GETTING STARTED WITH THE NEC3

GETTING STARTED WITH THE NEC3 NEC3 TERM SERVICE CONTRACT (TSC) AND NEC3 TERM SERVICES SHORT CONTRACT (TSSC) Supported by: Published by the British Institute of Facilities Management April 2015

Introduction If you have the complete set of NEC3 Term Services Contract documents (boxed set), this Guidance Note will help you chart your way through so that you can prepare the documents you require for your procurement exercise. If your knowledge of procurement practices and/or contract law is limited you may need to seek qualified assistance to complete the documents. Box Set Contents The box set contains a copy of the BIFM FM Procurement Good Practice Guide, an invaluable guide that will help you prepare the full set of procurement documentation, and the NEC documents shown in this table. Table 1 Box Set Contents Ref Title Purpose 1 NEC3 Term Service Contract (TSC) 2 NEC3 Term Service Short Contract (TSSC) 3 How to use NEC3 contracts in FM 4 TSC Guidance Notes Contract to appoint a supplier for a period of time to deliver a service contract. Shorter version of the TSC. The guidance document which reviews the various NEC3 contracts that can be used in an FM environment, procurement strategies, and other procurement aspects. This document is invaluable in understanding how to interpret and select the right optional clauses to suit your needs. The Appendices contain useful drafts for some of the accompanying contract documents as well as a look up guide to the core and optional clauses. 5 TSC Flow Charts 6 TSSC Guidance Notes and Flow Charts These documents contain process maps of the contract conditions. This document provides the detail in 4 and 5 for the short form. Further reading Further information and links can be found on the NEC web site at: www.neccontract.com/tsc 7 How to write the TSC service information 8 How to use the TSC communication forms This document is intended to help users write the Service Information. This document contains samples of best practice communication in accordance with the contract. 1

Which NEC3 Contract Should I Use? TSSC (Term Service Short Contract) The first decision to make is whether to use the TSC or TSSC. The NEC advises as follows: Title NEC3 Term Service Short Contract (TSSC) NEC3 Term Service Contract (TSC) Purpose Contracts which do not require sophisticated management techniques, comprise straightforward work and impose low risk i.e. a bundled contract where a single supplier provides two or more services on a low risk FM contract. Contract to appoint a supplier for a period of time to deliver a service contract. Suitable for a bundled contract where a single supplier provides two or more services on a complicated FM contract or a Total FM (TFM) contract where all services are outsourced to a single supplier. As the name implies it is a short contract comprising of sections on: Contract Data the Contractor s offer and Employer s acceptance a Price List Service Information a sample task order form for use postcontract to instruct work within the service but which is to be carried out within a stated period of time on a task by task basis conditions of contract The associated Guidance Notes and Flow charts will help you complete the contract and administer it. Try to keep the Service Information simple but as complete as needed to accurately reflect the parties agreement. Although document 7 is intended for use with the TSC there is a lot of useful information that will help you draft the Service Information in the TSSC so review its contents. If you use the TSC you will not need to refer to the documents referenced 2 and 6. Similarly if you elect to go with the TSSC, documents referenced 1, 4 and 5 will not be required. Documents 5 and 8 are primarily designed to help you administer the contract once it has been signed. Take a quick look inside to familiarise yourself with the contents and then set them to one side for use after the procurement exercise has been completed. Document 3 is not required as you have already decided to use the TSC or TSSC, but refer to Part 4 (Other Procurement Aspects) as it might help you draft elements of the Agreement. If you have chosen to use the TSC it will be the BIFM Procurement GPG and documents 1, 4 and 7 you require and if you have chosen the TSSC it will be the BIFM Procurement GPG and documents 2 and 6. 2

