Lh 48BXSURCOTraining ‘Module 6 - AGENDA Ltt sen cesBXSURCOTraining (ed What is a Target Cost Contract? + Cost reimbursable contract arrangement where the Contractor is paid ‘cost +fee' as defined in a series of contract rules, with parties also sharing cost savings and cost overruns against pre-agreed target = Contractor's Risks become shared Risks when using ‘Target Cost Contracts (except Disallowed Cost) » Itincorporates cost management and incentivsation ‘mechanisms through gain share / pain share and value ‘management provisions. Ths allows the parties to share ‘the benefits of project risks and opportunities What is Cost? » Cost reimbursable contracts often will not pay the full total project cost incurred by the Contractor + Some costs are non-recoverable or disallowed + Other costs are shared between projects Other costs may be included in OH&P » Cost reimbursable contracts should therefore convain detailed rules for what cost is recoverable » For the NEC this is provided in the SCC (Options C&D) and SSC (Options A&B for CEs) “ BeAsiaracie OE, CCrtited NEC Profesional Training Course (CNPC-190712) Modules 5&6 ‘Copii feat, nt ih of etBXSURCOTraining | Why Use a Target Cost Contract? » For projects of high risk and complexity, which otherwise can suffer from poor performance and cost overruns when using traditional contract forms, which often seek to transfer risk to Contractor for limited’ / no cost. These contractual arrangements will also often lead to disputes when risks materialize. To manage costs and create savings against an agreed cost target (gain-share). Emphasis is on early identifieation of risk/opportunity mitigation of rsk and maximizing opportunity ‘through proactive and collaborative management. » Toengage the talent and expertise ofthe whole project team 10 efficiency improvements in delivery of the project through ‘alternative design and construction solutions. * BesarcicOS Pi Si aia Tons acl aa Use of Target Cost Contracts - Why? » Identifying, Sharing and Mitigating risks + Pre-contract Risk and Contingency Assessment + Development of Realistic Outturn Cost (The Target) Utilizing Contractor Expertise + ECI, methodology-driven or specialist projects » Maximizing Efficiency * Combine Contractor/Consultant knowledge and expertise collaboratively to improve project outcomes » Proactive and Collaborative Management + Teamwork creating win-win scenarios : Beart O& Certied NEC Professional Training Course (CNPC-190712) Modes $6 (copy eee na 0 he ph ea aie nme ingen by BE S7RCO ta tno mtb yo ely edgy we i emi BK SURED LlBXSURCOTraining increased management effectiveness. and fffcleney through collaboration Incentvisation of oth pats to perform for ‘heir mutual benefit aie) es Innovation share in savings from Contractors improved performance & covery co : ‘avoidance of confrontation on highly ‘complex works increased confidence in working methods increased cooperation from designers on bulldabilty issues mitigation of risk ‘greater predictability of outturn cost (Ceried NEC Professional Training Course (CNPC-190712) Modes 5.4 6 ‘copy ft es no eso trance ig led SRC ta ‘ny mynd a yd ay pb gay hewn permis oF BK SURO Ls. 2BXSURCOTraining Prac aT Tendering Target Cost Contracts » Contract Strategy + completeness of design + activity schedule vs. ills of quantities, + one stage vs. two stages, ee » Early Risk Identification + Tender documents should identify and provide for time to deal with contract risk + Combine project team expertise at earliest stage ‘+ mutual benefit ~ limit time/cost overruns Bessie OF Pienaar cmon Tendering Target Cost Contracts jingle Stage + Traditional Tender Process based on + Pretender Selection Process + Selective Tender based on Qualitative/Quantitative + Activity Schedule produced by Contractor (Option C), of + Bill of approximate quantities which is used to produce ‘the Active Schedule (Option C) + BQ produced by Client (Option D) 7 Bensaraic OE Certified NEC Professional Training Course (CNPC-190712) Modules 5 6 ‘otters an ay ed ny pa gy ht ttn para oBE SURCO Li 8 i fe ser sneer iting inl y BK RCO Lad 3BXSURCOTraining a Tendering Target Cost Contracts » Two Stages + Stage 1 ~ Selective tender + Selected list of qualified bidders + Fee and preliminaries/ste establishment costs Estimate of overall cost + Project duration/ work methods + Stage 2 ~Shortlst tender / Negotiated agreement Direct cost estimate + isk review and pricing Share ic for Govt due to ‘probity’ concerns BeAsiarcicOS PSs cence a a] Tendering Target Cost Contracts » Pricing the Work + Contractor divides the total tender price into two parts: 1. the “Target Cost” and 2. the “Fee + Target Cost and Fee are treated and adjusted separately, + If Target is unrealistically low then Client/Contracor will spend exceed target, encouraging claims Beside st NEC Professonal Training Course (CNPC-190712) Modules 5 & 6 ‘copy ft nn a ot to acne hit ining ie BK SURCO La sy mn eon any way oe yb py bat en prion BK SUROBXSURCOTraining Daas naan ry Acceptance of Tender and Agreement of the Target Cost + Assessment and Acceptance of Tender + should include price and technical review + Agreement ofthe Target Cost + realistic and achievable by the Contractor + needs to include reasonable allowances for likely Contractor risk + needs to incentivize cost savings 5 BeAsiaracitc OF Establishing the Target » Should inelude construction costs «site establshment/overheads + adequate duration + allowances for a majority proportion of known potential risks * Contractors Fee for OHA? ‘Target agreed and fixed at outset » Contractor tender or negotiation or combination +» Ficat positive probability level of beating target ~ incentive = Competitive open tender? - Bersih OS Tealning Course (CNPC-190712) Moduler 5 fo le ee ip oe mah ned a othe ep ay o o elySgy wi e i eBXSURCOTraining Main Contract Options of ECC Option Target Contract with Activity Schedule + Cost reimbursable plus pre-agreed Target + Incentive sha 19 of any cost savings at pre-agreed rate + Risk sharing on any cost overrun at pre-agreed rate + Provisions for shared Value Management savings. + Incentivizes efficient cost management : BeAsiaracin OS, i Activity Schedule for Option C ‘What is the AS used for in Option C? + Only used to calculate target used at the end of the contract -no effect upon eash flow » activity required by Scope isnot listed, the Contracter will still have to do it, and be paid Defined Cost, but price deemed included in a target » Therefore risk of accuracy of Activity Schedule is shared by the Parties » HK Govt Practice Note P102 states that unless otherwise agreed AS will be used as the basis of valuing CE's Bessie OS, Certiied NEC Professional Training Course (CNPC-199712) Madea 5.4.6 (Scone mae ere hf eatin an em gd ce by BE SURED La {dey my nto ny ye ay pb pay wine win pri BK RCO LaCertned NEC Profeso ‘cipher fe nh lorie aia ty mnt breed yy oly ay wo BXSURCOTraining Option C - Target Cost with Activity Schedule ‘cost reimbursable contract incorporating a payment ‘mechanism for sharing cost saving or cost overspend compared to a pre agreed Target Cost sum based upon a priced Activity Schedule plus a Fe. ‘Target Cost ~ Actual Cost = Shared Saving Final Amount Due = Actual Cost + Share of Saving Perhaps the most significant of the NEC options which represents a radical shift in procurement thinking from business as usual. BeAsiaracic OS ng Course (CNPC-190712) Mode inne etn by SURCO Lt 7BXSURCOTraining De cc ceca Main Contract ECC Options Option arget Contract with BQ + Cost reimbursable Plus Target + Target established with priced BoQ + Risk/Incentive Sharing as in Option € + Final Target adjusted according to actual quantities + Value Management savings provisions. + Changes valued at Cost-Plus «= BeAsiePacitic OE Ln a anal Bill of Quantities for Option D What is it used for in Option 02 ~ Used to calculate target used atthe end ofthe contract no ‘fect upon cashflow » So the work nthe oxginal Scope is “e-messured”tore- ‘aleulate the arg ‘As with all options, changes called compensation events are not (using Unamended NEQ valued uring the Bl of Guantiies se Defined Cost pls Fe unless othentise agreed » However practice Note P102 reverses used to assess CE's ‘Achange in quantities not arising from a change in Scope may bea compensation event (604-6) with the BQ being "i BeAsiaPaciic OE Course (CNPC-190712) Moduler 5 6 wold tn tained SURCO Lad ny ie pry oto be ie rms of BK SURO La ih a ec en ihBXSURCOTraining ECC Option D Uses Where the Works extent cannot be fully defined at Tender and some design development is anticipated ‘Where the design is sufficiently advanced to allow a BQ to be produced ‘Where the Client