Professional Documents
Culture Documents
Dr Stuart Kings
BSc(Hons), PhD, MRICS, MCIPS, NEC Consultant
22/04/2015
NEC Contracts
22/04/2015
Terminology
Pitfalls
NEC Contracts
Managing cost
Terminology
Pitfalls
NEC Contracts
Managing cost
22/04/2015
Terminology
Pitfalls
NEC Contracts
Managing cost
22/04/2015
NEC Contracts
Defined
Cost?
CD Part 2
rate or
%?
Fee?
Cost incurred
Need to consider how to
allocate money, Defined Cost?,
CD? if not, include in Fee
(52.1)
22/04/2015
NEC Contracts
Inappropriate terminology
Target cost
GMP
AMP
..using lay terminology becomes confusing people then start to
get target and cost mixed up
We use Prices (target/ contract sum) and Price for Work Done to
Date (Defined Cost plus Fee) i.e. cost
22/04/2015
Terminology
Pitfalls
NEC Contracts
Managing cost
Defined Cost
11.2(23)
Compensation Events
Defined Cost
11.2(23)
Terminology
Pitfalls
Disallowed Cost
11.2(25)
Fee
(direct &
subcontracted)
Managing cost
Terminology
Pitfalls
Managing cost
It includes:
22/04/2015
Terminology
Pitfalls
NEC Contracts
Managing cost
10
In Contract Data part 1 & 2 (as part of the tender process) both
parties list the matters to be included in the Risk Register
Terminology
Pitfalls
Managing cost
Terminology
Pitfalls
Managing cost
22/04/2015
Terminology
Pitfalls
NEC Contracts
Managing cost
13
22/04/2015
Terminology
Pitfalls
NEC Contracts
Managing cost
14
Very often, it is not fully appreciated how the rates and percentages
in Contract Data part two are used in terms of the Price for Work
Done to Date and for compensation events
Common misconceptions:
Terminology
Pitfalls
NEC Contracts
Managing cost
15
Rate
Percentage
direct fee %
subcontracted fee %
People overheads %
Published list of Equipment
Percentage adjustment
Rates for other Equipment
Terminology
Pitfalls
Managing cost
Terminology
Pitfalls
Managing cost
Managing cost
Cost forecasting
22/04/2015
Terminology
Pitfalls
NEC Contracts
Managing cost
19
Activity Schedule
Bill of Quantities
Defined Cost
Compensation
events
Defined Cost
Disallowed
Fee
Disallowed
Defined Cost
(SCC): 11.2(23): C-E
Cost
(direct &
(SCC): 11.2(23): C-E Cost
11.2(24): F
Subcontracted)
11.2(24): F
Terminology
Pitfalls
Fee
(direct &
Subcontracted)
Managing cost
Unit
Price
()
Earthworks as
per WI 1.1
Sum
10
Drainage as per
WI 2.1
Sum
10
Concrete as per
WI 3.1
Sum
10
Steelwork as per
WI 5.1
Sum
10
40
Month 1
Month 2
Defined Cost:
Terminology
Pitfalls
direct
fee
other
Sub/c
fee
Sub/c
Activity
nr
PWDD:
Less
Diss.
Less
Diss.
See overleaf
Managing cost
SCC (other):
Sub/c
fee
direct
fee
Sub/c
other
Defined Cost:
Less
Diss.
Less
Diss.
1. People
2. Equipment
1.00
1.00
4. Charges
1.00
5. Manufacture &
fabrication
10 %
1.10
6. Design
10 %
1.10
Subtotal
6.30
10 %
Total (other)
6.93
Sub/c total
Sub/c fee%
10 %
Total (sub/c)
6.60
PWDD = (other) +
(Sub/c)
13.53
Sub/c:
Terminology
Pitfalls
10 % (WAO)
1.10
Managing cost
Terminology
Pitfalls
Managing cost
Pitfalls
Managing cost
Terminology
Pitfalls
Managing cost
Terminology
Pitfalls
Managing cost
Terminology
Pitfalls
Managing cost
Artwork
A one-off architectural feature
Terminology
Pitfalls
Managing cost
Terminology
Pitfalls
Managing cost
Pitfalls
Managing cost
Mixture of:
Accounting:
Audit skills
Contractual
understanding (ECC)
Understanding of Defined
Cost, Disallowed Cost &
Fee
Detailed understanding of
accounting procedures:
accruals, payroll uplifts etc
Knowledge of the
construction industry
Terminology
Pitfalls
Managing cost
Understand
the ECC
Agree
audit
strategy
Dummy-run
Understand
Contractors
cost system
Tip:
Understand
Comprehensively deal
with each stage before
proceeding to the next.
Contractors
existing
accounting
procedures
Terminology
Pitfalls
Managing cost
Understand
the ECC
Understand
Agree
audit
strategy
Contractors cost
system
Understand
3
Terminology
Pitfalls
Contractors existing
accounting
procedures
Managing cost
Dummyrun
Understand
the ECC
Agree
audit
strategy
Understand
Contractors cost
system
Understand
3
Terminology
Pitfalls
Contractors existing
accounting
procedures
Managing cost
Dummyrun
1
4
Understand
the ECC
Understand
Agree
audit
strategy
Contractors cost
system
Understand
3
Terminology
Pitfalls
Contractors existing
accounting
procedures
Managing cost
Dummyrun
Any gaps (areas where the existing system does not comply)
should be evident from stages 1, 2 & 3 (Defined Cost, costing
system and accounting procedures).
1
4
Understand
the ECC
Understand
Agree
audit
strategy
Contractors cost
system
Understand
3
Terminology
Pitfalls
Contractors existing
accounting
procedures
Managing cost
Dummyrun
2.
1
4
Understand
the ECC
Understand
Agree
audit
strategy
Contractors cost
system
Understand
3
Terminology
Pitfalls
Contractors existing
accounting
procedures
Managing cost
Dummyrun
6: Have a dummy-run
No matter how comprehensively you have dealt with stages 1-5, issues may
still occur.
Review the process do key personnel need to understand stages 1-5 more
clearly?
Should it be revised?
1
4
Understand
the ECC
Understand
Agree
audit
strategy
Contractors cost
system
Understand
3
Terminology
Pitfalls
Contractors existing
accounting
procedures
Managing cost
Dummyrun
Manager
Terminology
Pitfalls
Managing cost
Pitfalls
Managing cost
Terminology
Pitfalls
Managing cost
Terminology
Pitfalls
NEC Contracts
Managing cost
43
Any questions?
22/04/2015
NEC Contracts
44