Licence expires 17 April 2009

Guidance notes and flow charts for the

Professional Services Contract

This contract should be used for the appointment of a supplier to provide
professional services

An NEC document

June 2005
(with amendments June 2006)

OGC endorsement of NEC3

OGC advises public sector procurers that the form of contract used has to be selected
according to the objectives of the project, aiming to satisfy the
Achieving Excellence in Construction (AEC) principles.

This edition of the NEC (NEC3) complies fully with the AEC principles. OGC recommends
the use of NEC3 by public sector construction procurers on their construction projects.
NEC is a division of Thomas Telford Ltd, which is a wholly owned subsidiary of
the Institution of Civil Engineers (ICE), the owner and developer of the NEC.
The NEC is a family of standard contracts, each of which has these
characteristics:
. Its use stimulates good management of the relationship between the two
parties to the contract and, hence, of the work included in the contract.
. It can be used in a wide variety of commercial situations, for a wide
variety of types of work and in any location.
. It is a clear and simple document – using language and a structure
which are straightforward and easily understood.
NEC Professional Services Contract is one of the NEC family and is consistent
with all other NEC3 documents. This document comprises the Guidance Notes
and Flow Charts for the NEC Professional Services Contract.

ISBN (complete box set) 0 7277 3382 6

ISBN (Professional Services Contract) 0 7277 3370 2
ISBN (this document) 0 7277 3371 0
First edition 1994
Second edition 1998
Third edition June 2005

Cover photo, Golden Jubilee Bridge, courtesy of City of Westminster

9876543
British Library Cataloguing in Publication Data for this publication is available
from the British Library.

# Copyright nec 2005

All rights, including translation, reserved. Except as permitted by the

Copyright, Designs and Patents Act 1988, no part of this publication may be
reproduced, stored in a retrieval system or transmitted in any form or by any
means, electronic, mechanical, photocopying, recording or otherwise, without
the prior written permission of the NEC Director, NEC, Thomas Telford Ltd,
1 Heron Quay, London E14 4JD.

Typeset by Academic + Technical, Bristol

Printed and bound in Great Britain by Bell & Bain Limited, Glasgow, UK
CONTENTS

Acknowledgements iv

Foreword v

Amendments vi

Introduction 1

Contract strategy The main Options 2

Dispute resolution Options 4
The secondary Options 12

Basis of the appointment 24

of a Consultant

Explanatory notes 27

Flow charts 53

Appendix 1 Sample form of agreement 144

Appendix 2 Contract Data – worked example 146

Appendix 3 Adaptation for subcontracts where a Contractor is employed under 151

the ECC and wishes to appoint a Consultant under the PSC

Appendix 4 Adaptation for subcontracts where a Consultant is employed under 153

the PSC and wishes to appoint a Subconsultant under the PSC
ACKNOWLEDGEMENTS

The first edition of the NEC Professional Services Contract was drafted by
Peter Higgins working on behalf of the Institution of Civil Engineers, with the
assistance of Frank Griffiths of the Chartered Institute of Purchasing and
Supply and Michael Coleman of the Association of Project Managers. Dr
Martin Barnes then of Coopers and Lybrand advised on the co-ordination of
the contract with the NEC.
For the second edition of the NEC Professional Services Contract the guidance
notes were produced by the Institution of Civil Engineers through its NEC
Panel and were mainly drafted by Bill Weddell and Tom Nicholson, with the
assistance of Peter Higgins, as members of the NEC Panel. The flow charts
were produced by John Perry, Ross Hayes and colleagues at the University of
Birmingham.
For the third edition of the NEC Professional Services Contract these Guidance
Notes were produced by the Institution of Civil Engineers and were mainly
drafted by Bill Weddell with the assistance of members of the NEC Panel. The
Flow Charts were produced by Robert Gerrard with assistance from Ross Hayes
and Tom Nicholson.
The original NEC was designed and drafted by Dr Martin Barnes then of
Coopers and Lybrand with the assistance of Professor J. G. Perry then of the
University of Birmingham, T. W. Weddell then of Travers Morgan Management,
T. H. Nicholson, Consultant to the Institution of Civil Engineers, A. Norman
then of the University of Manchester Institute of Science and Technology and
P. A. Baird, then Corporate Contracts Consultant, Eskom, South Africa.
The members of the NEC Panel are:
P. Higgins, BSc, CEng, FICE, FCIArb (Chairman)
P. A. Baird, BSc, CEng, FICE, M(SA)ICE, MAPM
M. Barnes, BSc(Eng), PhD, FREng, FICE, FCIOB, CCMI, ACIArb, MBCS,
FInstCES, FAPM
A. J. Bates, FRICS, MInstCES
A. J. M. Blackler, BA, LLB(Cantab), MCIArb
P. T. Cousins, BEng(Tech), DipArb, CEng, MICE, MCIArb, MCMI
L. T. Eames, BSc, FRICS, FCIOB
F. Forward, BA(Hons), DipArch, MSc(Const Law), RIBA, FCIArb
Professor J. G. Perry, MEng, PhD, CEng, FICE, MAPM
N. C. Shaw, FCIPS, CEng, MIMechE
T. W. Weddell, BSc, CEng, DIC, FICE, FIStructE, ACIArb
NEC Consultant:
R. A. Gerrard, BSc(Hons), MRICS, FCIArb, FInstCES
Secretariat:
A. Cole, LLB, LLM, BL
J. M. Hawkins, BA(Hons), MSc
F. N. Vernon (Technical Adviser), BSc, CEng, MICE
FOREWORD

The first edition of the Professional Services Contract (PSC) was published in
1994 as part of the New Engineering Contract (NEC) family of contracts. It
was designed for the purpose of appointing professionals to carry out various
roles in the NEC contracts (Project Manager, Supervisor, designers) and for
the wider use of appointing professionals where the NEC was not used, or
even when no construction work was required.
As Employers have begun to appreciate the benefits of the PSC and the NEC
principles on which it has been drafted, they are using it in many different
circumstances. Its structure permits wide flexibility in the choice of different
options of payment to the Consultant, as well as in the allocation of risk
between the Parties. Its incorporation of established management procedures
has also been seen to be of considerable benefit.
With the increasing use of partnering arrangements, Employers have sought
conditions of contract which are compatible with partnering. For the
appointment of professionals, the PSC with its non-adversarial approach, has
been seen to be well suited for this purpose. It is also anticipated that wider
use of the PSC will be made by local authorities in appointing individuals and
firms to provide professional services previously done in-house.
As a result of experience in using the PSC, and changes in the construction
industry in the wake of the Latham Report, published in 1994, it became
evident that various amendments were required and that several
improvements to the PSC could be made. Accordingly the second edition was
produced under the supervision of the NEC Panel. Flow charts which were
used to check the drafting of clauses were also included. The Panel also had
the benefit of comments of the Construction Industry Council’s Task Force,
which was established to investigate harmonisation of conditions of
engagement (1994–5).
As in the first edition, the method of resolving disputes is adjudication. Since
publication of the first edition, the UK Parliament has provided a right to
adjudication for any disputing party in construction contracts (including
professional services agreements) in the form of the UK Housing Grants,
Construction and Regeneration Act 1996. Since the PSC, like all other
standard forms of contract, does not comply with the Act, a secondary Option
Y(UK)2 and Option W2 have been included for use where the Act applies to
UK contracts.
The third edition of the Professional Services Contract has been produced to
incorporate suggestions made by users of the second edition, and also other
changes which reflect recent developments in the construction industry.
AMENDMENTS JUNE 2006

The following amendments have been made to the June 2005 edition.

