girl flynn and welcome to our latest NEC webinar this one is titled using 822 early contracting involvement clause I'm rob dyrdek see user group secretary this is Megan's chair of in DC for contract Paul so little bit of housekeeping first of all hopefully all of you are hearing this if you were if you're not then you're gonna struggle with these next instructions but your audio must be connected by your computer audio all means put some questions in if you if you're struggling to sort of your audio answer what did the best that we can to help you there's a questions to have a new control panel by all means and we would encourage you to put questions in throughout this webinar well what we thought was probably best is we often revenant eject or mix of this or questions with the discussion of the webinar but it's also do slightly different and actually have our discussion first and then address questions at the end so you might want to hold about your questions and hear the story that we're about to tell because that might influence the questions that you have the webinar will be recorded later to be available through the NC websites YouTube and as usual I promises any questions that we don't quite managed to get through today we will give a written answer in due course may also publish it in the NC user free newsletter so we're in sunny central London today and you may hear helicopters buzzing around us it's there's something big going on today apparently so we hope that you enjoyed this this webinar so our agenda there's a this is the introduction we're going to look in the context of ECI so of course we only used the entity construction contract I'm gonna focus on NEC for the NC for was the first publication of Ector 20x20 to itself was available previously as a clause on our website for use with the NC three contracts but of course now it's published for the first time problem Tennessee for contracts so I think ins Randall is he for contracts and the the main three areas to think about or for us to talk about his contract preparation supplier selection and contract management and our thoughts are the clauses are the clauses in contracts we can all see them we could read them hopefully they're there a generally easily understood you may disagree one or two of those points I my defects your questions there's guidance notes on them I like 222 as well of course but we were going to try and set the scene for the key issues that surround these clauses that enable the the clients and their supply chain to get the best out of these clauses so how do we know we have the best them at the most appropriate supplier what preparation of what documents will be helpful in going forward with ECI how do we actually manage the contracts viewing stage one to get to the point that we're pretty comfortable with the contractor the prices the program etc for delivery and stage two so the idea that the webinar isn't to pick through this clause by clause we do have the contract in front of us we do have at the close of course therefore is just the the important scene set in the overall moment of x22 to deliver the potential that we think we think it offers so in the introduction as the same we're going to use anything for engineering and construction contracts otherwise known as the ECC and we are going to focus on sec of your option x 22 which is called the early contractor involvement now we do say that's you don't drop shin see any so the very first question why that is but if i just work through this slide first of all we're thinking of just focusing on that what we call a middle ground ski that's where the client and perhaps their advisors have developed work sufficiently to be pretty confident in the budget that they're putting forward so I said my main focus so he's got a fairly good handle on on the scheme itself and it gives us confident therefore in the budget so we'll go through those previous slides points as I mentioned and then will perhaps a little too left and right from that where perhaps the contractors are already designed the works we're pretty sure of the design but we would like to ECI the design so we've been bringing the contractor for things like build ability safety efficiencies of waste things like that but also then negotiate the prices and the other extreme was where we have minimal information client just once design the build a road for example of remain to be they've got a budget at twenty million what happens next okay but we're going to focus mainly on the middle ground scheme so first of all Peter when the clause was drafted and because the gap the brief actually design of taking what we had before and rewriting it such that we could use it for options at a through two F and that in itself became tricky so we ended up just with options C unique so perhaps and explain why that is that we ended up with just using this for option C me well the issue is really that if you use not being a contract then the motivation for the contractor becomes a little different from if you're using an option C or an e contract production a the contractors real objective is to make sure he doesn't spend more than his option a price with an option C&E there's a sharing of risk and a share an allocation way of dealing with what's happening the contract which both parties are going to collaborate in resolving the clauses were written on that basis and what we realized pretty quickly that if you do want to use a lot of laying contract you need to put additional information and to manage that additional risk of the contractors involvement in option a so not that you can't use an option a with early contractor involvement but the clause of themselves wouldn't need to be modified or added to rather if you wanted to do that so we felt rather than trying to do too many things we would produce a few new would work on an option C any basis where both parties are cooperating in trying to enable the work to be delivered at below the budget and within the agreed target price yeah so okay okay so so what else only can't use it take care use what would produces that there's the basis and modify accordingly yeah okay so moving on so contract preparation so we're at the stage of project where there's a genuine belief that easy I will bring a considerable advantage to the project so in preparing the the contracts of like stage naught sandy CI effectively has to safety state one that states to stage one is the really CI bit and stage service which is the delivery bit but in preparation of the tender document to select your NCI contractor what sort of information they thought do we think the client needs to specify and how do we set the rounds yet how do we set this information out to use it properly in the contract because what in contract preparations a lot more involved than what we're talking about here we're looking at some narrow parts of it you know pairing the contract there's a lot of things to think about as to what goes in the contract we're not trying to