wants to engage the Contractor in ‘creating design/material options for mutual benefit. ‘Where a reliable budget using a 8Q can be produced and risk/opportunity can best be managed by a combined Contractor/Client team working together Bessie OS 1g Course (CNPC-190712) Modules 38.6 (cenit nn rw gh he mae nin rn oe ingen yO RCO La ‘Shy myst mda ony gay a he wen race 8 SURED Lak 30BXSURCOTraining Target Cost Ratios Under GPN October 2016 BeAsiaPac Module 6 - AGENDA > Stes D> yieaes So Bensiaracic OF, Certied NEC Professional Training Course (CNPC-190712) Modules 3 & 6 soo ae ining iti BK SURCO LatPayment — Assessing Amount Due PWDD for each NEC4 Main Contract Option : Besar O& z istration of Target Cost » Assessment of Payment @ > clause32.2(30) » Part actual/accrued cost and part estimate » Intended to improve cash-flow to supply chain » Practice Notes supportive of this ' MIRC utilize 2 months in advance payment Certed NEC Profesional Training Course (CNPC-190712) Medes 5 46 (copying ane ingen by BK SIROO Lal 5 BeAsiaPacic@: ‘tn. mentee ay yo lye gy wie in ferme BK SURED Lal 61BXSURCOTraining = SSCC~ Short Schedule of Cost Components + Used only for assessing compensation events ‘in Options A and 8 +» For Options Cto E Defined Costs the cost of components in ‘accoriance withthe SCC ~ Schedule of Cost Components + Used only in Options C0 & * Used for assessing bath * Price fer Work Done to Date (PWOD) + Compensation events ( NB Govt Practice Notes change default CE assessment for options C&D to BQ/AS) BeAsiaraci OF Certified NEC Profesional Training Course (CNPC-190712) Modes $6 ‘Seon tes ses ns eso eon aon! rans ie BK URC tl ‘oth my bere any oe abe ey ot ern prison of SURO Li.BXSURCOTraining Le aia Schedules of Cost Components » 1 People + All personnel directly employed by the contractor including both staf and labour ( NB regular updated organograms necessary), + People have tobe inthe Working Areas (the site and other areas designated in CD2) and used to Provide the Works + Includes for recovery of all dtect costs of employment * Verification can be an isue due to privacy and accounting charging systems for staf costs + Expenses and sundry costs are often accrued separately + Can revert to average or annualized cost for ease of aust . Bisaratic OS ER Schedule of Cost Components » 2. Equipment + Covers contractor’ plant and temporary works + Can only be claimed ifin working area and used to Provide the Works + hired then actual cost recoverable + Trowned by Contractor then ether rates in CD2 or notional ‘open market rates + Residual values taken into account fo plant purchased for the project + For target contracts should be consistent with re-contract, incusons * BeAsiaractic OE Certified NEC Professional Training Course (CNPC-190712) Mass 5 & 6 ‘OCaml y BE URCO a ny meth motel yy odin oy pe diy ita he wre prin of SURED LaBXSURCOTraining De aaa) Schedule of Cost Components + 3.Plant and Materials + Items for incorporation into the Works + Contractor paid actual cost of purchase and delivery + Credits for any payments received for disposal + Need to be for Providing the Works + Reconciliation with quants installed may be necessary for cost reimbursable contracts - BeAsiaPacii: OS Di ETSI Schedule of Cost Components + 4. Subcontractors + Notpart of sce orsccinnecs 4.2019) pf + Payments made to Subcontractors for work subcontract + Adjustments made to prevent any double accounting for ‘amounts retained or paid eg retention + Subcontractors defined in 11.219) : Bnet OF Certified NEC Profesional Traaing Coutse (CNPC-I90712) Modules $& 6BXSURCOTraining Schedule of Cost Components » 5. Charges + Utilities consumed in the Provision of the Works paid at cost + Payments to public authorities reimbursed at cost + Special payments associated with the Works + Appercentage overhead charge to cover certain site facilities which is added to People Costs - reduces the ‘admin burden of calculating these for variation purposes. However, often amended for simplicity. : Bersih OS Schedule of Cost Components » 6, Design + Cost of design of the works and Equipment done outside the Working Areas + Amounts calculated by rates for people inthe Contract Data (€D2p84) by the total time ‘appropriate to that rate’ spent ‘outside the Working Areas + Also reimbursable is the cost of travel to and from the Working Areas