Page Clause Line

34 32.1 4 deleted: ‘and early warning

matters’

79 Flow chart 32, Box 32.2 deleted: ‘and of notified early

warning matters’ and correct
heading to ‘32.1’

85 Flow chart 50, Box 50.4 1 ‘of Time Charge made by the
Option C Consultant’ replaced by
‘for staff whose staff rate is
stated in the Contract Data’
4 ‘him’ replaced by ‘the Consultant’
Flow chart 50, Box 50.5 new box inserted with text for
Option E additional sub-clause 50.5
‘Payments for staff whose
staff rate is stated in the Contract
Data in a currency other than the
currency of this contract are
included in the amount due as
payments to be made to the
Consultant in the same currency’
Flow chart 50, Box 50.6 new box inserted with text for
Option G additional sub-clause 50.6
‘Payments for
. staff whose staff rate in the
Contract Data or
. items whose prices in the Task
Schedule are stated
in a currency other than the
currency of this contract are
included in the amount due as
payments to be made to the
Consultant in the same currency’

109 Flow chart 70, Box 70.4 inserted ‘otherwise’ after ‘stated’

147 Worked example, 1 4 added before full stop: ‘(with

General amendments June 2006)’

148 Worked example, 3 new second bullet added:

Time . ‘the Consultant submits revised
programme at intervals no longer
than 5 weeks.’
...........

150 Worked example 35 new bullet added:

. ‘the tendered total of the Prices is
£93,400 (ninety three
.....................................................................
thousand four hundred pounds
.....................................................................
sterling)’
.....................................................................
 Guidance Notes for the Professional Services Contract

INTRODUCTION

The NEC Professional Services Contract (PSC) has been developed as part of
the New Engineering Contract (NEC) system of contract documents. The PSC
has been drafted with the same objectives as the NEC and has adopted
clauses from the NEC Engineering and Construction Contract (ECC) where
they were considered to be appropriate for the appointment of a professional
organisation or person.
The purpose of the document is to form a standard contract for the appoint-
ment of consultants providing professional services to be used in engineering
and construction generally. It can be used for the appointment of a project
manager or a supervisor under an NEC contract and also for the appointment
of persons fulfilling other roles associated with construction contracts (such
as a designer responsible either directly to the Employer or to the Contractor
in a construction contract) or for appointments of consultants in advance of
construction (e.g. appointment of a project manager or designer during the
early development stages of a project).
Its use however is not limited to projects where other NEC contracts are being
used. It can be used where no construction works are to take place or where
other forms of contract for construction are being used. When the PSC is used
by a contractor (for instance, to appoint a designer as a subcontractor in a
‘design and construct’ contract) the contractor has the role of ‘Employer’ in
the PSC. In such circumstances, the PSC can be used as a subcontract (ECC
clause 26) with appropriate amendments. (See Appendices 3 and 4.)
The contract has been drafted as a ‘shell’ contract which requires important
information to be provided separately. The most critical document to be pro-
vided is the Scope. This contains the detailed requirements of the Employer
and is frequently referred to within the PSC.
The purpose of these guidance notes is to explain the reasons for some of the
provisions in the PSC and to provide guidance on how to use it. Where clauses
are similar to those in the ECC, reference may be made to the ECC guidance
notes for further explanation. The flow charts show the procedural logic on
which the PSC is based and are published in this volume for reference.
The NEC conventions of using italics for terms which are identified in the Con-
tract Data and capital initials for terms defined in the PSC have been used in
these guidance notes. Neither the guidance notes nor the flow charts are
contract documents, nor are they part of the PSC. They should not be used for
legal interpretation of the meaning of the PSC.

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CONTRACT STRATEGY

The Employer chooses the contract strategy. This determines the specific
professional services to be carried out, the basis of payment and the balance
of risks between Employer and Consultant. The decision on contract strategy
will identify the options from the Professional Services Contract to be chosen,
the need for other provisions, and some of the material to appear in the
Scope.

The main Options There are four types of payment mechanism available through the main Options.
Option A Priced contract with activity schedule
Option C Target contract
Option E Time based contract
Option G Term contract
For a particular contract, one main Option must be chosen. The clauses from
the selected main Option are combined with the core clauses, the appropriate
dispute resolution Option (W1 or W2), and the clauses from the selected
secondary Options to provide a complete contract.
The main Options provide different allocations of risk between the Employer
and the Consultant and use different arrangements for payment to the Consul-
tant.
. Option A is a lump sum priced contract in which the risks of being able to
Provide the Services at the agreed prices in the activity schedule are
largely borne by the Consultant.
. Option C is a target contract in which the financial risks are shared by
the Employer and the Consultant in agreed proportions.
. Option E is a type of cost reimbursable contract in which the financial
risk is largely borne by the Employer.
. Option G is a term contract in which various items of work are priced or
stated to be on a time basis. Thus the risk of being able to perform the
instructed Tasks at the agreed prices or staff rates is largely borne by the
Consultant, whilst the Employer retains control over the individual Tasks
to be carried out.
The ad valorem or percentage fee type of contract has not been included as
an option. Under this arrangement, payments to the Consultant are an agreed
percentage of the works construction cost. This implies that the cost of the
Consultant’s services is proportional to the cost of constructing the works. Its
merits were carefully considered, but rejected for the following reasons.
. The Consultant has no incentive to produce an economical design or
other service.
. The cost of construction is largely a function of the market and bears no
relation to the cost of professional services.
. The final cost of construction (and therefore the final fee) is not estab-
lished until after construction is complete, whilst most professional costs
are expended much earlier and even before construction starts.
. The effect of variations to the Scope on the payments due to the Consul-
tant are difficult to assess.
Option A: Priced contract Under this contract the Consultant is paid a lump sum for the services. An
with activity schedule activity schedule is a list of the activities which the Consultant expects to carry
out in Providing the Services. When it has been prepared and priced by the
Consultant, the lump sum for each activity is the price to be paid by the
Employer for that activity. The total of these prices is the Consultant’s lump
sum price for providing the whole of the services.

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 Contract strategy

Option C: Target contract Target contracts are sometimes used where the extent of work to be done is
not fully defined or where anticipated risks are greater. Although used
frequently in construction contracts, they have had limited application in
consultancy contracts. The financial risk is shared between the Consultant and
the Employer in the following way.
. The Consultant tenders a target price in the form of a priced activity sche-
dule. The target price is the Consultant’s estimate of Providing the
Services and is defined as the total of the Prices.
. The Consultant tenders his staff rates.
. During the course of the contract the Consultant is paid the Time Charge,
which is the staff time for the services carried out priced at the appro-
priate staff rates. This is defined as the Price for Services Provided to
Date
. At the end of the contract, if the final Price for Services Provided to Date
is less than the final total of the Prices, the Consultant is paid his share
of the difference according to the formula stated in the Contract Data. If
the final Price for Services Provided to Date is greater than the final total
of the Prices, the Consultant pays his share of the difference.
The Scope must be sufficiently descriptive to enable the Consultant to price
the services in his tender.
The target price set at the Contract Date may change during the contract as
the compensation events procedure is applied to changes in the Scope and
other compensation events.

Option E: Time based This is a cost reimbursable type of contract which should be used when the
contract services cannot be defined sufficiently accurately for a lump sum to be
quoted. In such circumstances the Consultant cannot be expected to take cost
risks other than those which the control of his employees and other resources
entails. He carries minimum risk and is paid the Time Charge (as defined by
the staff rates stated in the contract).

Option G: Term contract This contract provides for the appointment of a Consultant for a term (an
agreed period of time). The Consultant prices a task schedule prepared in
advance by the Employer as well as providing staff rates for different grades
of staff. Each price on the task schedule is a lump sum for that particular
item. Some items on the task schedule may be stated to be carried out on a
time basis rather than for a lump sum price.
When the Employer requires specific services to be carried out by the Consul-
tant he identifies a proposed Task by selecting individual items from the task
schedule. Any items not on the task schedule are notified as compensation
events and the compensation event assessment procedure is used to deter-
mine how each item is to be paid for. The Consultant carries out each Task
only when he has been instructed to do so by the Employer.