deal with those we're really thinking here about those things which are important from the successful operation of an NCI colleseum treant down yeah so the first thing is to recognize that in preparing and specifying information you want you need to think about what how you're going to use it so if you're asking for information at time attender firstly you should make sure you're using that to assess whether the supplier is bid you're looking at is appropriate and the one you really want secondly you need to make sure you use that information then in the contract because there seems little point in asking for information at time of tender and they're not using it again afterwards so information required by the client contract looks of this thing called pricing information and so this is one of the key things you're going to ask for and the pricing information really needs to be two things it really needs to include some indication as to how the prices are going to be established what prices are in there so it could include some for example typical rates for typical operations that's going to be carried out but that by itself is not really going to be very helpful because things will be different we may have the contract so what you need most importantly is to specify or identify how are you going to use that information to calculate the price the stage to work when it comes to that end of stage one so if you've got some prices you need to have a procedure a set of rules for how that's going to be used typically contractors are pretty good at estimating they've got good estimating systems you need to be able to somehow log into that and use that estimating system in an efficient way to get prices fixed so you need to specify this information this is what I want this level of pricing information and this explanation is how it's going to be used and then explain that that method of approach than those prices are going to be used in setting the prices but also how they're going to be used in awarding a contract yeah so I think people fall into the trap of thinking that price information is leaked through those Shephelah rates or 10 pounds of square meters of 10 pounds cube meets a main clue that sort of and actually you can do so but it's a lot more than math you need yeah I think you look at the clause it talks about whittling that the hell yeah let's do that probably post information is information is information so it's information we've specified how the contractor prepares its assessment of the prices for stage 2 so it's a story isn't it it is not a schedule it's a story how are you going to prepare the assessments of the price in stage 2 that's what we wanted from the clients perspective is that confidence that the chapter is well versed in the art of ECI in fact in working in the art of tendrán they have a really good process with you know which will be done with all view diligence and we gain confidence that you know this this is a good firm to deal with that I'm moving on to supplier selection which I shouldn't do but this trying to get that confidence in the contractors organization that the pricing information will give you the clear outlines to have they intend to prepare their assessment of prices for states - yes the never signs that what we don't want to try and do is to create some new mechanism which is a imposed on the suppliers as I said all contracts have got pretty good estimating departments and estimating systems we should be looking to tap into that use that and be able to monitor how it's being used and I'm access to it in the price setting stage yeah we should have been doing forever in a day I mean I don't know you Maddie isn't that much difference if you like yeah a bit I mean you're just telling a story a bit stage in the past perhaps we attempted she's got a price be a lump sum or be measured by the Constitution or what everyone's for now it's it's it's more than that isn't it some support in particular of the process that contractor intends to use in coming up with it the state of treat prices so how do we how do we set that information out then how do we help clients and or contractors in this thing the price information supposedly sits with the client to determine that doesn't yeah the clients got to start off by saying how they're going to use the information in agreeing the prices to always start at the tail end how you going to use this information and that drive what you're going to do in terms of specifying it and they'll also give you then the guidance on how to use it in assessing tenders but start with it basis as to what you're going to ask for at this stage when you're looking to agree the prices yeah what information you want there and it seems to me what you want is some basis for the pricing data which usually will come from the contractors own estimation database you want the mechanism and the process that the contracts going to use to calculate it and you want to have the money to that and see that it's being used in the way that you expected so having decided that's what you're going to do in the contract you come back to ask him for the information necessary to they will you to do that yeah I always have a problem with the thought of a of rates for example which potentially if you just asked for that they could actually not be market rates and prices so one of the key clauses I think the governor's EC is close 42.1 where up and those few things for these contrabass apart / market rates and prices so why would you kind of defeats the objects by putting a number per square meters in which could be very different to the michael ranson prices you're potentially yeah driving an inconsistency between what you asked for and what plus 52 for one sales yeah there's a light we've drawn unique you need usually under most systems or procurement regulations you need some information about the price in order to get a contract and therefore you do need to get some information there's there's not a great deal of need for a massive great schedule but moment in my view what we if we always go back and say the contractor who's bidding for this job knows how they calculate prices knows where the information comes from and if their sales bidding on a job on an option a contract for example they will make sure that their market rates and prices because that's where their margin comes yeah so as long as we tap into that information we're going to get the right data to help us to get the right prices at the end of the day yeah and yeah and basically it's best to they ultimately start seeing most appropriate supplier the one yeah this is helping build the confidence in that particular supplier okay so if we move on from contract preparation into supplier selection so now very carefully a lot of careful thought here from clients who is my my best contractor in these circumstances for this particular project so things that discuss here are how do we provide that information required by the clients and how we use that