TSC (Term Service Short Contract) The TSC is more sophisticated and is divided into four main parts: core clauses main option clauses secondary option clauses Contract Data Core clauses The nine core clauses are included in every contract; with limited commentary, these are: 1. General The requirement for the Contractor or Service Manager (SM) to act in a spirit of mutual trust and co-operation as clause 10.1 and also obliges each to notify an early warning of anything that might affect price, service delivery or the like which is included in clause 16, together with the requirement for the SM to update the Risk Register and if necessary initiate a risk reduction meeting. The introduction of a Risk Register is included in clauses 11 and 16, with any specific inclusions detailed in the Contract Data. It is kept up to date by the SM and is amended from time to time to include all early warnings. 2. The Contractor s responsibilities The primary responsibility is for the Contractor to provide the Service in accordance with the Service Information prepared by the Employer. The Contractor prepares a Contractor s plan detailing how it will deliver the service and the first plan can either be included in the Contract Data or submitted within the period stated in the Contract Data after the Contract Date. The process for submitting/accepting revisions to the plan post-contract and the associated timescales are also included. 4. Testing and Defects Sets out the procedure for notifying and correcting Defects in particular. 5. Payment Sets out the payment terms and the payment intervals (which are not greater than 5 weeks) and confirms the right to hold back 25% of the Price for Service Provided to Date until the first Contractor s plan has been submitted. 6. Compensation events Events which can occur and are not the fault of the Contractor, entitle the Contractor to financial compensation. Clause 60.1 identifies what constitutes a compensation event and further events are stated in secondary options X2, X12 and X19. In addition, the list can be enhanced by adding further conditions of contract via secondary Option Z. 7. Use of equipment, Plant and Materials 8. Risks and insurance 9. Termination Main Option clauses The main Option clauses offer the opportunity at tender stage for the Employer to select the preferred pricing mechanism and dispute resolution process. Pricing options Option A: Priced contract with price list basically a lump sum contract for use where the precise nature of the service to be provided can be clearly specified Option C: Target contract with price list Option E: Cost reimbursable contract 3. Time Affirms the Contractor s obligations relating to the starting date and service period and gives the SM the authority to stop or not start any work. 3

TSC (continued) Dispute resolution options Option W1: The dispute procedure which can be used where the Housing Grants, Construction and Regeneration Act (HGCRA) 1996 does not apply; this will essentially be a service contract that does not include construction activities (as defined in the Act). Option W2: The dispute procedure which can be used where the HGCRA does apply, this will essentially be a service contract that includes construction activities. Secondary Option clauses These 13 clauses are available to the Employer should they choose to incorporate them into the contract at tender stage. They include items such as inflation, performance bonds and Key Performance Indicators. An explanation of these and how to use them is in the TSC Guidance Notes (see Table 1, Document 6) pages 47 to 59. Contract Data The arrangement of the TSC makes it infinitely flexible however to avoid any difficulties; start by completing the details required in this section. This section is in two parts; the first part will need to be completed by you (the Employer or on behalf of) the second part is to be completed and returned with the Contractor s tender. See Annex A for further information. Option Z Z clauses are those which you can add in order to meet the specific contractual requirements of your organisation and/or the contract. They should only be used to supplement the terms and conditions and service related requirements (such as security, environmental requirements etc should as far as possible be written into the service information). Z clauses need to be drafted with care so that they do not create any ambiguities with the core and secondary Option clauses. Extensive use of Z clauses tends to undermine the ethos of the contract so try to limit them. There are some additional clauses that have been drafted for public sector contracts dealing with things such as the Official Secrets Act and security. These can be found on www.neccontract.com If you research the term NEC3 TSC Z Clauses you will find numerous examples of other Z clauses that are being used by organisations, but seek legal advice prior to using. Some of the more common Z clauses deal with: Freedom of information Public sector bodies may want to include a statement relating to the Freedom of Information Act Assignment Employer and/or Contractor restriction regarding assignment of part or the whole of the contract TUPE Regulations 2006 Specific details relating to TUPE transfer, if applicable Right of step-in To provide a right of step-in as an alternative to termination. Further reading Further information and links can be found on the NEC web site at: www.neccontract.com/tsc 4