Dispute resolution Options There are two procedures included for the resolution of disputes.
. Option W1
. Option W2
One of these must be selected and the choice depends on whether the UK
Housing Grants, Construction and Regeneration Act 1996 applies to the
contract. Under this Act, a construction contract includes ‘an agreement –
a. to do architectural, design or surveying work, or
b. to provide advice on building, engineering, interior or exterior decoration
or on the laying-out of landscape,
in relation to construction operations’.

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 Guidance notes and flow charts for the Professional Services Contract

Thus, many contracts in the United Kingdom for providing professional

services are subject to the Act. Option W2 has been drafted as a dispute reso-
lution procedure which complies with the Act. Option W1 should be selected
for all non-UK contracts and contracts which are not construction contracts as
defined in the Act. The selection of Option W1 or Option W2 should be indi-
cated in part one of the Contract Data.

Dispute resolution This Option should be selected whenever the United Kingdom Housing Grants,
Option W1 Construction and Regeneration Act 1996 does not apply to the contract in
question.
It is the intention that disputes should be referred to and resolved by the Adju-
dicator. If either Party is dissatisfied with the Adjudicator’s decision and
wishes to pursue the matter further, he is free to refer it to arbitration or the
courts, whichever is identified as the tribunal in the Contract Data. The Parties
may deal with the dispute by other means if they agree to do so. The key
periods affecting dispute procedures are illustrated in Figures 1, 2 and 3
which should be referred to in conjunction with the notes.

Dispute resolution W1
W1.1 Disputes are to be dealt with by adjudication in the first instance.

The Adjudicator W1.2 The person appointed as Adjudicator is named in part one of the Contract
(1) Data. He is to be appointed jointly by the Parties using the NEC Adjudicator’s
Contract (one of the documents of the NEC family of standard contracts). His
fees and expenses are shared equally between the Parties to a dispute,
regardless of his decision, unless otherwise agreed.
The Adjudicator should be a person with experience of the kind of services
required of the Consultant and who occupies or has occupied a senior position
dealing with similar dispute problems. He should be able to understand the
point of view of both Employer and Consultant, to judge the required level of
skill and care and be able to act impartially.
(2) The obligation of impartiality is fundamental to the role of the Adjudicator. The
duty is repeated in the NEC Adjudicator’s Contract. The Adjudicator’s status is
different from that of an arbitrator.
(3) The Adjudicator is appointed jointly by the Employer and the Consultant for the
contract. The Employer should insert his choice of Adjudicator in part one of
the Contract Data. If the Consultant does not agree with the choice, a suitable
person will be the subject of discussion and agreement before the Contract
Date. Alternatively, the Employer may propose a list of acceptable names, and
the Consultant may be asked to select one of them to be Adjudicator. Some
Employers may prefer Consultants to propose suitable names.
Where an Adjudicator has not been named in the Contract Data, this
subclause describes the procedure for appointing one. The procedure also
applies where a replacement adjudicator is needed in the event that the
named Adjudicator has resigned or is unable to act. In the UK there are
several Adjudicator nominating bodies who are able to appoint a suitable
person to act as Adjudicator.
(4) Any existing disputes on which the original Adjudicator has not made a deci-
sion are automatically referred to the replacement adjudicator. It is important
that the Parties ensure that the replacement adjudicator receives all the rele-
vant information. The time stated in the contract for supply of information
then runs from the time of appointment of the replacement adjudicator.
If a need arises for a temporary replacement adjudicator (e.g. during the Adju-
dicator’s holiday), the Parties should agree a temporary appointment.

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 Contract strategy

Figure 1. Steps in adjudication under Option W1 for a disputed action or lack of action on the part of the Employer.

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 Guidance notes and flow charts for the Professional Services Contract

Figure 2. Steps in adjudication under Option W1 for a disputed about a quotation for a compensation event which
is treated as having been accepted.

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 Contract strategy

Figure 3. Steps in adjudication under Option W1 for any other disputed matter.

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 Guidance notes and flow charts for the Professional Services Contract

(5) It is important that the person appointed as Adjudicator is protected from

legal actions by the Parties and others.

The adjudication W1.3 This subclause requires that any of the four categories of dispute listed in the
(1) Adjudication Table is referred to the Adjudicator. Time limits are provided for
notification of the dispute to the other Party and for reference to the Adjudi-
cator. The procedures for the four categories of dispute are shown diagram-
matically in Figures 1, 2 and 3.
(2) The Parties are barred from referring a dispute to the Adjudicator or the
tribunal outside the stated time limits.
(3) It is important that the Adjudicator has all the relevant information to enable
him to reach a decision. The Parties are required to submit all information
supporting their case within four weeks of the referral to the Adjudicator, or
greater agreed period.
(4a) Where a dispute which affects services being carried out by a Subconsultant
arises and which may constitute a dispute between the Consultant and
Subconsultant as well as between the Consultant and the Employer, there is
provision for the matter to be resolved between the three Parties by the Adjudi-
cator named in this contract. This prevents the dispute being dealt with by
different adjudicators who may make different decisions. This does mean,
however, that the adjudicator named in the subcontract will not be used for
the dispute under that subcontract, and the Subconsultant will be obliged to
use an Adjudicator he has not previously agreed to. It would be helpful if the
Adjudicator’s name is included in the subconsultancy contract documents so
that Subconsultants have prior knowledge of the identity of the Adjudicator in
the main contract.
(4b) This subclause applies only when the PSC is used as a subcontract. (See also
Appendices 3 and 4.)
(5) Although the Adjudicator is empowered to review and revise any action or inac-
tion of the Employer and alter a quotation treated as having been accepted,
the Parties are not permitted to widen the dispute to include other disputes
which might have occurred after the original submission. The Adjudicator has
wide powers under this subclause. He may seek information himself in addi-
tion to information submitted by the Parties.
(6) It is important that copies of the communications sent to the Adjudicator are
sent to the other Party so that each Party is aware of the other Party’s case.
(7), (8) The Adjudicator in notifying his decision is required to state reasons for his
& (9) decision and also to include his assessment of additional cost and delay as
appropriate. Pending settlement of the dispute, the Parties proceed with their
duties under the contract.
In complex disputes and for other valid reasons the Adjudicator may require a
period greater than the four weeks stated. An extension of the period requires
the agreement of the Parties. If such agreement is not forthcoming and the
Adjudicator cannot or for some other reason does not notify his decision within
the four week period, either Party may refer the dispute to the tribunal under
subclause W1.4(3).
(10) A valid decision by the Adjudicator is enforceable in the courts. The decision is
also final unless within four weeks the dissatisfied Party has notified his inten-
tion to refer the dispute to the tribunal (subclause W1.4(2)).

Review by the tribunal W1.4 Initially the Employer, and by acceptance also the Consultant and Sub-
(1) consultant, will select the method of final and binding dispute resolution. It
can be either arbitration or litigation in the appropriate court.
If arbitration is chosen, the entry in the Contract Data against the tribunal is
‘arbitration’ together with the arbitration procedure and other details proposed
for the conduct of the arbitration (subclause W1.4(5)).

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 Contract strategy

If litigation is chosen, appropriate entries must be made for the jurisdiction

chosen. In England and Wales, the tribunal might be ‘trial by a judge sitting
as such in the High Court of Justice in London’. Advice should be taken,
however, on the appropriate entry to provide for the jurisdiction intended.
(2) A dispute cannot be referred to arbitration or litigation unless it has been
referred to the Adjudicator. A time limit is given for notification of intention to
refer the matter to the tribunal, after which the Adjudicator’s decision will be
final and no further notification of intended reference to the tribunal may be
made. If the adjudication involves three Parties – i.e. a subconsultant is joined
in the adjudication – the dispute resolution by the tribunal will also involve all
three parties.
(3) A dispute may be referred to the tribunal where the Adjudicator has failed to
notify his decision in time, as well as where a dissatisfied Party wishes to take
the matter further.