BeAsiaPaciicOE ‘Corte NEC Profes tn mabey Wy wey Spy we ie Training Course (CNPC-190712) Modules 586 none eine ning rtd by BE SIRCO CaBXSURCOTraining ET] Schedule of Cost Components = » 7. Manufacture and fabrication + Costs incurred outside the Working Areas + Intended to provide for recovery of fabrication costs incurred by Contractor in facilities remote from and not exclusively used forthe Works + Contractor provides hourly rates for people stated in (CD2p84 and records of time spent on manufacturing and fabrication of Plant and Materials + Need tobe Providing the Works Pinna aan Schedule of Cost Components » B.Insurance + Includes only reference to items which are to be deducted from cost + These include + The cost of events for which the Contractor is toinsure + monies paid to the Contractor by insurers + Does not include the cost of insurance premiums which is part of the Contractor's fee . BeAsiaracic OE (Ceried NEC Profesional Training Course (CNPC-199712) Modes 5.4 6 ‘Sci ote nes, ‘dy my nbaBXSURCOTraining Disallowed Cost Options C and D © Cause 112 026) Disallowed Cost is cost which ‘snot justified by the Contactors secount and records + should not have been paid to 2 Subcontractor oF supplier in accordance with ts contact + was incurred only because the Contactor didnot + follow an accoptance or procurement procedure ststed in the Scope or + di nor give an early warning which the contract required into give + give notification tothe Project manager ofthe [preparation for and conduct ofan audition or ‘proceedings of tba. and the cost of. 7 BeAsiapacric OE a Disallowed Cost Options C and D © Clause 11.2 26) ont) ond the cost of, + correcting Deft after Completion *_comecting Defects caused by the Contractor not complying Iwth a constraint on ow he iso Provide the Works stated the Scope, + Plant and Materials not used to Provide the Works after allowing for reasonable wastage) unles resulting om a Change tothe Scope, *+ resources not used to Provide the Works ater allowing for ‘reasonable availabilty and utilisation) or not taken aay from {the Working Areas when the Project Manager requestsd and + preparation for anc conduc ofan adulation, payments toa ‘member ofthe Dispute Avoiance Board or procesdings of the ‘mbunal between the Parton " Bersirac OE Certited NEC Professional Traling Course (CNPC-190712) Moduler 5 6 ‘cont tse mse ns ra hei theese a a nig ie by BK SURCD LdBXSURCOTraining Ea es Payment — What is the NEC4 Fee? = + The Fee (11.2(10) is calculated by applying + The fee percentage (CD2p81) to the amount of Defined Cost » All Contractor's costs not included in Defined Cost (defined in the SCC and SSC ) are treated as included in Fee (52.2) BeAsiaracf OS CCertited NEC Professional Training Course (CNPC-190912) Modes 3.6 [Scone ft ma nn a ei alae et fig ei BK SRC La ity yt enue any ay td yb aay tS ts pun FE SURO ad 68BXSURCOTraining Paces tc Nobatitoraces What is the Fee? » Would usually include + Head and regional office overheads + Head and regional office staff + Insurances + Profit » Often contracts will sek to define the various elements of these costs, but importantly NEC defines reimbursable Defined Cost with all other costs being treated as being included in the Fee : Birsarai OS Administration of Target Cost Contracts }» Value Management Clause 63.13 + Ifthe Contractor proposes a value engineering idea that changes the Scope to reduce the Contractor's costs, then the target cost isnot changed + In this manner, both Client and Contactor will share any savings due to the target cost share mechanism + The PM issues a no-cost CE implementing VE proposal. Target remains constant but lower cost of VE change should yield a saving to be shared between Client and Contractor in accordance with ratio in Contract Data + Incentivises Contractor to use engineering/technieal ‘expertise to review and optimize design - Bersaractc OG {Certined NEC Professional Training Course (CNPC-190712) Moduler 5. 