Annex A Contract Data Completion of the Employers section of the TSC is open to choice and the notes below are for guidance only, most of the criteria are self-evident but comments relating to some of the sections in part one are added below. Consult your sponsor and/or legal adviser if you have any doubts about the information for inclusion and how this should be worded. 1. General Main Option - Insert A, C or E Dispute resolution Option - Insert W1 or W2 Secondary Options: Insert X, Y and Z clauses as appropriate The Employer: Ensure you include the full name of the trading company The Service Manager: The Service Manager (SM) is the Employer s representative under the TSC; it can be an in-house or an external appointment and should only be undertaken by somebody with a good understanding of contract management. He/she will play a pivotal role during the service delivery phase of the contract having the authority to: Issue instructions to change the Service Information Monitor the performance of the Contractor Maintain the risk register Assess compensation events and payments. The Adjudicator: It is worth noting that under both options no dispute may be referred to the tribunal (i.e. arbitration or litigation) unless it has first been referred to adjudication, so take care when selecting the Adjudicator. (Details should be included in the Contract Data). The Affected Property: List the premises that are to be covered by the services, if there are a significant number they can be included in an annex. The Service Information: Engage with the project sponsor and other key stakeholders at the outset of the procurement exercise to understand the drivers, standards and scope of the services that are to be procured. The Service Information will usually be contained in an annex and referred to in clause 1, include all the information that the Contractor will require to provide a price for the services. (Refer to document 7). If some of the information required is contained in other documents you can attach them as appendices but ensure that you refer to them in the Service Information. The information that might be included is set out in Chapter 5 of document 7, in addition you might want to consider adding some of the following: Details of the Affected Properties possibly including drawings Service level agreements(slas) Asset Registers Risk Register TUPE information Low Service Damages Schedule (if option X17 is selected) there is a tendency in some larger contracts to have fairly complex pain/gain mechanisms that penalise the Contractor for poor performance issues. If the requirements cannot be adequately captured in the Service Level Table it could be written into the Service Information and could also be dealt with as a Z clause Historic information related to the Services and/or Affected Properties, which would assist bidders to price the services The language of this contract: Usually English The law of the contract: Will depend on the location of the Affected Property. The period for reply: (see TSC clause 13.3) weeks. 5

Annex A Contract Data (continued) 3. Time The starting date: see TSC clause 30.1. The service period: see TSC clause 30.1. 5. Payment The assessment interval: This is the interval between interim payments, usually monthly or 4-weekly. The currency of this contract: Usually GBP (pounds sterling). The interest rate is:...% per annum express as x% above the base lending rate of the Bank of England. 8. Risks and insurance Complete this section with realistic requirements. Place the insurance and indemnity limits too high and it will be reflected in the tender prices. This document was produced by the British Institute of Facilities Management (BIFM) and the BIFM Procurement Special Interest Group (SIG). Further information on the Procurement Special Interest Group can be found at: www.bifm.org.uk/procurement *While all due care is taken in writing and producing this guidance note, BIFM does not accept any liability for the accuracy of the contents or any opinions expressed herein. 6

About BIFM The British Institute of Facilities Management (BIFM) is the professional body for Facilities Management (FM). Founded in 1993, we promote excellence in facilities management for the benefit of practitioners, the economy and society. Supporting and representing over 15,500 members around the world, both individual FM professionals and organisations, and thousands more through qualifications and training. We promote and embed professional standards in facilities management. Committed to advancing the facilities management profession we provide a suite of membership, qualifications, training and networking services designed to support facilities management practitioners in performing to the best of their ability. British Institute of Facilities Management Number One Building The Causeway Bishop s Stortford Hertfordshire CM23 2ER T: +44(0)1279 712 620 E: info@bifm.org.uk www.bifm.org.uk