information in the selection process so we want what will it you know well it's my best supply in these circumstances any thoughts on this well the first part is really down to the down to the bidding contractors how they have they're going to provide information clients ask for certain data what am I going to provide to that client and really the the most appropriate route just and look and seeing what the client is looking for how he's going to use that and make sure you give the information which is best able to give the right answer there's a commercial edge here because the client is looking at getting the prices really a realistic market prices the contractor has bidding wants to make sure that the prices he gives not such that he's going to keep saying he it is no girl to lose man so there's a little bit of emotional tension here and this is where the supply selection part comes in so the contractor will provide the data that the clients were looking for and if the contractor is completely open and says this is my date this is how my database works this is how my estimates are prepared and this is the information I used to provide them and here's things the samples from it then it seems to me that both sides are going to get the best result because the contractor is using its only information which has confidence in its provided that to the client because the client is looking at the contractors own information they get confirmation so from the point of view of contractor it seems to me that the best route is to be open about your own about the connectors own systems to disclose that and make that available to the client how that fuse then the client needs to be fairly open about this there's a lot of attempt to be secretive about it's certainly in the financial side about having a model which combines information from on the financial side and building it up into something which can be used as a proxy for cost yeah so the rebook there will be a system that the client has developed towards an advice have developed which brings in the various prices that have been asked for and combines them in a certain way to give a price now really bidding tenderers need to know how that's going to be done yeah they need to know enough information to be able to say yes if I provide this and it will give me this answer and that is what I'm not trying to give so there needs to be a bit of openness by the client in how he's going to use it the second part of course is that the as well as the crisis is going to look very carefully at the contractors remaining submission the key part about how there's how these prices are going to be used how the contractor is going to build up prices plus possible quite likely much other information about how the contracts can be managed I was going to run the project in the way weeks make sure that the client gets what they want and that the project goes well and within the time scale and for the budget so there's a lot of informations going to be provided financial side and and then on the technical side they need to learn professional side they need to explain how they're going to be built up and they also need then to make an assessment as to the relative merits of both or level of conferencing as the client got that the price that's calculated is realistic whatever confidence has the client got that the information given on the technical and professional side it is is appropriate combined those in proportion to give an overall number that can range from some clients might go actually a hundred percent or massive amount of money to tie to the financial side wouldn't we recommend it because that is a very small part of the whole information others will go using very little information from the financial side but the nice Lisa makes there with a logical arguments or some either be there the percentages be chosen yeah again we need tensions being to pick the most appropriate support supplier in these in these circumstances which is quite difficult isn't it so it is difficult it's a bit like think about our program when you were saying that you know rather than say do how many plans have you got how people are they showed me an example of a program that backs you've done in the past for a minute let me have a look at that I was also on 20 calls yesterday it's a slight aside but do no easier training calls yesterday and the question was asked whilst we have an e CI in the for the t1 contracts of Japan PTC what about subcontractors can you easier subcontractor cushy care now actually I wasn't too sure to check been the engine construction subcontract there isn't it makes 22 really wouldn't beyond the way of anybody to take you know maybe half or two-thirds of what is in x22 and convert that into an ECR clause for a subcontractor the main point being that during stage 1 release er contracts they would most likely be reluctant subcontractors who would not prepare to open up and be overly helpful because they fear that all they good ideas would get sucked out through the stage 1 process and then may or may not get a chance to bid and they might go to the lowest cost of some of the subcontractors so there's a nervousness reluctance with subcontractors to engage without some formal EGR process thoughts on that pizza well the key thing I think when the subcontractor point of view is to have a process in the subcontract for agree in the price and that clearly got to be linked back into the agreement of the price with the client because if the subcontract price is sensible but the client thinks that that's not appropriate that should be done a different way or use a different supplier that expensive supply whatever that is a problem so there needs to be a process in the subcontract for agreeing the price for the work that the subcontractors are going to do in stage 2 has to be linked back into the agreement under the main contract as well yeah and that seems to be the critical part the the the the there is a perhaps a slightly less confidence on the subcontracting side that they are fully protected by an ECC by a rabbi and a CI contract but I think it could be built in very very simply yeah I think so yeah so yeah it was about home why not negotiate some sub contracts prices yeah what we tend to competitively tend to everything don't wait so with this value proposition between Tier one on the clients and then this lowest cost race to the bottom position is subcontractors you know some of them surely surely are negotiable is his right proper to negotiate with the sub contracts well probably moving a little bit off supply selection into the next stage but if you think about it a large proportion probably majority of the work will become very high so contenders and therefore if you're looking at coming up a price then the subcontractors prices are going to be quite important and this selection process needs to understand how subcontractors are selected how they're identified and how the contractor has confidence that those subcontract