Volos Ident

Date:

11th January 2023

Although the title ‘Quantity surveyor’ is not one that is recognised under the NEC ECC form of contract, their role is crucial in supporting the Project Manager. Together they strive to ensure the project’s finances are controlled and managed effectively. The intent of this blog is to provide quantity surveyors with an overview of the best practices for managing the financial aspects of an NEC ECC contract. It is written in NEC4 terminology however, the principals are also applicable to an NEC3 contract.

Not all functions undertaken by quantity surveyors will be captured. However, below is an overview of the added value a quantity surveyor can provide the Project Manager.

It is imperative that a good quantity surveyor firstly undertakes a thorough review of the contract documents, including drawings and the Scope to familiarise themselves with the project they are undertaking. Following this, the quantity surveyor should then bring to the attention of the Project Manager any risks found such as, a discrepancy between the Scope and the drawings. This is good practice as it will enable the Project Manager to give an early warning and instruct the Contractor to attend an early warning meeting to mitigate risk.

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Early Warning

Clause 15 is one of utmost importance to the function of an NEC ECC contract. Both the Contractor and the Project Manager work together in ensuring that both parties are consistently aware of any risks concerning Prices, Completion, Key Dates or issues that may impair performance. A pro-active quantity surveyor plays a big role within the early warning process.

A forward-thinking quantity surveyor will always be aware of potential risk, this awareness should be used in advising the Project Manager. This may be as simple as supporting the Project Manager in communicating and resolving any project issues with designers and Contractors. A good quantity surveyor will want to be attentive regarding risk which may affect the Prices and Completion.

Usually, the quantity surveyor will attend an early warning meeting where discussions regarding risk mitigation will be held with the Contractor. Here, the role of the quantity surveyor is to advise the Project Manager on the cost implications of any decisions made, for example, the Contractor may be experiencing difficulties obtaining the specified paving material which may have a risk to programme, the Scope could be changed to mitigate delay and cost by specifying an alternative material. Here, a good quantity surveyor will not only advise the Project Manager on cost but also advise on the programme benefits it could provide by reducing lead-in times and potentially bringing forward activities on the programme.

Programme

Clause 31

The Accepted Programme is a fundamental tool in managing any NEC contract. Its aim is to encourage efficient project management, by ensuring all parties are provided with deadlines and expectancies as well as, prompting the assessment of compensation events. A regularly updated Accepted Programme plays a critical part in the financial management of all NEC contracts.

The review of Clause 31 is to be carried out by the Project Manager with the assistance of the quantity surveyor, to ensure the programme contains the information within the Scope, for instance, acceptance procedures, material lead in times, etc. In addition, information contained within Clause 31.2 should be included, for example, starting date, access dates, Key Dates (if applicable), Completion Date, planned Completion, float, time risk allowances, health and safety requirements etc.

A quantity surveyor can add significant value when reviewing whether the Contractor’s outputs are both reasonable and deliverable. This can be achieved when the quantity surveyor is equipped with an in-depth understanding of the requirements of the Scope and is able to cross reference the quantities of the project with the time allocated to each activity on the programme.

Following this, they should be able to use the skills and knowledge, which they will have obtained through experience, to ensure that the outputs are realistic in the requirements of not only the Scope but also for the location of the site. An example of this may be, the recognition of the reduction of outputs when working within a city centre as opposed to a greenfield site.

A good quantity surveyor understands the importance of having a regularly updated Accepted Programme, as a project without is almost impossible to assess any compensation event and to provide the Client with a financial understanding of the project.

Clause 32

Just like the Clause 31 programme, a good quantity surveyor will work with the Project Manager to review the Clause 32 programme. In addition, the quantity surveyor should assist in the review of the Contractor’s actual progress achieved on each activity, where the Supervisor’s records are utilised along with a review of the future activities to ensure the logic is to the benefit of the project.

Payment

Prior to, or on the assessment date, it is the Contractor’s responsibility to submit an application for payment, this is commonly undertaken by Contractor’s quantity surveyor. The assessment interval is identified within Contract Data Part 1.

On each assessment date, the quantity surveyor should be present on site to review and evaluate the application for payment as well as, the PWDD (Price for Work Done to Date). This is often in conjunction with the NEC Supervisor and Contractors quantity surveyor.

The Secondary Option clauses, chosen for the project must be reviewed by the quantity surveyor. For example, if X16 Retention has been selected, the quantity surveyor will check the retention percentage (this can be found within Contract Data Part 1). Furthermore, the quantity surveyor must also check the retention free amount (if any), this is the value that no retention will be applied to, for example, the first £100k will not be subject to retention, any value thereafter will be.

Following the above steps and any amendments, the quantity surveyor will advise the Project Manager on the amount due to be paid and details of the assessment of said amount, this information must also be provided to the Contractor. Note, it is the Project Manager’s responsibility to issue the payment certificate once the PWDD has been calculated and advised by the quantity surveyor.

Within 1 week of the assessment date, it is the role of the Project Manager to issue the payment certificate to enable the Contractor to submit their invoice and to facilitate the payment. A good quantity surveyor will understand the importance of adhering to the dates specified within the contract as it of the utmost importance to enable appropriate cash flow for the Contractor and to ensure the Client’s financial procedures are adhered to.

A proactive quantity surveyor will report the financial position of the project to the client ideally monthly (or more frequently if required).

The added value this brings to the Client is a well drafted and informative cost report will assist in the Client’s management of internal finances and to understand if the project is on budget, and if not why?

The cost report is to ensure the project’s budgetary requirements are being met, and to advise the Client if the application for more funding is required, or if there are any potential opportunities for the Client to consider value engineering the scheme. Without frequent and well-written cost reports from the quantity surveyor, the client would not understand the financial position of the project and will not be able to make informed decisions regarding finances.

Generally, included within the cost report is the following:

  • Client’s budget
  • Anticipated total of the Prices

  • Compensation event quotation value

  • Anticipated compensation event value

  • Movement since last report

  • Cashflow forecast

  • Position of programme.

Here is where a well-skilled quantity surveyor comes in to their own, applying the contract fairly with good people skills and acting in the spirit of mutual trust and cooperation to find a common ground with the Contractor, for the similar purpose of promptly implementing the quotation. This should provide all parties with a much clearer picture of the financial position of the project.

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