Dispute resolution This Option should be selected whenever the United Kingdom Housing Grants,
Option W2 Construction and Regeneration Act 1996 (the Act) applies to the contract in
question.
It is the intention that disputes should be referred to and resolved by the
Adjudicator. If either Party is dissatisfied with the Adjudicator’s decision and
wishes to pursue the matter further, he is free to refer it to arbitration or the
courts, whichever is identified as the tribunal in the Contract Data. The Parties
may deal with the dispute by other means if they agree to do so. The key
periods affecting dispute procedures are illustrated in Figure 4 which should
be referred to in conjunction with these notes.

Dispute resolution W2
W2.1 Disputes are to be dealt with by adjudication in the first instance. The phrase
(1) ‘at any time’ is a requirement of the Act. The only limit to this time is the
limitation period for the contract. This means that disputes arising several
years after the Consultant has completed his work may be submitted to the
Adjudicator.
(2) Generally time periods in the PSC are stated in weeks. In Option W2 and the
Act, time periods are in days, which means that ‘day’ must be defined. The
definition in this subclause is as in the Act. Days include Saturdays and
Sundays.

The Adjudicator W2.2 The person appointed as Adjudicator is named in part one of the Contract
(1) Data. He is to be appointed jointly by the Parties using the NEC Adjudicator’s
Contract (one of the NEC family of standard contracts). His fees are shared
equally between the Parties to a dispute, regardless of his decision, unless
otherwise agreed.
The Adjudicator should be a person with experience of the kind of services
required of the Consultant and who occupies or has occupied a senior position
dealing with similar dispute problems. He should be able to understand the
point of view of both Employer and Consultant, to judge the required level of
competence and be able to act impartially.
(2) The obligation of impartiality is fundamental to the role of Adjudicator. The
duty is repeated in the NEC Adjudicator’s Contract. The Adjudicator’s status is
different from that of an arbitrator.
(3) The Adjudicator is appointed jointly by the Employer and the Consultant for the
contract. The Employer should insert his choice of Adjudicator in part one of
the Contract Data. If the Consultant does not agree with the choice, a suitable
person will be the subject of discussion and agreement before the Contract
Date. Alternatively, the Employer may propose a list of acceptable names and
the Consultant may be asked to select one of them to be Adjudicator. Some
Employers may prefer Consultants to propose suitable names.

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 Guidance notes and flow charts for the Professional Services Contract

Figure 4. Steps in adjudication under Option W2

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 Contract strategy

Where an Adjudicator has not been named in the Contract Data, this
subclause describes the procedure for appointing one. The procedure also
applies where a replacement adjudicator is needed in the event that the
named Adjudicator is unable to act. In the UK there are several Adjudicator
nominating bodies who are able to appoint a suitable person as Adjudicator.
(4) Any existing disputes on which the original Adjudicator has not made a deci-
sion are automatically referred to the replacement adjudicator. It is important
that the Parties ensure that the replacement adjudicator receives all relevant
information. The time stated in the contract for supply of information then
runs from the time of appointment of the replacement adjudicator. If a need
arises for a temporary replacement adjudicator, e.g. during the Adjudicator’s
holiday, the Parties should agree a temporary appointment.
(5) It is important that the person appointed as Adjudicator is protected from
legal actions by the Parties and others. It is also a requirement of the Act.

The adjudication W2.3 The Party wishing to refer the dispute for adjudication initiates the procedure
(1) by giving a notice to the other Party, with a copy to the Adjudicator. The pro-
cedure also confirms or otherwise whether the Adjudicator is to proceed with
the adjudication.
The time periods in this subclause and subclause W2.2(3) are designed to
ensure that an adjudicator is appointed within seven days as required by the
Act.
(2) It is important that the Adjudicator has all the relevant information to enable
him to reach his decision. The Parties are required to submit all information
supporting their case within fourteen days of the referral of the dispute to the
Adjudicator or greater agreed period.
(3a) Where a dispute which affects services being carried out by a Subconsultant
arises and which may constitute a dispute between the Consultant and the
Subconsultant as well as between the Consultant and the Employer, there is
provision for the matter to be resolved between the three Parties by the Adjudi-
cator named in this contract. This prevents the dispute being dealt with by
different adjudicators who may make different decisions. This does mean
however that the adjudicator named in the subcontract will not be used for
the dispute under that subcontract, and the Subconsultant will be obliged to
use an Adjudicator he has not previously agreed to. It would be helpful if the
Adjudicator’s name is included in the subconsultancy contract documents so
that Subconsultants have prior knowledge of the identity of the Adjudicator in
the main contract.
Because of the timing requirements of the Act, this process will only be
practical with the agreement of the Subconsultant.
(3b) This subclause applies only where the PSC is used as a subcontract. (See
also Appendices 3 and 4.)
(4) Although the Adjudicator is empowered to review and revise any action or
inaction of the Employer and alter a quotation treated as having been
accepted, the Parties are not permitted unless agreed by the Parties and the
Adjudicator to widen the dispute to include other disputes which might have
occurred after the original submission. The Adjudicator has wide powers under
this subclause. He may seek information himself in addition to information
submitted by the Parties.
(5) It is important that any delay caused by a Party does not delay or stop the
adjudication. Thus, where a Party does not comply with the Adjudicator’s
instructions, the adjudication continues. This would also apply where a Party
refuses to take part in the adjudication.
(6) It is important that copies of the communications sent to the Adjudicator are
sent to the other Party so that each Party is aware of the other Party’s case.

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 Guidance notes and flow charts for the Professional Services Contract

(8) The Adjudicator in notifying his decision is required to state reasons for his
decision and also to include his assessment of additional cost and delay as
appropriate.
In complex disputes and for other valid reasons the Adjudicator may require a
period greater than the twenty-eight days stated. An extension of fourteen
days may be granted if the referring Party agrees, or other period if both
Parties agree.
(11) A valid decision by the Adjudicator is enforceable in the courts. The decision is
also final unless within four weeks the dissatisfied Party has notified his inten-
tion to refer the dispute to the tribunal under subclause W2.4(2).

Review by the tribunal W2.4 The Employer should insert in the Contact Data the tribunal that will decide a
(1) dispute if either Party does not accept the Adjudicator’s decision. The choice
will normally be either arbitration or the courts. An individual person should
not be named.
(3) The tribunal has wide powers to settle the dispute and is not tied to a decision
or action of the Employer. Referral of a dispute to the tribunal should not be
regarded as an appeal against the Adjudicator’s decision. Thus, the Parties
may rely on new evidence and submissions that were not put before the
Adjudicator.
(4) Standard arbitration procedures generally deal with appointment of arbitra-
tors, replacement arbitrators and time limits. Standard procedures for civil
engineering works in the UK include those published by the Institution of Civil
Engineers, and for building works those published by the Joint Contracts
Tribunal (JCT).

The secondary Options After deciding the main Option and the appropriate dispute resolution Option,
the Employer may choose any of the secondary Options.
Option X1 Price adjustment for inflation
Option X2 Changes in the law
Option X3 Multiple currencies (used only with Options A and G)
Option X4 Parent company guarantee
Option X5 Sectional Completion (not used with Option G)
Option X6 Bonus for early Completion (not used with Option G)
Option X7 Delay damages
Option X8 Collateral warranty agreements
Option X9 Transfer of rights
Option X10 Employer’s Agent
Option X11 Termination by the Employer
Option X12 Partnering
Option X13 Performance bond
Option X18 Limitation of liability
Option X20 Key Performance Indicators (not used with Option X12)
Option Y(UK)2 The Housing Grants, Construction and Regeneration Act
1996
Option Y(UK)3 The Contracts (Rights of Third Parties) Act 1999
Option Z Additional conditions of contract
Any combination of secondary Options may be used.

