Determine from the NEC contract, the requirements for valuation of the works in the event of termination and provide a narrative on the process that

Assessment Criteria and Grading Sheet

No.

Learning Outcomes

Weight (%)

Marks Awarded (%)

1

Task 1

Determine from the NEC contract the requirements for valuation of the works in the event of termination and provide a narrative on the process that is to be followed referring to the P procedures and R clauses (350 words)

10%

2

Task 2

The termination of the contract is valid, and you do not to consider the merits of it, you must however, provide your

client with a proposed methodology for addressing the termination costs premised (250 words)

10%

3

Task 3

Following the initial referral to adjudication it is MRU’s position that no/little money arises due to the failings in the substantiation provided. The Adjudicator agreed. You are engaged to provide an independent opinion on the validity of

this statement. You are to agree or disagree with the report of the MRU expert and provide reasons thereof (250 words)

10%

4

Task 4

Having decided that you can support the client’s claim you are tasked with responding to the submissions of the MRU expert

in detail determining their credibility and rebutting them with points of law and/or authority (900 words)

25%

5

Task 5

You must respond to and rebut this statement in your report

to the client and consider how the valuation should be provided (500 words)

20%

6

Task 6

You are tasked with providing your client with a conclusion on the rebuttal, your request for evidence and the correct

method of calculating entitlement (250 words)

15%

7

Task 7

Provide advice to your client as to the merits and entitlement of the matter, you can make assumptions as to entitlement as you deem appropriate. However, the client is concerned that in the event of a positive award, MRU will not pay and wonders if this is all worth the effort? Advise CBL of their

rights to secure the award (or not) and ensure payment thereafter. (250 words)

10%

TOTAL

100%

ASSIGNMENT

Scenario

You are engaged by Corn Balls Ltd (“CBL”) from the UK to act as their Quantum Expert in a matter that they have with the principal Contractor, Mines R Us Ltd from Spain, in the construction of new facilities at a mine in Kenya.

The mine was constructed under the NEC3 Engineering & Construction Contract, June 2005 (with amendments June 2006), main Option A (Priced Contract with activity schedule).

The contract was terminated by Mines R Us Ltd, and they have valued the amounts outstanding at zero.

Corn Balls Ltd have valued the amount due on termination as R44 328 533.54.

Corn Balls Ltd entered into adjudication (as per the contract provisions) and the Adjudicator concluded that they had failed to bring forward one single jot of evidence and decided that zero should be awarded.

The adjudicator relied on the report in contravention of the Mines R Us expert who rebutted all of the claims made by Corn Balls Ltd.

Unfortunately, in the adjudication Corn Balls Ltd did not use a Quantum expert but in referring the matter to arbitration you are now engaged.

The expert for Mines R Us report rebutted each and every claim, this is included as attachment 01.

Your client wants to know what to supply in support of evidence and needs your guidance. The client relies on you to rebut the failure to bring forward one single jot of evidence

Task 1

Determine from the NEC contract, the requirements for valuation of the works in the event of termination and provide a narrative on the process that is to be followed referring to the P procedures and R clauses (See Clause 90.2 from NEC3 contract). (350 words)

The particulars of contract are as follows:

Task 2

a. On 28 June 2017, CBL and MRU entered into a sub-contract (“the Contract”) for the execution of Works which included the modification of the existing tippler system, new conveyors, transfer houses, modifications of existing conveyors and infrastructure.

THE CONTRACT REQUIREMENTS

To the extent that the Contract is an NEC3 Engineering & Construction Contract, June 2005 (with amendments June 2006), main Option A (Priced Contract with activity schedule) with various secondary Options and as amended by additional Z clauses, this provides for the methodology of evaluation.

The termination of the contract is valid, and you do not to consider the merits of it, you must however, provide your client with a proposed methodology for addressing the termination costs premised on; (250 words)On 26 July 2019, MRU issued a termination notice in accordance with clause 91.5 of the Contract.On 28 November 2019, CBL provided MRU with its final assessment of the amount due on termination.On 14 October 2020, CBL provided MRU with a ‘full’ breakdown of the amount claimed in the sum of R44 328 533.54.