6 ‘cipro ane she ip of em ne ain ng rid by DK SURO a ty mented nya ol gay wi ei omen BK SURED EaBXSURCOTraining » Provisions for Value Engineering proposals [- tarncr OS] Certified NEC Professional Training Course (CNPC-190712) Modulos 5 6 ‘cee fo mes es a te te ees ee et ie, ted eB RCO Li ‘yay epee fay way edn ey i py oS ts ermion BK SURO Li. 0BXSURCOTraining Peo reas en iL aaa tiuat falar Forecasts of the total Defined Cost » Clause 20.4 ( NB only in Options C&D) » Tip: Requires further elaboration in Scope : Bensiercc OS Subcontracting with NEC ( n ECC User Guide - No Nominated Subcontractor ‘Alternatives include: + providing for separate contracts + Including lists of acceptable subcontractors in Scope « Bersih OE CCeried NEC Professonal Tras ourse (CNPC-190712) Moduler $6 ‘Sony ftv en ara hh of hemes acne en nn ine y BK SURCD Lt ‘ety tend nay yl iy pa poy Wie wen prion of B SRCD LalBXSURCOTraining Subcontracting with NEC Conditions ECC User Guide - Subcontract « BiAsiaPaciic OS Subcontracting for Cost reimbursable Contracts » Guidance Notes ‘+ Where Options C-F used itis common for PM to require more oversight of subcontract procurement such as + minimum number of tenderers selection criteria + PM involvement in procurement/appointment «It is expected that NEC Subcontracts will be used + (NB See HK Govt Practice Notes P110-116 for ‘extensive procedures on procurement and subcontracts) = pensar OS CCertiied NEC Professional Training Course (CNPC-190712) Modes $& 6 ‘Sonya mn, ne haf tr acne hn ting tied BK URC La ‘ott uy bernard in a ue pb deplay at spinon of Be SURO LaBXSURCOTraining es ca SUC ee Subcontracting under NEC » Subcontracting (Core Clause 26) » If subcontracts, Contractor still responsible for Providing the Works (26.1) » Contractor submits + name of proposed Subcontractor to PM for acceptance (26.2) * proposed subcontract documents (except pricing) unless + NEC contract (unamended except back to back) is proposed, of + PM agrees no submission required (263) » However, PM should take a measured approach tots involvement with the procurement selection process which remains the Contractor's responsibilty and expertise e Biases OS Administration of Target Cost Contracts + Subcontracting (Clause 26.4 C-F only) + Tip : Further enhancement may be required ~ See User Guide . Bersih OS tiled NEC Profesio arse (CNPC-190712) Modules 5 6 ‘Scipyit tie ess iw ier emo one nn singe eid by BK SURCO ta toy my beeen Wao ely ie egy Wea ie ie rao =f SUROD LakBXSURCOTraining Module 6 - AGENDA D> Sinton ree 2 -mptconconoatg 3 necruptcn mt an Ain “ BkAsiaPaciic OS | » Choice of Contractor indset + Motivation + Mutual Trust + Management Backing Programming / Procurement Resources + Understanding of Target Cost Design / Engineering Capabilit Keys to Successful Target Cost Contracting + Management Capability - Project Management / “ BKAsiaracitc OF Certified NEC Profersional Training Course (CNPC-I907I2) Modules $6 Cita fis ss ne se a te sto oop ee et ‘ety erp ay a of dina ne ply mt he ees oma oBESUROO i ”BXSURCOTraining |S eseana ae ie in ative) Keys to Successful Target Cost Contracting » Target Cost Planning + In conjunction with financial forecasting + establishment of projected cost outcome ~ Cost Plan + Identification and targeting of potential savings + Focus efforts on Gain-Share + Beat the Target : Binsareci OS Administration of Target Cost Contracts » Manage Low Value Compensation Events + Consider the introduction of a monetary threshold for CE's (Through Z Clause) + Threshold determines whether or nota compensation event results in an adjustment to the Target Cost * Removes the incentive for Contractor to pursue low value Cesand EW's + Reduces administration burden + MIRC does th : BeAsiaraatic OF Certined NEC Professional Training Course (CNPC-190712) Medes 5 6 {copy oft en ia hie fem one ln ne nn rend y BK SHRCO ta {ay men bere! nay yo yagi win pee 6 BK SURED LalBXSURCOTraining Dace ae a] Keys to Successful Target Cost Contracting » New Culture/ Mindset ‘+ Mutual trust: win-win situation, aligned objectives * Collaboration: incentives to work closely together for fair gain share + Proactive approach (vs. reactive): suggestions, early warning, cost update oi Benin OS aT Keys to successful Target Cost contracting » New Management/Administration System + Risk Management (early warning system) + Programme Management + Compensation Event (variation, time bar) + Financial Forecasting of Outturn Cost + Open book account/ access to records/ auclt + Procedures driven/ time limits * Consider EDMS/PM Software (NB DevB Practice Note) : Binsin OS Certied NEC Professional Training Course (CNPC-190712) Madles 3 & 6 ‘conyers of tr acon nig ied BK SURO Lad {dy myn bene ny a rd ay pb