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 Contract strategy

Option X1: Price This Option should be used if the Employer decides to accept the risk of
adjustment for inflation inflation.
The price adjustment factor (PAF) is calculated on each anniversary of the
Contract Date (subclause X1.1) and is then used during the following year to
make adjustments for inflation.
The Employer decides which published index to use, e.g. the Retail Prices
Index, and enters this in part one of the Contract Data.
The Consultant’s staff rates stated in part two of the Contract Data may be
either
. fixed, and thus not variable with changes in salary actually paid to indivi-
duals or
. variable with changes in salary paid to individuals.

Fixed staff rates In all the main Options, a price adjustment factor is calculated as stated in
subclause X1.1. This factor is used for calculating the additional amount due
and adjustment of expenses in all main Options.
For target contracts (Option C), an amount for price adjustment is added to
the Prices (subclause X1.3) so that the total of the Prices can be fairly
compared with the final Price for Services Provided to Date (the Time Charge
using variable staff rates) for calculating the Consultant’s share.

Variable staff rates Different subclauses are used according to which main Option applies, as
follows.
Option A Subclauses X1.1 X1.2 X1.5 X1.6
Option C Subclauses X1.1 X1.3 X1.5 X1.6
Option E Subclauses X1.1 X1.6
Option G Subclauses X1.1 X1.4 X1.5 X1.6
For a priced contract using an activity schedule (Option A), an amount for
price adjustment is calculated as stated in subclauses X1.1 and X1.2. The
Time Charge to be used in the assessment of compensation events is
adjusted to the Contract Date using subclause X1.5 in order to maintain the
time basis of the Prices.
For target contracts (Option C), an amount for price adjustment is added to
the Prices (subclause X1.3) so that the total of the Prices can be fairly
compared with the final Price for Services Provided to Date (the Time Charge
using variable staff rates) for calculating the Consultant’s share. The Time
Charge to be used in the assessment of compensation events is adjusted to
the Contract Date using subclause X1.5.
For term contracts (Option G), a price adjustment is necessary only for the
lump sum items in the task schedule using subclause X1.4. The Time Charge
to be used in the assessment of compensation events (for the lump sum
items added to the task schedule under subclause 55.1) is adjusted to the
Contract Date using subclause X1.5.

Expenses For all the main Options (Options A, C, E and G), if the expenses are stated in
the Contract Data as fixed prices and are not adjustable for inflation, an
amount for expenses adjustment should be included in the amount due in
accordance with subclause X1.6.
Worked examples of the calculations of the amounts for price adjustment and
expenses adjustment are given in Table 1.

Option X2: Changes in X2.1 This Option reduces the effect on the Consultant’s costs and programme of
the law the risk of changes to the law of the project which occurs after the Contract
Date by making such a change a compensation event. Such changes can
have a dramatic effect on the Consultant’s costs and his liability to make
progress on the services.

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Guidance notes and flow charts for the Professional Services Contract
Table 1. Option X1: Price adjustment for inflation – worked examples
Contract 1st 2nd
Date anniversary anniversary

(i) Price adjustment


Index 100 105 110
(subclause X1.1)
PAF 0.0 0.05 0.10
(a) Fixed staff rates (Options A, C, E and G)
Change in PSPD NO £20,000 £20,000
Change in price adjustment amount (subclause X1.2) PRICE £20,000  0.05 ¼ £1,000 £20,000  0.10 ¼ £2,000
ADJUSTMENT
(b) Variable staff rates
Option A and Option G (lump sum items only)
Change in PSPD NO £20,000 £20,000
Change in price adjustment amount PRICE £20,000  0.05 ¼ £1,000 £20,000  0.10 ¼ £2,000
(Option A – subclause X1.2. Option G – ADJUSTMENT
subclause X1.4)
Staff rates for compensation event assessment NO Current staff rate  1.05 Current staff rate  1.10
(subclause X1.5) ADJUSTMENT
Option C
Change in PSPD NO £20,000 £20,000
Addition to Prices (subclause X1.3) ADJUSTMENT £20,000  0.05  1.05 £20,000  0.10 
¼ £952.38 1.10 ¼ £1,818.18
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Staff rates for compensation event assessment NO Current staff rate  1.05 Current staff rate  1.10
(subclause X1.5) ADJUSTMENT
(ii) Fixed expenses adjustment
Options A, C, E and G
Change in fixed expenses NO £2,000 £2,000
Change in expenses adjustment amount (subclause X1.6) EXPENSES £2,000  0.05 ¼ £100 £2,000  0.10 ¼ £200
ADJUSTMENT
 Contract strategy

The Employer should review the laws which could be relevant to the services
and identify those where he is prepared to carry the risk of changes as law of
the project in the Contract Data. These could be the law of the contract
(subclause 12.2), or the law of the country where the services are to be
provided, where the construction site is or where a major supplier is located.
For the purposes of this subclause, the law includes a national or state
statute, ordinance, decree, regulation (including building or safety regula-
tions), by-law of a local or other duly constituted authority and other delegated
legislation.
The subclause is reciprocal in the sense that it may result in either increased
or reduced payment to the Consultant.

Option X3: Multiple X3.1 This Option is used (in conjunction with main Options A and G only) when it is
currencies (used only with intended that payment to the Consultant should be made in more than one
Options A and G) currency and that the risk of changes in the exchange rates should be carried
by the Employer.
The Employer should state in the Contract Data which items and activities are
to be paid for in currencies other than the currency of this contract, what
those currencies are, the maximum amounts payable in each currency and
the exchange rates to be used in calculating the payments. Exchange rates
are usually those published some two weeks before the Consultant submits
his offer to the Employer. Any subsequent movement of the exchange rates is
therefore at the Employer’s risk. No provision is made for multiple currencies
in main Options C and E because the Consultant is paid the Time Charge.

Option X4: Parent X4.1 This Option should be included where the Employer requires the greater
company guarantee security provided by the parent company for the performance of the Consul-
tant. The parent company guarantee should be provided by the Contract Date.
If that is not achieved, a four week limit is provided as a fall-back. The form of
guarantee should be included in the Scope in part one of the Contract Data.

Option X5: Sectional X5.1 This Option should be included when the Employer requires parts of the
Completion (not used with services to be completed before the whole of the services. The parts are called
Option G) sections, each of which should be identified in the Contract Data part one,
with a completion date for each. Completion of the sections is followed by
Completion of the whole of the services. The sections do not make up the
whole of the services. Delay damages and bonus for early completion can be
related to section completion dates by using Options X7 and X6 respectively.

Option X6: Bonus for early X6.1 Where Completion as early as possible would benefit the Employer, whether of
Completion (not used with all or a section of the services, the Employer can use this Option to achieve
Option G) early Completion. The bonus calculated in accordance with this subclause will
be included in the assessment occurring at Completion of the whole (or
section) of the services.

Option X7: Delay damages X7.1 Delay damages are the liquidated damages paid by the Consultant when he
fails to complete the services (or sections of the services if Option X5 is also
used) by the Completion Date. Under English law and some other legal
systems, if it is not included, delay damages are ‘at large’ and the remedy
open to the Employer is to bring an action for damages for the Consultant’s
breach of contract. In this event, evidence of the actual damage suffered by
the Employer is required.
The amount of delay damages should not exceed a genuine pre-estimate of
the damage which will be suffered as a result of the Consultant’s breach. They
are described as delay damages because these are not the only liquidated
damages in the PSC. Interest on late payments as provided for in subclause
51.4 is a form of liquidated damages.

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 Guidance notes and flow charts for the Professional Services Contract

Appropriate entries for delay damages should be made in the Contract Data.
They may represent cost to the Employer caused by delayed start to another
contract, or simply interest on the capital invested in the services of which the
Employer has been deprived of the benefit. Damages greater than a genuine
pre-estimate constitute a penalty and are not generally enforceable under
English law.
Since delay damages are amounts to be paid by the Consultant, appropriate
deductions are made in the first assessment of the amount due, occurring
after the Completion Date, and in subsequent assessments up to Completion.
X7.2 This subclause protects the Consultant when he has paid delay damages and
a later assessment of compensation events results in a delay to the Comple-
tion Date. This could arise when a compensation event occurs at a late stage
or if an Adjudicator or tribunal changes the assessment of a compensation
event and the decision is made after delay damages have been paid.

