CONTRACT PRACTICE

Contract Practice



Contract Practice

Introduction

The main purpose of this paper is to make an analysis on the option of the NEC and its application. The paper also discusses the ways of implementing NEC in order to procure construction works. The paper also makes discussion on the concept of best value procurement and target cost contract option.

Task 1: Investigate how this option of the NEC contract is applied and explain your understanding of the way in which it might be implemented to procure construction works.

The institute of Civil Engineers have constructed the formal system of the New Engineering Contract (NEC). The main purpose of this contract is to produce the documents in different civil engineering and construction projects. This is done for the purpose of obtaining different bids, awards and contracts administration. This contract also helps in giving the legal definitions of the responsibilities and duties of the contractors and employers in the works information. The main component of the data contract is the information and knowledge about the work. On the other hand, the second part is contract data which is the data which the contractor has provided. The three editions have been added in this regard, the first edition have been launched in 1993, second in 1994 and the third one has been launched in 2000 (Alhazmi, 2000, p. 34). Another issue has been amended in June 2006.

The NEC is a family of standard contracts; each of them consists of the following characteristics:

Its use stimulates good management of the relationship between the two parties to the contract and therefore, the work included in the contract.

Can be used in a wide variety of business situations for a wide range of types of work, anywhere.

NEC contract option C is applied through the amily of standard costsand it embraces the understanding of partnership. NEC contract option C works to provide encouragement to contractors, employers, project managers and designers in order to work together and achieve customer's objectives. The NEC contract option C is the target cost contract which is used to create alignment of the motivation of parties in order to decrease the cost in an effective manner. They are very famous and used increasingly because of their partenering trends.

Task 2: Research and critically evaluate the concept of best value procurement and target cost contract options. Highlight any advantages and disadvantages you see being offered by this procurement approach together with an examination of any long term problems for the construction industry associated with the adoption of collaborative forms of procurement as advocated by Latham and Egan.

Target Cost Contract Options

Target contracts are used when the work specifications and extent is not defined in a proper manner. They are used in the situations when the anticipated risk is high. The application of target contracts is very limited in consultancy contracts in case when their usage is frequent in construction contracts. In the target contracts, there are different ways through which the financial risk is shared between the employer and ...