prices are good proper market rates yeah which is which is the supply side so I was trying to get to also I do very often pay yourself but it's more than just the contractor themselves is some of the key members their supply chain okay so so submission so wait so we come to has been awarded we're in stage one of a VCI we hope to get to stage two we hopefully get some notice to proceed by the by the project manager but there are a number of things going on through the stage one and we're looking to position ourselves that's that the the prices in particular and the scope is is finally acceptable so we have some submissions to worry about in stage one so what are these submissions pizza so what would we include how do you though what is the sizes of accepting proposals so these final of these Fenice really get completed design is it an on roofs is it halfway there nearly there what what happens at the end with the submissions at the end of stage one well the first thing to recognize is that the contract allows the client to specify in the scope how this solution procedure is going to be operated yeah and that's quite an important point because what you really don't want is a contractor coming along and saying well here's my proposal for Stage two what do you think of it it needs to be done in stages it needs to be done fast and there also needs to be some dialogue as part of the process so I would imagine that the first things what will happen is that will be some discussion between the contractors technical specialists and the client technical advisors on various possibilities and home it homed in on one which makes sense from the point of view of technical and commercial inputs so there will be a discussion in the first place the contract will then come forward with a submission now that submission should the proposal list of what is going to be built a design of some kind some level of detail as to what the design is but importantly there must include the impact on program impact on the budget of this proposal so if it's a particularly expensive way of doing things it may be that it's going to blow the budget so it's not going to be accepted so we need to look at those things now the key part is that we think of the design submission has been not just a piece of design look a completed impact of that design on what's being proposed to build so whatever it is whatever it may be there needs to be a review an explanation as part of the submission as to what its cost is going to be how that impacts on the budget what its time scale is going to be how that works on the intended program for the work now having got to the process where you've got that submission there is a set of rules of the contract in terms of which state they're accepted pretty clear that if they comply with the contract their company within the budget they meet all the requirements the contract then there's no it is very large memory they're not accepting it so don't accept a proposal it doesn't become a binding obligation to do that but it would be if it's not changed it's always possible for the contractor to come back later and say well we know we agreed this as a proposal for this particular piece of work but actually having gone and looked at something else we think this is a better way a more effective way reduce costs can reduce the time scale it reduces risk so look at let's look at this one but he doesn't depart from the scope it's in compliance as an alternative way of doing that but then the contractor can do that in traditional team beat up anyway so the stroke is this high level performance I said we can do this at some points they would actually change our mind this is safer quicker cheaper better the kilometer mountains it so no difference their River in terms of level of detail it needs to be sufficient so that the client and the client advisors can see what's being proposed and to assess whether or not it's going to be client needs it doesn't doesn't necessarily need to have the last amount of detail because the final detail can be worked up during stage two but it just needs to be enough there to say for the client to be confident that the end has liver what he wants so confident so does world of clean uses so he gives that level of confidence isn't it I was looking the gaming in the age of twenty two provisions so as you say the submission itself so the projector submits its design proposals for stage two and that's the mission includes their forecast of the effect of the Sun proposal and the project costs no deceptive program so jury stage one that the project costs will get that bit more firmed up the safety program whilst on day one of stage one will be through fairly detailed for Stage one because that's usually rational services but could involve some mitigation and some advanced modes possibly things like that the stage to my be just a single bar of one year in duration or something like that however during stage one and by the end of stage one that accepted program should have been sufficiently developed to have a month Red Room some of the stage two worse if by the end of stage one at the stage where you're looking at deciding whether to proceed you have a fully detailed accepted program yeah and there's no reason why you okay I always say it's very onerous this is closed for the off point to accept requirements on the contractor but no excuse in your soul the contractor we need that level of information probably needs to work the contractor probably needs to work that level of detail up on the programming in order to be confident as to what he am posing for this stage too yeah yeah well what about the situation where let's go back through the host that's before stays warm preparing the information for the the contacts the beard and if we have the the completion date that I can see we can't actually change the completion out something for lunch accounts in at the end of stage one so at the end says won't you might well say willing in good faith we thought this was a 12-month stage to like contracts leads 15 months really some big difference and any thoughts on the ability to change the completion date yes I mean there's two ways of dealing with dealing with this one I've seen some client will deliberately intentionally leave the completion date for stage two open at the initial contract stage and similarly required that we completed as part of the agreement to proceed in stage two that's one way of the other way is is really coming back to it change to the contract needs to be made no great difficulty over that if everybody agrees that it's more sensible to take a little longer to do the job in order to say keep the project cost down or whatever the reason is then I just can always go into that change it could well be like say that you struggling to get project cost within the budget but your genuine belief is another one on two months worth of stage one we could well crack it so so go for it okay so it says two ways of a sentence in terms