Option X8: Collateral X8.1 A collateral warranty agreement is an agreement entered into by the Con-
warranty agreements sultant with purchasers or tenants or funding organisations (who are not the
Employer) of an industrial or commercial development. It has the effect of
binding the Consultant in contract, and creating legal liability toward parties
other than the Employer which may not otherwise exist. Details of the
collateral warranty agreements which the Consultant will be required to enter
into should be stated in the Contract Data.
These details should include
. form of warranty agreement,
. limitation period,
. insurance requirements,
. rights of assignment, including number of assignments to subsequent
purchasers/tenants, permitted and
. others providing warranty agreements.

A requirement to enter into such agreements can represent a considerable

extension of a Consultant’s liability. Legal advice may be necessary and advi-
sable. The British Property Federation has published model forms of collateral
warranty which have been agreed by the ACE, RIAS, RIBA and RICS, after
consultation with the Association of British Insurers.
Option Y(UK)3 also provides for third party rights for contracts in the UK.

Option X9: Transfer of X9.1 The rights over drawings, documents, designs and the like prepared by the
rights Consultant would normally remain with the Consultant. The core clauses recog-
nise this but give the Employer entitlement to use any documents for the
purposes stated in the Scope. If, in addition to this, the Employer wishes to
obtain the rights for himself, this Option should be chosen.

Option X10: Employer’s X10.1 This Option should be used where a corporate body wishes to appoint an
Agent individual, either from within its own organisation or an external consultant, to
act as its agent under this contract. The Agent should be identified and the
extent of the Agent’s authority defined in the Contract Data.

Option X11: Termination X11.1 Under the core clauses the Employer is entitled to terminate following the
by the Employer substantial failure of the Consultant to carry out his obligations, on insolvency
of the Consultant or when the Employer no longer requires the services. This
Option gives a further power to the Employer to terminate the appointment of
the Consultant for a reason not stated in the contract which might involve no
default of the Consultant.
X11.2 This subclause gives the Consultant entitlement to increased payment if the
Employer terminates for a reason not stated in the contract. The 5% payment
is arbitrary, but recognises that the Consultant has been deprived of some
profit which he would have made if he had been permitted to continue with,
and complete, the services.

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 Contract strategy

Option X12: Partnering This Option is used for partnering between more than two parties working
on the same project or projects or on the provision of services. The Option is
included in all NEC contracts which each party has with the body which
is paying for the work or service. The parties who have this Option included in
their contracts are intended to make up the partnering team. Option X12,
does not, however, create a multi-party contract.
The content of the Option is derived from the ‘Guide to Project Team Part-
nering’ published by the Construction Industry Council (CIC). The requirements
of the CIC document that are not already in the NEC contracts are covered by
this Option.
The purpose of the Option is to establish the NEC family as an effective
contract basis for multi-party partnering. By linking this Option to other bi-
party contracts, the NEC can be used
. for partnering for any number of projects and services,
. internationally,
. for projects and services of any technical composition and
. as far down the supply chain as required.
Parties must recognise that by entering into a contract which includes Option
X12, they will be undertaking responsibilities additional to those in the basic
NEC contract.
A dispute (or difference) between Partners who do not have a contract
between themselves is resolved by the Core Group. This is the Group that
manages the conduct of the Partners in accordance with the Partnering Infor-
mation. If the Core Group is unable to resolve the issue, then it is resolved
under the procedure of the Partners’ individual contracts, either directly or
indirectly with the Client who will always be involved at some stage in the
contractual chain. The Client may seek to have issues on all contracts dealt
with simultaneously.
Option X12 does not include direct remedies between non-contracting Part-
ners to recover losses suffered by one of them caused by failure of the other.
These remedies remain available in each Partner’s individual contract, but
their existence will encourage the parties to compromise any differences that
arise. This applies to all levels of the supply chain, as a Consultant who is a
Partner retains the responsibility for actions of a subconsultant who is a
Partner. The final sanction against any Partner who fails to act as stated in
Option X12 is for the Partner who employed them not to invite them to partner
again.
There are many scenarios possible in which Option X12 may be used. The
NEC family of contracts with Option X12 is sufficiently flexible to deal with
them. For example, the contract may be an NEC Engineering and Construction
Contract or an NEC Engineering and Construction Short Contract for a project.
It may involve also an NEC Professional Services Contract. Later, an NEC Term
Service Contract may cover maintenance of the asset created by the project
and provision of other services for the Client.

Identified and defined X12.1 The point at which someone becomes a Partner is when his Own Contract
terms (1) (which includes Option X12) comes into existence. They should be named in
the Schedule of Partners, and their representative identified.
(3) Not every Partner is a member of the Core Group.
(5) There are two options for subcontractor partners. Either the amount payable
cascades down if the schedule allocates the same bonus/cost to the main
contractor and subcontractor, or the main contractor absorbs the bonus/cost
and does not pass it on.

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 Guidance notes and flow charts for the Professional Services Contract

Working together X12.3 The Core Group organises and holds meetings. It produces and distributes
(5) records of each meeting which includes agreed actions. Instructions from
the Core Group are issued in accordance with the Partner’s Own Contract. The
Core Group may invite other Partners or people to attend a meeting of the
Core Group.
(8) The Partners should give advice and assistance when asked, and in addition
whenever they identify something that would be helpful to another Partner.
(9) A subcontractor may be a Partner, but the general policy on this should be
decided at the beginning of the project or service contract. The Core Group
should advise the Contractor at the outset if a subcontractor is to be asked to
be a Partner. A subcontractor who the Core Group decides should be a Partner
should not be appointed if he is unwilling to be a Partner.

Incentives X12.4 If one Partner lets the others down for a particular project or service by poor
(1) performance, then all lose their bonus for that target. If the Employer tries to
prevent a target being met, he is in breach of subclause 10.1.
There can be more than one Key Performance Indicator (KPI) for each partner.
KPIs may apply to one Partner, to several Partners or to all Partners.
Example of a KPI
KPI Highways licensing of skips
Target Skip applications decided within 3 days
Measurement Number of applications decided
Amount Main contractor £5 per application
Subcontractor £30 per application
(2) The Client should consult with the other Partners before adding a KPI. The
effect on subcontracted work should be noted. Adding a KPI to work which is
subcontracted can involve a change to the KPI for a subcontractor.

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Schedule of Partners
Date of last revision: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Partners are the following.

Name of Partner Representative’s Contribution and Joining Leaving Key Performance Target Measurement Amount of
Address and objective date date Indicator arrangement Payment if the
contact details target is improved
upon or achieved

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Enter nil in the last column if there is to be no money incentive
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 Guidance notes and flow charts for the Professional Services Contract

Schedule of Core Group Members

Date of last revision: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Core Group members are the Client and the following.

Name of Partner Address and contact details Joining date Leaving date

Option X13: X13.1 Where a performance bond is required by the Employer the ideal is that it
Performance bond should be provided by the Contract Date. If that is not achieved, a four week
limit is provided as a fall-back. The form of the performance bond should be
included in the Scope and the amount of the bond should be stated in the
Contract Data.

Option X18: Limitation of

liability
Limitation of liability X18.1 Some situations under the PSC may involve risks of low probability but high
& impact. For this reason, it may be necessary for purely commercial reasons to
X18.2 limit the Consultant’s liability for certain risks. These subclauses state these
limits, by reference to entries in the Contract Data.
X18.3 This subclause exempts the Consultant from any liability notified after the end
of liability date which is stated in the Contract Data.