aay wiht hewn pion BE SURED LaBXSURCOTraining Pi a nc Keys to Successful Target Cost contracting » New roles and responsibilities for project staff + Open to change and empowered through delegation + Prepared to work as part of a team + Fully aware of the differences to those under » traditional main contract + Training, Experience, Guidelines + Capable and wing to embrace New Skis + Estimating, Planning, Value Management, Cost Validation BeAsiaraciic @& | De a Na aA Target Cost Summary - Upside » Provides contractors and subcontractors with an incentive to improve performance and enables the client to secure a share of the benefits of a well-managed project » Can drive design and production efficiencies through incentivised cost savings » Encourages active and equitable risk sharing, based on a clearly defined allocation of risk agreed at the outset of the project. » Provides an accountable mechanism to enable public sector clients to use incentives + Improves supply chain profitability : BensiraincOS CCertined NEC Profesional Training Course (CNPC-190712) Medes 5. 6 cont ft oe mo ia hei ees owe ain eninge i by BK SURED LdBXEL Seqeqera | Atarsoa | tinisog a x Aap |x | | | x Swe on wea ex on on x on on =x on zop80e1398 i os I ST =a — RAT [on | wonesndaos | iso | go) suowos BOTPSNOTEIG | 1509 pouTea 30) wast so Summon 9 a708619 eNO. 5 won Ue moj ROT STERIC € feq ~ sosiaioxg doustiom, O /S_amig osep= 61 11. PalsiH485 Old D3NSOQ rurveswa ‘ono ag + | o00'asy | mone ye Gurepne dooney on tar seaucans ‘OL > 15. | eoo'ese ‘Bunsp prem Buoj oh np oiaeeR IANO) as 000'0$ | m0} por sem Bus 0 jmp oe 0108p E> “2 Li | 00's9 | arouses np sus spe so sumo nage nL seb m>emeD S| (000109 | _ (las sou) rsa pu sym nos GUE aN ‘dig Banos aus) | o0o'eer | snow eo} aun ns uo pura ua ‘ope ms L | oogtet | vopennsucn nnn Sumida sb anaes 2 lan conn] {2221 | cones | puntnrma herd weoutony vo wenn + Sa 15 ea on vemauey | "vey | gun uous BED Pawo 09 PUPA 0D wen sua Susionos ain Hoy PeNUED 3 woRKO We 104 "ROT TTS, € feq ~ sasis10xq doysio, salpms ase> — Buluiesy payne old 33N[NEC Pro Certified Training ~ Case Studies Workshop Exercises ~ Day 3 Module 6 ~ Target Cost Inan option C the Contract Data states that + Thecontractr’s share percentages and the share anges are Contractors share percentage: Share range ‘Scenario @) ‘Scenario 2) less than 90% 50% 15% from 90% up to <95% 50% ox from 95% up to <100% 50% 55% from 100% up to <105% 50% 55% From 105 up to <110% 50% oe ‘greater tharVequal to 110% 100% 100% Following completion of the whole of the work the total of the Prices (having been adjusted for compensation events) is agreed at $300 Million, 1. The Contractor has been paid the PWDD which totals $285 Million, What other payments is he due (gain share)? = Seovbay = [Saute = 97% ‘a. Scenario 1 $1.Sat = Wes i. Scenatio? £615 mph 2. ‘The final paid PWD is $345 Million. How much isthe pain share for the Contractor? Bese HS 2 Scenarior 75 nv Bonde Pee ei Oars pen 3. Which share percentage regime is most likely to increase the likelihood of target cost savings? Sconowes 2 BXAsiaPacific GS| NEC Pro Certified Training — Case Studies ‘Workshop Exercises ~ Day 3 ‘Module 6~Target Cost 1. The Contractor has been paid the PWD w! ‘payments is he duc? totals $285 Million. What other a. Scenario 1 Contractor is due his share of savings achieved (Gainshare) Adjusted Target ls All savings therefore fall into share range 95% to 100%, where C's Share is 50% ‘Csamount due is therefore 50% of HK§15m = HKS7.5m (C's amount due is therefore 55% of HK$15m = HKS8.25m 2. The final paid PDD is $345 a. Scenario 1 Contractor must repay his share of additional costs (Painshare) PWDD less adjusted target = HK$45m 45m as a percentage of Target = 15% Additional costs fal into 3 categories, 100 to <105%,105 to <110%, and 110%> For the first two categories C share is 50% and for the third 100% (C’s pain share is therefore 15m x 50% + 15m x 50% + 15m x 100% = HKSi0m jon, What is the Contractor’ pain share? 1b, Scenario? (Cs share is 55% in first category, 60% in second and 100% in the third (C’s pain share is therefore 15m x 55% + 15m x 60% + 15m x 100% = HK$52.25m. 3. Which share percentage regime is most likely to increase the likelihood of target cost savings? ‘Scenario 2 should motivate the Contractor more to achieve savings and avoid cost BiAsiaPacific @ &