Task 3

Following the initial referral to adjudication it is MRU’s position that no/little money arises due to the failings in the substantiation provided. The Adjudicator agreed. You are engaged to provide an independent opinion on the validity of this statement. You are to agree or disagree with the report of the MRU expert and provide reasons thereof. (250 words)

Task 4

Having decided that you can support the client’s claim you are tasked with responding to the submissions of the MRU expert in detail determining their credibility and rebutting them with points of law and/or authority. (900 words)

The focus of your response is to be on the claimed sums below. BASIS OF CLAIM. The summary of the amounts subjected to further evidential burden are below and you should refer to the MRU’s commentary on each (Please see report example provided with module 3 Lecture 7 that may assist you):

Item

Claim Description

Amount Claimed

1.0

Assessment of work done under Certificate 19

R5,503,812

2.0

Open & Active Compensation Events.

R23,196,655

2.1

CE007: Spike rollers

R825,076

2.2

CE009 Rev 1: New specifications 10 galvanizing and painting

of hand railings & stanchions guards, crawl beams

R821,549

2.3

CE013 Rev 1: Additional signals on conveyor system

R96,360

2.4

CE014 Rev 3: Updated Ventilation fans and starters

R350,798

2.5

CE017: Interim change to completion date to 02 September 2018

R13,771,321

2.6

CE022 Rev 1: Cancellation of Shutdown (up to April 2019) provisional

R7,331,551

3.0

CE027: Subcontractor’s costs for the Termination

(including its Sub-Subcontractors)

R9,146,635

4.0

Previously part of the items certified under certificates 4 and 8.

R6,370,348

4.1

Omitted from the total in payment certificate 4

R4,888,726

4.2

Omitted from the total in payment certificate 8

R1,481,622

Total

R44,217,450

Task 5

You must respond to and rebut this statement in your report to the client and consider how the valuation should be provided (in the primary and secondary position?); (500 words)

‘The issue of whether a compensation event should be calculated by reference to forecast costs or actual costs in an NEC3 contract was referred to the court for determination in a 2017 court case. Although the case related to a dispute under the NEC3 Professional Services Contract and was heard in the Northern Ireland Queen’s Bench Division (Commercial) the decision may be of some benefit to the current disputes, if not authority. The decision was supportive of the use of actual costs to assess the effect of compensation events.

Paragraph 35 of the Decision states:

‘Evidence, from time sheets and other material, of what the consultant actually did in that period, particularly with reference to the change in instructions, is not only relevant evidence but clearly the best evidence to assist the court in calculating the compensation to which the consultant is entitled.’

Mr. Bond says in his report, ’In my experience it is standard industry practice to support claims for costs of personnel or labour with breakdowns of the time expended (with timesheets that reference the activity undertaken) and hourly rates (supported by payroll information). It is also standard industry practice to support amounts claimed for materials or equipment supplied with invoices from suppliers.

Task 6

You are tasked with providing your client with a conclusion on the rebuttal, your request for evidence and the correct method of calculating entitlement (the primary and/or secondary position) (250 words)

In your conclusion consider the following.

You are not so sure on the concept of standard industry practice as this would result in all variations being valued to cost whereas the mechanisms of the traditional contract provide for the use of rates.Is this a matter for further debate in the submissions given that the NEC is an Option A Contract?MRU’s expert’s further point, ‘It is also consistent with the breakdowns and substantiation required by the SSCC when submitting and assessing Defined Cost’ has some place within the NEC Option A but it is not to detract from the efficacy with which the NEC is to be used.Further discussion on this alternative form of valuation should be robustly contended in the ensuing Referral, the conclusion of this aspect may well be MRU’s willingness to accept the NEC priced CE when confronted by higher actual costs having been incurred.

Task 7

Provide advice to your client as to the merits and entitlement of the matter, you can make assumptions as to entitlement as you deem appropriate. However, the client is concerned that in the event of a positive award, MRU will not pay and wonders if this is all worth the effort? Advise CBL of their rights to secure the award (or not) and ensure payment thereafter. (250 words)

Please attachment 1 – Expert Report of 21 January 2021 – Note that the appendices to this report have not been included. The figures and amounts have been included in the contents of the report.