of completion day but where the middle ground projects you probably okay with the completion date in the first place but the extreme of the D&B however may to these and that one example what so I gambled the the open she said yeah I think if you're very unclear as to precisely what you are going to build then it's obviously possible to define a completely yeah so as is as it is the budget so the thing about the budget on that point with the budget the budget is probably something that you've that the client has been given authorization to spend in doing this fee so if there is an internal issue there in terms of the budget so it the contractor needs to be aware of that because the contractor has to recognize that this team will only go ahead if the client can get funding for it if that's the budget and the budgets inadequate he profit the client probably we're not going to go ahead and the contractor will not be able to build a work so that's a point that they basically be aware of but it does need to be identified he disclosed so that yeah people can take an assessment of that risk you have a fighting chance you almost you must turn on its head from I won't want this asset or when there's Road from A to B like for this amount of budget and then eventually we can't have it for that but it contains but no it can't so what can I have for this budget maybe jewel territory becomes single carriageway something like that okay so we're in our Prince Wednesday's one so we're in stage one all the other aspects of the contract is still in place is how about core clauses we still if we an option C have a requirement for tractors to give a forecast of the defiant loss for the whole the words we still have an obligation on both the project manager tractor to notify early warning system say friends but very mines the prices are only the stage one prices not the stage two prices and for example early warnings the first photo saying bullet is about increasing turret the prices in brackets fly for Stage one so you wouldn't expect too many early warning to a conversation events in stage one too many that's a bit of generalistic the other one would come out only because the cost of the work in stage one is going to increase but we need to bear in mind that in the ECI cloth we've got an additional provision for forecasting both details one the forecast of stage one but also a regular forecast for the total project costs which would include cost the clients incurring with other organizations so there are there are additional requirements over and above lien early warning system for monitoring and managing the cost of stage one but clearly during stage one you're not making any attempt to reflect on what's going to happen to the prices in stage two yeah you see we're not careful it for everyday you be notifying ten early warnings or whatever as you being told us the design emerges that's not the intention moderate engineer we are negotiating during stage one an acceptable level of prices until you've identified what the prices for stage two are it's difficult to understand how you can give an early warning that they might change yeah exactly exactly okay so move the last plus a couple of bits and then we'll have a look at the questions so assessing prices for Stage two so how are we going to do that we can of course use that pricing information so totally so we're going to follow the process presumably that the client has asked for and the contractors stated which which is why they've been selected is to assess that process you decided the process is okay so it's really a matter of checking that that proceeding follow yeah yeah it shouldn't be a massive difficulty if you've got all the information you need the problem would become as if you have a cast with the information start you didn't look in detail about how the assessment process is going to work then it becomes rather more difficult becomes bit too close to a negotiation which is not what you want we should be looking at the contractors own pricing information own pricing process or auditing it to see that's being followed and that should give you the right answer and as long as this fits within the budget and it's what you expected that should be quite acceptable yeah and if not well the problem comes of course is if the prices come in and they can't the job cannot be done within budget now the key point about getting regular submissions and the impact on the price on the on the project cost is you don't suddenly get a problem at this stage of saying do I go ahead or not so if you can see from early submissions that there's a problem coming you know well in advance there's a problem so you know either decide you're going to find more money or you decide if you can't build this scheme and you pull the plug so you should never get to the stage of final just about to proceed we've done a lot of stage one and then say oh goodness me I can't afford it yeah you should aware that in the world before them yeah so you should have high quality month written information which is being collected and feeding you know fed through at the appropriate stages you are allowed of course to change the budget one of the reasons is programmatic gives instruction changing the client requirement stating the scope so you know we can increase it we can decrease it we have that facility I think the problem there is to allow the budget to be increased because the clients have changed its mind yeah want something a bit different it's not designs are so change change SS change Columbia College go down it happens you go yeah but the budget is something that the client has got to live with the contractor needs to be aware of and looking to try to achieve everything within that budget because if it doesn't and the scheme doesn't go ahead then the profit the contractor is anticipated making on this contract has disappeared yeah yeah okay the final point on the contract management there which is basically it's just the stage one is the time scale which which I presume really realistically should be indicated in the documentation before the contractor bids you know if there is a maybe the good reason a three month decision of somebody to go ahead or not yes there could be a lot I don't know it's the internal governance the outside of the Yang's is the key point because once you've assessed the prices you happy with the prices you happy with the design then decided to proceed is purely a governance issue who has to give them the approvals and how long will that take and that's important from the point of view of the program of work because when the work is being planned and the prices of enos s and the program fee prepared it makes assumptions about when the Notice to Proceed is going to be given yeah so that has to be all built into the program and it must therefore be something identified upfront call it a constraint so it means constraint in their scope if like that one of the bullets here so we give the message to proceed when the