Option X20: Key X20.1 Key Performance Indicators (KPIs) are being increasingly used as a means of
Performance Indicators to improving efficiency and encouraging better performance by Consultants with
X20.5 a view to continuous improvement. KPIs are provided for in Option X12 where
partnering arrangements are in place. This Option can be used to provide for
KPIs when Option X12 is not used. The procedure in Option X20 requires the
establishment of performance targets and regular reporting by the Consultant
of his performance measured against the KPIs.

Option Y(UK)2: The This Option is prepared solely for use on contracts which are subject to the
Housing Grants, United Kingdom Housing Grants, Construction and Regeneration Act 1996
Construction and Part II (the Act). The Option should not be used in other circumstances.
Regeneration Act 1996
The two principles contained in this Act which affect the NEC Professional
Services Contract are those related to payment and adjudication. This Option
deals only with the payment aspect. The adjudication aspect is dealt with
under Option W2. The definition of a ‘construction contract’ in this Act is wide
ranging and can be found in Section 104. It covers not only an agreement to
carry out ‘construction operations’ but also ‘an agreement to do architectural,
design or surveying work, or to provide advice on building, engineering, interior
or exterior decoration or on the laying-out of landscape in relation to construc-
tion operations’. Thus the Act will apply to many agreements made using the
PSC.

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 Contract strategy

The definition of a ‘construction operation’ can be found in Section 105(1) of

the Act. The operations and contracts that are not subject to the Act are
defined in Sections 105(2) and 106. In the United Kingdom (England, Wales,
Scotland and Northern Ireland), the Parties to a contract should consider care-
fully whether the operation is subject to the Act before proceeding. If the
operation or contract is subject to the Act, it is intended that, by incorporating
Option Y(UK)2 into the contract, the payment provisions of the statutory
Scheme for Construction Contracts do not become implied terms of the
contract (Section 114(4)). Parties must be aware that it is not possible to
contract out of a statutory requirement.
Subclause Y2.1 deals with the measurement of time periods in relation to the
Act. Subclauses Y2.2 to 2.4 have been drafted with the intention of complying
with Sections 109 to 113.
Y2.1 In the NEC family of contracts periods of time are usually measured in weeks
thus avoiding complications of rest days and statutory holidays in different
countries in which these contracts are used. The Act, however, defines most
periods as a number of days. Section 116(3) of the Act states that Christmas
Day, Good Friday and bank holidays are excluded from any period specified in
the Act. Where the time period associated with the Act is referred to, that
period has been stated in days in Option Y(UK)2.
The key periods affecting the procedure for payments when Option Y(UK)2
applies are illustrated in Figure 5, which includes references to the Act and to
the Y(UK)2 subclauses. Figure 1 should be referred to in conjunction with the
following notes on subclauses Y2.2 to Y2.4.
Y2.2 These additional clauses are drafted to accommodate Sections 109 to 111
& of the Act. The Employer is now required to give notice to the Consultant of the
Y2.3 payment to be made, and the basis on which the calculation is made. This is
achieved by the third paragraph of subclause Y2.3.
Y2.3 augments core subclause 51.3 by requiring the Employer to notify the
Consultant of any payment he intends to withold as required by Section 111
of the Act.
The Act uses very specific language about what and when ‘payments become
due’ and when particular notices are issued and in defining the ‘final date for
payment’.
Subclause Y2.2 sets out time periods and circumstances to meet the require-
ments of Sections 110(1) and 110(2) of the Act. Section 110(1)(a) requires
an ‘adequate mechanism for determining what payments become due under
the contract and when’. This mechanism is provided by the Employer’s notice
to the Consultant in the third paragraph of Y2.2. This notice is to be issued
not later than five days after the date when payment becomes due which is
seven days after the assessment date. Section 110(1)(b) requires that there
should be ‘a final date for payment in relation to any sum which becomes
due’. This is fourteen days, or the period stated in the Contract Data, after the
date on which payment becomes due. The significance of the final date for
payment is that if the Employer intends to withhold part of the amount due,
he must give notice not later than a ‘prescribed period’, i.e. seven days before
the final date for payment, as indicated in Section 111 of the Act.
Y2.4 Under Section 112 of the Act, where a sum due is not paid by the final date
for payment and no effective notice to withhold payment has been given, the
Consultant has a right to suspend performance. This right can only be
exercised if the Consultant gives seven days’ notice of his intention
(subclause Y2.3). The right to suspend ceases when payment is made in full.
Under Section 112(4) of the Act, the Completion Date is, in effect, delayed by
the period of suspension. The effect of subclause Y2.4 is to treat such
suspension as a compensation event. Thus, in addition to the extra time, the
Consultant is entitled to additional costs resulting from the suspension.

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 Guidance notes and flow charts for the Professional Services Contract

Figure 5. Construction Act – Payment periods under Y(UK)2.

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 Contract strategy

Option Y(UK)3: The Y3.1 If it is decided to give rights under the contract to a third party, it is important
Contracts (Rights of Third that the rights are clearly stated in the Contract Data by reference to clauses
Parties) Act 1999 in the conditions of contract.

Option Z: Additional This Option should be used where the Employer wishes to include additional
conditions of contract conditions. These should be carefully drafted in the same style as the core
and Option clauses using the same defined terms and other terminology. They
should be carefully checked for consistency with the other conditions.
Additional conditions should be used only when absolutely necessary to
accommodate particular needs, such as those peculiar to the country in which
the work is to be done. The flexibility of the PSC main and secondary Options
minimises the need for additional conditions. Additional conditions should not
be used to limit how the Consultant is to do the work in the contract as this is
part of the function of the Scope.

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BASIS OF THE APPOINTMENT OF A CONSULTANT

The contract between the Employer and a Consultant will normally consist of
. a letter or form of offer from the Consultant,
. the Contract Data part one (completed by or in conjunction with the
Employer),
. the Contract Data part two completed by the Consultant,
. an activity schedule (Options A and C) or a task schedule (Option G),
. the Scope,
. a letter of acceptance from the Employer and
. form of agreement (if any).
Contract Data The purpose of the Contract Data for a particular contract is to identify the
terms printed in italics in the conditions of contract (subclause 11.1) and to
provide the information that some clauses state is in the Contract Data. The
Contract Data thus completes the conditions for a particular contract.
Part one of the Contract Data is prepared by the Employer and identifies his
requirements. The wording of the required statements is given in the PSC.
This wording should be reproduced (but preferably not photocopied) with the
various statements completed with the information relating to the particular
contract.
Statements which must be included in all contracts are listed first, followed by
optional statements. The introductory explanatory sentences (printed in bold)
should be omitted. Only those statements which are needed for the particular
contract should be included. In order to avoid lengthy entries for certain items
it may be convenient to list them in a separate document, which can then be
referenced in the Contract Data.
The completed part one of the document is normally issued to a consultant
together with the prepared part two, which he is required to complete. It will
identify other documents (e.g. activity schedule, task schedule) which are to
be priced by the Consultant and submitted to the Employer with the completed
part two of the Contract Data.
Further notes and a worked example of a completed Contract Data are given
in Appendix 2.

Activity schedule This document is a list of the activities which the Consultant will need to carry
(Options A and C) out in order to Provide the Services. It should be prepared and priced by the
Consultant but the Employer can include in his instructions to tenderers his
required framework for the document or a list of the minimum items to be
included.
The price entered by the Consultant for each activity is a lump sum, not a unit
rate. In Option A the Consultant is paid for activities completed at each
assessment date. In Option C, the total of the Prices in the activity schedule is
the target price.

Task schedule The task schedule is prepared by the Employer and describes (in sufficient
(Option G) detail to enable the Consultant to price them) individual items which the
Employer is likely to require the Consultant to carry out. Other items may be
included in the task schedule to be paid for on a time basis using the Time
Charge.

