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Issue No. 38 THE NEC3 PROFESSIONAL SERVICES CONTRACT BY MICHAEL ROWLINSON, ALWAYS ASSOCIATES

September 2007

The first point to note is that whilst the NEC3 Professional Services Contract (PSC) can be used for Contractor/Consultant relationships, it is more common to use it as the contract between the Employer on the one hand and either the Project Manager or the Supervisor or the Employers Designers on the other hand, as well as of course any other such relationship that might arise in connection with a particular project. The PSC is drafted so that it can be used for this wide variety of situations without the need for change. In order to achieve this flexibility, in common with other NEC3 contracts it provides the users with a variety of options from which to choose as best suits the particular circumstances. What is different to the ECC, being the baseline I tend to compare the other contracts in the family too, is that the title of some of the core clauses and main options have been changed from the same number or letter in the ECC. That said although the titles are different the content of these core clauses and main options are familiar and follow the same general principles as the ECC. Indeed the Guidance Notes to the PSC refers the reader to the Guidance Notes for the ECC where the core clauses are identical or similar for further guidance. Within the core clauses the changed titles are core clause 2 The Parties main responsibilities (The Contractors main responsibilities in the ECC); core clause 4 Quality (Testing and Defects in the ECC); core clause 7 Rights to material (Title in the ECC); and core clause 8 Indemnity, insurance and liability (Risks and insurance in the ECC). The content of these core clauses is self explanatory and consistent with the coverage of the same clause in the ECC albeit changed to suit the provision of services rather than construction. For this reason I do not intend to go into any greater detail. As to Main Options users are provided with four choices, these being Main Option A Priced contract with activity schedule; Main Option C Target contract (Target contract with activity schedule in the ECC); Main Option E Time based contract (Cost reimbursable contract in the ECC); and Main Option G Term contract (no equivalent in the ECC, but separate contract in the NEC3 family). Although Main Option C does not refer to an activity schedule in its title, the Prices side of the Consultants share mechanism (which works exactly as the Contractors share in the ECC) is based on an activity schedule, so in practice there is real difference between Main Option C in the PSC and Main Option C in the ECC. Main Option E, whilst entitled Time based contract, works in essentially the same way as the cost reimbursable option under the ECC, in that the Consultant is paid for the hours worked at the appropriate staff rate. This is not true cost reimbursement as the Consultant quotes the rates, which will not necessarily reflect true cost. Main Option G Term contract, does not have an equivalent in the ECC; instead for the provision of construction there is a separate Term Service Contract (reviewed in Construction Law Review 2006 published by ICES). On the face of it the Term Service Contract could be used as the contract governing the supply of professional services over a stated term, but as the PSC provides such an option then regular users

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of the PSC will probably feel more at home using Main Option G. Under Main Option G a framework for the pricing of services, whether by lump sums for predetermined activities or at time charge rates is established. Every time the Employer then requires some work to be done he issues a Task Order. Each Task Order, as required by clause 55.1, includes a detailed description of the work, a priced list of items of work taken from the Task Schedule, the start and completion dates for the Task, the amount of delay damages (if any) and the total of the Prices for the Task. The Employer is required to consult the Consultant about the contents of the Task Order before issuing it. This consultation will hopefully avoid the situation whereby the Consultant is faced with a Task he cannot carry out for some reason, as he will have had the opportunity to discuss such problems with the Employer. As to Secondary Options, the PSC shares Secondary Options X1 to X7, X12, X13, X18, X20, Y(UK)2, Y(UK)3 and Z with the ECC and also includes X8 Collateral warranty agreements; X9 Transfer of rights; X10 Employers Agent; and X11 Termination by Employer. Secondary Option X8 merely requires the Consultant to enter into a collateral warranty agreement. Details of the collateral warranty agreements are set out in Contract Data Part One by reference to the parties involved and a reference number to that warranty. Secondary Option X9 provides for the transfer of the rights to the material produced by the Consultant and any Subconsultant unless there is an exception stated in the Scope (see below). Secondary Option X10 allows the Employer to appoint an agent who will act on behalf of the Employer under the PSC with the agents authority being set out in the Contract Data. The Employer may change the agent at any time after notifying the Consultant of the name of the replacement. This agent could be the Project Manager under a related ECC. Under Core Clause 9 the Employer can terminate the contract for three main reasons, the insolvency of the Consultant, the substantial failure of the Consultant to carry out his obligations or because the Employer no longer requires the services. Secondary Option X11, if selected, allows the Employer to terminate for any other reason not covered by core clause 9. In the event that such a reason is used then the Employer will pay the Consultant 5% of the remaining value of the service which he has not performed, i.e. an arbitrary loss of profit payment. The only other key point to note is that instead of Works Information, the PSC has a document called the Scope, which is defined at clause 11.2(11). Essentially this is the same as Works Information in that it describes the service to be provided and any constraints on how the Consultant provides those services. Exactly what is included in the Scope will vary depending on the options in use, but like the Works Information it is a dynamic document as it is in the documents listed in the Contract Data or in an instruction given under the contract. The reader will hopefully have gathered by now that anyone familiar with the ECC will have no problem with administering the PSC. The format is very familiar, the language consistent and although some of the clauses are slightly different the underlying intent and spirit is that of all the NEC contracts. The foundation of a spirit of mutual trust and cooperation, communications (core clause 13) and early warnings (core clause 15) are present and essential. In addition the requirements for programming (core clause 3) and compensation events (core clause 6) are the same in procedural terms, albeit the contents of the programme (clause 31.2) and the list of compensation events (clause 60.1) are different. In conclusion, the PSC provides a very good skeleton with which to set up a contract for the provision of any type of professional services. It is highly recommend when other contracts from within the NEC3

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family are being used as it keeps all the procedures and requirements in line with these other contracts, which should enable everything to run smoothly. That said I can see no reason why it should not be used for Professional Services when, for whatever reason, another form of construction contract will be used. For further information please contact the author on 01295 275975 or email michael.rowlinson@alwayassociates.co.uk. Based on an article originally published in Civil Engineering Surveyor.

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