client has confirmed the words are to proceed so we have to give the client their time that they told us in advance their one week to week two months but that's a constraint in the scope and they say broke so build a program around you so there isn't a fixed time to get in the contract that's all related to how long the client is going to need for internal processes to get approval to go ahead I can vary as a government client probably have a ministry yeah if it's a private organization it may just be a board approval yeah even the delegated to the members so it could be it could be very short or quite long so the client under their advisers are making sure that all the things that we how we set this up to succeed have actually happened I worry that thun these funds would be to spend that our efforts on the minutia you know this is the small things without actually making sure but all the other thing how we said this thing off has actually been enacted yes should mention of course that in stage one in reaching the end of state one any approvals which are necessary to allow the project to proceed have to be obtained yeah so if it needs planning consent that has to be going in stage one if it needs some form of public inquiry for a government job then that has to be followed through in stage one so when we reach the end of stage one with proceeding on stage two commitment is given to build yeah okay and just one or two of the little points that I would pick out and then we have look at the questions we go now one of the clauses say tells us that the contractor completes any outstanding design during stage two so there need to be very carefully because potentially could be client design works and this is saying however and he had something these are not yet done during stage one passage to you as a competitor in stage two if you see a problem with us or we've written that so we've jobs identity basic basically what it does is to say that the stage two is effectively the same as any other design-build contract whatever design is left to be done and the contractor does and there's the point I made earlier about the submissions the solutions need to have sufficient detail to judge whether they're acceptable but not necessarily the full detail because that would be provided in stage two the only side of the contract if I mean the case where for example some clients have used our contracted to work with the clients designer where the client's designer will prepare the design for Stage two and the contractor will give guidance and advice and assistance to help the designer get the right design even in that case that consultant does finish the design it's handed then to the contractor to get on with the job in stage two any design that's remaining has to be done by the contractor yeah so this is serious consideration by the contractor in there so I mean their prices and their program that's the implications of that so you can appraise yourself as what design remains will it be done yes or no this side of stage one otherwise I'm thinking of them having gone with it and just the point not really a question but in options say yellow at the end of first stage 1 then the contractors make the total of the prices for stage 2 in the form of revisions of the activity Sheffield's and now we are changing the prices from that whatever amount of money for the state one usually professional sources into the prices for stage 1 and stage 2 okay so that pretty well so as you can see we're not really going to detail the clothes themselves maybe some of the questions you have a little bit more focus we were just trying to sort of set the scene for the most effective way to use option option x-22 so any questions and we have already have some questions okay so I thought they'll come through here but what's up thank you Tony wants to remain anonymous in this case either I can't read from thicket I used to be able to in the old days I could break them but I can sort of do so let me pick some of these and so how does the ECC address tier 1 contract from an chest ability to avoid Fernando Valley of Maine contractors like in a projects were mentioned in a supplier selection process so how do we address financial stability in that map to me is a general performance issue for all clients to carefully consider the financial status their contractors we're not providing a whole procurement process in any contracts there they are they are contracts online so you've got to do all sorts to diligence checks on the financial stability of your contract at all so there's no it's not a contract issue it's a matter of having to carry out your decision as to how to appoint a contractor whether it's done a lot of pre-qualification basis or an assessment of material provided as part of the bed yeah okay so how do we ensure that an easy on contractor focuses on what is best for the project rather simply proposing a methodology that suits their business structure nice okay then you can come in to start the starting point means is to think about what the project is what it is you're looking to build and then identifying potential contractors who can do that so it's may be at all appointing a contractor to do some work if they're not experienced in that kind of work or they're specialists in some other kind of work she's associated with it you need to have somebody who can do the work you're expecting to do so that's that's a starting point as a procurement issue as to how you get them to do that the second part is having got within that position how do you make sure that they are actually looking after client interests in terms of providing designs which you better the client rather than those suitable for the contractor this is where I think climb will always need some kind of technical assistance either in-house is an organization or as an external adviser to work with them to look at what the contractors proposing and challenge any proposals to make sure that they are getting sensible advice from the contractor yeah you certainly have to write your scope just as carefully here as you would do with any contract the other way I would think of these sensitization so through the aurochs of of x20 key performance indicators if there are certain aspects of the assay would you wish you to create that are very involved to you or not incense was the contractor in that direction I think you can use the incentive mechanism and clearly the the idea about in DCI beating beating the target if you have one is itself going to incentivize the contractor to come forward with the most efficient and cost-effective way of doing things but it may may just be that the three or four different ways of doing it a contractor who's got of specialism which actually comes up with a really effective way of doing it is seems to be quite the right answer is if it's given the right solution which is within budget saving money why would you watch them right yeah is the problem so the question just the ECI period usually