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Updated ECC has the answers

The third edition of the Engineering and Construction Contract addresses development in the industry by identifying and clarifying shortcomings in the previous editions and including a host of new provisions, writes Guy Cottam

THE THIRD edition of the Engineering and Construction Contract has been recently published by the Institution of Civil Engineers.

First issued in 1991, the ECC was drafted in clear English and without complex cross-referencing. It is 10 years since the second edition was published and it has achieved wide acceptance. This edition is endorsed by the Office of Government Commerce and recommended for use for public construction projects. The OGC describes it as selected according to the objectives of the project aiming to satisfy the objectives of Achieving Excellence in Construction (AEC) principlesZ.

The third edition is the product of a tidying-up process, but it includes new features arising from developments in the industry. There are new provisions for partnering, performance indicators, key dates and a risk register.

The procedures for assessing compensation events have been tightened up and simplified.

actual cost , a definition that caused much misunderstanding, is replaced by defined cost , a more accurate description for the evaluated costs.

Vital to the smooth running of any construction contracts is the mechanism for valuing changes. The ECC pioneered the use of quotations for additional cost items, referred to as compensation events . The loose drafting of these provisions led to many disputes.

For events for which the employer was responsible, the project manager was required to obtain quotations when he instructed to carry out the additional work. But if he failed to do so, the onus was on the contractor to give a notice within two weeks of the event.

It was intended that the contractor s failure to give a notice should bar him from making future claim in respect of that event. It soon became clear that it was not; so the new version bars a claim by a contractor if he fails to notify a compensation event within eight weeks of becoming aware of it.

A second problem arose if the project manager failed to respond to a quotation within two weeks, so everybody was left in limbo. Now, under the third edition, if the project manager fails to respond within a week, the contractor can give a notice and if a response is not made within a further two weeks, the contractor s quotat ion is deemed to be agreed.

A further difficulty often arose if a contractor failed to submit a quotation as required within three weeks of being asked by the project manager.

The project manager was then required to make an assessment; and this project managers singularly failed to do.

There was then no fall-back mechanism for valuation because there was no requirement for record-keeping in ECC.

The revised edition does not directly address this point. It would seem that, with the further notification, the contractor could submit a new quotation and the assessment mechanism would start afresh.

Va lu a t ion of compen sa t ion events was valued on the forecast costs of the contractor in much the same way as the initial tender was estimated. The costs allowed were listed in a schedule and shorter schedule.

The schedule listed all the permitted costs, while the shorter one was the equivalent to the day-work provisions of standard contracts.

The schedule has been modified and is used in the target and reimbursable versions only for the purpose of assessing costs incurred; the shorter schedule is used for assessing compensation events.

The third edition also includes a risk register. This is drafted on behalf of the employer and included in the tender documents. Parties are required to give an early warning whenever an event occurs that could increase the costs to the employer, delay completion of the works or a key date, or impair the performance of the works in use.

Before, following an early warning there would be a meeting to discuss the problem.

This has been renamed a risk reduction meeting. Matters for which an early warning is given are included in the register.

The dispute procedures have been revised with two versions for the UK depending whether the contract is a construction contract for the purposes of the Construction Act. Adjudication is now a mandatory step prior to being permitted to go to the tribunal . . . arbitration or the courts.

For major disputes it is probably just an additional expense.

However, the most important failing has not been addressed . . . there is no default appointer of either the adjudicator or the tribunal should the contract not make such a provision.

Most of the other amendments are tidying up. The secondary options are now all prefixed X instead of successive alphabetical letters.

The ECC provides a sound basis for construction contracts;

it is only when it is extensively amended by the employer s advisers that major difficulties arise. If specific problems need to be addressed, there is no need to amend the conditions because there is provision for special requirements . . . it is called Option Z.

Let all in the industry herald this edition with a Mid-Year s Resolution not to amend it.

Law Report is a weekly column covering legal issues of all kinds . . . including contractual, employment and industrial relations. To h e lp us provide a steady f low of quality, readable legal articles, we have created a panel of expert advisers. They are: ¦ Daniel Atkinson, executive director of Atkinson Law; ¦ James Bell, partner with London law firm Christian Khan; ¦ Guy Cottam, a conciliator, arbitrator and former chairman of the arbitration advisory panel of the Institution of Civil Engineers; ¦ Catriona Dodsworth, a partner with law firm Pinsent Masons; ¦ Rudi Klein, visiting professor of construction law at the University of Wolverhampton and chief executive of the Specialist Engineering Contractors Group; ¦ Lindy Patterson, partner and head of construction group with Dundas & Wilson;and ¦ Jeremy Winter, a partner with law firm Baker & McKenzie.

Key points The new ECC is endorsed for public sector projects by the OGC.

The third edition includes conditions for partnering.

Quotations become agreed if not responded to by the project manager.

Failure to notify a compensation event within eight weeks causes loss of r ight.

Compensat ion events are valued on the shor ter schedule.