include detailed design so these efforts so the presume this is the stage one stage one period definitely at some point in time somebody has to design it but who is defensive is the designer how far advanced it is I mean in that one extreme situation he said the the client may well it is on just about everything we just wish to use ECI but just to validate to let me build a built in health and safety so that pretty well could be the detailed design that's complete where as a middle ground scheme this is developing design his name sufficient in order to the budget but he will require to be designed so you would I would I would suggest that you are doing detail design to the stage one with the hope that you've finished after in stage two but not too much finishing off as my early experiences were will sort that out on-site if you have the mentality of sort of gown size not careful you'll fall into the trap of leaving too much desire to be turned on during stage to not allow sufficient time for that to happen and it causing the problem yeah you did recognize one of the key benefits of easy is that you get rid of as many risks as possible before you start work you're looking at things and you're de-risking your project so your design needs to be carrying at sufficient levels so that you've actually idea defied the risks and either dealt with them or have identified the appropriate management technique for mitigating the effect of it so to that extent the amount of design you do will depend on what's necessary to deal with those issues and it can be from a very great amount of design or in fact very very little it depends on what you're actually looking at doing but the key point is to think about the risks to the project and how you're going to deal with those yeah yeah somebody said I'm new to x-22 are we old please comedic stain explain what Stacy's 1 & 2 are well the easy answer is they have the meanings given to them in the scope that's why the contracts age state stage one is to pick up from before stage to start yeah or stage to follow stage 1 know that state that the decision is that stage 2 is the bit where you start you've given commitment to build so once you said yes I'm happy with everything now go away and construct it that is stage 2 stage 1 is everything before then yeah yeah at first some clients use a stage 0 which they really mean this 10 to stage you know you could read them like that yeah yeah non-contractual stage and the interesting question so x-23 point things changes to the budget what are typical examples of additional events in contract beta so there's one bullet so what how when can we change the budget very extremely rare circumstances one hopes but one way as we discussed early is the problems of giving an instruction changing the client requirements so we want something perhaps quite different to that which we had in the scope initially but then he goes on to Clause say additional events of the contract later as well so the contract the the client is involved in rebuild work it's got an existing factory there's been running for the last 20 or 30 years he wants to extend it so that we can increase the output for the factory not entirely sure what can be there and there's a worry about Vestas is there you might well say if asbestos is there we look at the budget again but things like asbestos without that trial thing it's too small but you could otherwise do with that as a compensation event but a conversation anybody blowing to change their budget yeah so yeah that's the case where you look at the essay well it says the only change of the rate but yes if the risk is something that it is really silly to ask the tractor to take on board then why do I do it so those are the things you would look to change the budget for okay Brent soon so what breaks it cause I'll just go up or down who knows hey good-lookin putting that one down but it's that it's that sort of significant race core issue it's something to change the budget you will have asked mr. risk analysis yeah on the project yeah an early stage yeah from that you've identified things that it is really not sensible to give the entire race to the contractor in terms of budgetary expenditure yeah because you want if you if you've got if your budget is blown then you've lost the motivation on the contractor to try and achieve savings on the budget yeah so you don't want me to happen otherwise you're not really getting the benefit with ECI contract so identify those big risks which the contractor can't readily manage your handle and include those as being things which you could change the budget yeah okay so Hank can you be more specific about what additional clauses may may need to be added to x22 to make it more appropriate for option a at stage two but I think we need to let stage 2 stage one the mothers of stage two option a fish runs as it normally should do another problem of budget ended motivator contractors motivation means that stage one won't work the way it should work that's the real problem I think they're not a yeah okay the big problems in in in option eighth if you see for option alpha stage one is that the concept is that we pay the real cost of people defined for us of people whereas that's not sort of a life or an option a is the concept of disliked cost so this whole thing about paying real defined cost is not provided for option eight you'd have to provide something there which would be tricky yeah I think what I've seen client sometimes do is to take a standard ECC and then effectively turn it into an option a four-stage to by not allowing changes to the to the prices new statement in stage 2 so it becomes effectively a third price for stage 2 so you don't along we get paid the defined cost we get paid the prices in stage 2 now that's as I say that can be done it needs a bit of careful drafting but it also needs to think very very carefully about the the motivation of the contractor in phase one yeah Stage one yeah I have seen in stage one well some time ago where we give a surprise for state or on the price came back as a pound you know bill its intention that if they spend well having many hundreds of thousand pounds that will get reflected in stage two prices and the end of stage one so be careful with that sort of thing actually on that another client that I've observed using ec I'm not using n CEC I actually sort of fix stage one and two price before actually doing stage one what was my experience there how do you do that I don't know 101 but I quite like a lump sum or a target from you and how much and we'll sort it all out during stage one won't wing but I'd like prize I think the idea being that you can allow you deviations but only certain circumstances but if you imagine setting the rules that for that would become credible very tricky no I don't think so so let me have a look at some more questions I'm keeping an eye on the time does this relate to the PSC contract so is there any time for the PSC well don't don't think so would you do early consultant I don't think so because the consultant is there to provide you ly the advice rather than to create the asset for you ECI contract is all about how you can get the asset done by have the right advice at an early stage rather than at the stage of building yes yeah and if you are so open-ended in being casual early to sort of use option a because you've just slipped from me down the with us you know where the direction the scope might take you I don't know right that question they're thinking about using a PSC in stage one and then they're the ECC in stage two except for hosting that I've done that yeah it is it is again it's a slightly complex way of doing things that probably had an unnecessary conflict but can be done as long as you draft your content very carefully I've done that in the past of PSC any CC or ECC then CC but there's a break point and there's two contracts and the problems in procurement law with with to contrast the beauty here if you've got that single contract with the noise yeah there's a serious problems on procurement in awarding to contract awarding a second contract without competition yes or yeah the way that that's been gone through the one that I've seen is that the contract data say that the conditions of contract are BSC for stage 1 and ECC for stage 2 now that creates problems but it can be done but you've got to just question what we're trying to achieve compared with using an ECC for both stage 1 and 2 what's missing why do we love to do something different yeah okay come on is the provision for is there a provision for the contracts compensated if stage 2 does not go ahead sadly no did you not terminate these fully compensate for all the workers before the work they've done see saying thank you very much however we could not make it work on this occasion yeah the body is lucky to be grossly exceeded its killed the business case stone dead thank you very thing you've done here's your here's your money and that's it so we we the program gives the instruction changing the scope to shrink the scope basically just answer stage one they cans and might because we're not terminating the secured I didn't added changes go throughout in something in terms of providing handover documents yeah so so till you might well say provide relief document so I can go out to tender now because we couldn't agree the prices yeah okay so very often the clients there are design changes in issue ated buyer by a sponsor to be part of these aren't developments which leads to increase design time and cost hamsters in France deal with such circumstances who is the designer we don't know from that mr. sheean the clients the designer so if the client is the designer and that will increase design time and cost how does the contractor deal with it Wayne the normal reporting mechanism will be well I think that what can happen is that the contracts are going to be spending more money in stage 1 which the client is going to be paying you know that can increase the overall project costs which the client contractor will be notifying the client of and it's up to the client as to how they want to go ahead they will either need to increase the budget because their design team or their consultant is being rather wasteful they could try and rein in the consultant who's overspending and all decide that because the way the money is going they're gonna have to stop the job yeah and or if it was one of those projects with the fixed completion dates and then that is the case for the early warning using early warning that the completion of all the works is in jeopardy because this ever changing from sponsors requirements okaying them all of them became five minutes being told so has there been the examples of ECI were acting contract costs of exceeded the agreed upon budget and if yes how's this result oh one thing we greatly struggle with a fund any contracts full stop these reliable statistics that people feedback in only we knew what people using the NC contract we're or the outcomes were so I don't have any statistics on DCI sadly it doesn't it does happen if you notice that we don't have a penalty for a overspend on budget yeah that was conscious decision because we felt been in many cases the budget were not it is prepared but solely by the client it may be accurate it may be inaccurate it will seem wrong to penalize the key factor for overspending a budget which was inadequate the the the whole process demands management by the client over the process over the whole the contract to look after the expenditure and the model monitor what's happening make sure the money being spent correctly right never lifetime and they take action if there's nervous been happening so he'll be taking action well before you reach the stage of overspending yeah you shouldn't get to the the surprise stage which although this habit that how did that happen so okay but I think that's it so any outstanding questions we will we will log and we will answer at some point and we will send back and this the video of the webinar with these & selling questions as soon as we can probably what time's going on it at the point so we've got really clearly in he fee in Glasgow in the 11th of October talking about whistling from craft supply chain do do trying 10 that if you possibly can register now in NC contract that column for slash events there's a new NC for box help that's the color of the previous one wasn't and so but now he's expanded to include the the new alliance contract that was out fairly recently so if you could just buy the larger box something so you can you know you know if you can not just the box but that's the content no okay so if it was silent partner in the room later this week know the answer to that so you need to buy a new box and sell you other one famous reset websites maybe some of you maybe most of you I'm not paying for your air fares might like to join us up the NSE asia-pacific user group conference in 2019 where we'll be celebrating 10 years of use of NEC in Hong Kong dramatic picture that is so save the date 29th of November this year and there's the website agreement very supported by Hong Kong in factors association as well always very good event hope to see some of you so that's it so here's some contact details where you hope to announce the next webinar fairly soon and maybe we dress or some contracture I think it was the topical issue too to think about so we hope that you've enjoyed today and we hope that it's been very informative and you are have a better understanding of of the four things that surround x-22 rather than the intricacies of x22 itself and the go forward you can more confidently set up projects using x-22 selecting the right supplier with their understanding processes and delivering some great outcomes so my thanks for - - Tony for setting this up and my thanks ma'am great thanks Peter Peter of course for a beauty in fact today and and enjoy the rest of your days thank you very much indeed and good bye bye