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 Basis of the appointment of a Consultant

The Consultant prices each item in the task schedule which is not time based
and quotes staff rates in part two of the Contract Data for use in calculating
the Time Charge. When the Employer identifies a proposed Task he wishes to
have carried out, he selects the required items from the task schedule, notifies
any which are not on the task schedule as a compensation event and instructs
the Consultant to submit his estimate for the Task. The Consultant does not
carry out a Task until instructed to do so.

Scope The conditions of contract refer to matters which must be covered by the
Scope. These matters are summarised in Table 2.
In addition to the requirements made necessary by the particular contract, the
Scope should contain further information describing what the Consultant is to
provide. The extent of the Scope will vary between appointments. It will vary
according to how well defined the Employer’s requirements are, what the parti-
cular Consultant’s tasks are and what function the Consultant is to perform.
Many professional bodies and organisations have prepared schedules of
tasks, as have many employers’ organisations. If assistance is needed in
preparing the Scope, it will normally be appropriate to appoint a consultant for
that purpose or to prepare it jointly with the selected Consultant.

Form of agreement The creation of a contract can be by means of acceptance of a tender or a

revised tender or by means of acceptance by the Consultant of a counter-offer
prepared by or on behalf of the Employer. A binding contract is thus created,
although some Employers may require such acceptance being subject to a
formal agreement. A suitable form of agreement is included in Appendix 1,
but Employers often have their own standard forms. Essentially, they record
the agreement between the two Parties.

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 Guidance notes and flow charts for the Professional Services Contract

Table 2. References to the Scope in the PSC

This table does not include uses of the Scope not specifically required by the clauses, e.g. any specific levels of
skill and care required (GN on subclause 21.2).

Subclause Item Comment

11.2(2) Identified and defined Definition of Completion Reference to Scope
terms
11.2(5) Identified and defined Definition of Defect Reference to Scope
terms
11.2(11) Specifies and describes the General definition of Scope
services. States any constraints
13.6 Communications Form of documents for retention Form of retained copies stated in Scope, e.g.
microfilm, originals
17.1 Illegal and impossible Consultant to notify Employer to instruct changes to the Scope
requirements
20.2 The Employer’s obligations Employer may change the Scope Only the Employer can change the Scope
21.1 The Consultant’s Provides the Services In accordance with the Scope
obligations
25.4 Other responsibilities Health and safety requirements In accordance with the Scope
31.2 The programme Inclusions in programme Dates constraining the work.
List of activities to be carried out by the
Employer and Others. Any specific information
which the Consultant is to show on the
programme, e.g. key dates, approvals
40.1 Quality management System requirements. The Scope should describe what quality
system management system the Consultant will be
required to operate
40.2 Quality management Information in quality plan The Scope should identify any specific
system information to be shown in the quality plan
and quality policy statement
50.2 Assessing the amount due Details to be provided with the The Employer should set out any information
Consultant’s invoices he will require from the Consultant with each
invoice to enable him to check the invoice for
correctness
60.1(1) and (5) Compensation Employer changes Scope. Compensation events related to Scope
events Employer or Others do not work
as stated in Scope
63.10 Assessing compensation Proposed staff rates for change Consultant to propose staff rates for people
events to Scope for whom there are no staff rates
70.1 The Parties’ use of Use of material by the Employer. The Employer must state the purposes for
material which he will be using any material provided
by the Consultant (e.g. construction,
maintenance, extension, rebuilding)
70.4 The Parties’ use of Consultant’s use of materials for ‘Other work’ to be stated in the Scope
material other work
Option X4 Form of guarantee If a guarantee is required, the Employer is to
X4.1 Parent company guarantee provide a pro-forma guarantee
Option X9 Rights over material Requirements stated in Scope
X9.1 Transfer of rights
Option X13 Form of bond Employer to state form of bond
X13.1 Performance bond

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EXPLANATORY NOTES

1 General

CORE CLAUSES

Actions 10
10.1 This subclause states the general obligations of the Parties to act ‘as stated
in this contract’. Specific duties of the Employer and the Consultant and the
procedures to be followed are stated elsewhere in the contract and are in the
present tense, i.e. as at the time of the action, rather than in the form ‘The
Consultant shall . . .’. Where actions are permitted but not obligatory, the term
‘may’ is used.
The inclusion of the requirement on how the Parties should act, namely in a
spirit of mutual trust and co-operation, is based on a recommendation in the
Latham Report (‘Constructing the Team’). This report, published in July 1994,
was the final report of an investigation by Sir Michael Latham into procure-
ment and contractual arrangements in the United Kingdom construction
industry.

Identified and defined 11

terms 11.1 The main definitions used in the contract are listed in subclause 11.2. Other
definitions appear in optional clauses where they are specific to a particular
Option. Capital initial letters are used in the PSC for defined terms to distin-
guish them from undefined terms. The same convention of italics and capital
initials is used in these guidance notes as in the PSC itself.
11.2 The definition of the Accepted Programme allows for the two situations where
(1) there may or may not have been a requirement for the Consultant to submit a
programme with his tender. A tender programme is identified in the Contract
Data and becomes the Accepted Programme when the contract comes into
existence.
(2) The Scope must state what work is to be done before Completion can be certi-
fied under subclause 30.2. This, together with the second bullet, avoids the
uncertainty associated with terms such as ‘substantial completion’.
(3) The completion date stated in the Contract Data may be changed as a conse-
quence of a compensation event.
(4) Contracts come into existence by various means – sometimes by means of a
counter-offer and its acceptance, sometimes after extended negotiations and
discussions. The Contract Date is used to define the date when the contract
comes into existence, regardless of the means by which this is achieved.
It is very important to establish and document the means by which the
contract came into existence. If this is not done, there is a significant risk of
later difficulties if a dispute about the contract arises.
(5) A Defect is simply something which the Employer realises will not satisfy his
requirements as stated in the Scope. This may be because the Consultant has
not provided the services properly or it may be that the initial Scope did not
accurately reflect the Employer’s intentions and therefore has to be changed
under subclause 20.2, triggering a compensation event under subclause
60.1(1). Clause 41 (Correcting Defects) deals further with the consequences
of a Defect.

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 Guidance notes and flow charts for the Professional Services Contract

(6) Key Dates are different from Completion Dates for a section of the services as
in Option X5. They are dates by which the services are required to reach a
stated Condition. The Employer has the authority to change a Key Date, and
such a change is a compensation event (subclauses 20.2 and 60.1(4)). The
consequences of failure by the Consultant to meet a Key Date are set out in
subclause 23.3.
(7) The defined term ‘Others’ provides a convenient means of reference (by
stating the exceptions) to people and organisations not directly involved in the
contract.
(9) & These subclauses define the two key terms used in subclause 21.1 to state
(11) what the Consultant is to do under the contract.
Within both definitions, a broad title of the services would be identified in the
Contract Data, e.g. ‘project management of the construction of a new factory
at Swindon’.
The Employer should use the Scope to specify and describe the services as
comprehensively as possible, including what he is expecting to achieve as a
result of the contract and a statement of any constraints which the Consultant
is to abide by.
The clauses of the PSC contain many references to information and require-
ments which should be specified in the Scope. These are summarised in Table
2. The Employer can change the Scope during the course of the contract
(subclause 20.2).
(10) The Risk Register provides a means of identifying the risks and managing
them by eliminating them or reducing them, or otherwise deciding how they
are to be dealt with. Subclause 15.4 provides a procedure for revising the
register following a risk reduction meeting.
(13) The Time Charge is defined in relation to staff rates and staff time expended
on the services. For many commissions the entries for staff rates in part two of
the Contract Data will have fixed hourly, weekly or monthly rates entered
against them. On other occasions, the staff rates will need to be defined in
relation to salary.
The Time Charge is used in the PSC in two ways
. for assessment of compensation events for all Options and
. for evaluation of the amount due to the Consultant for the services in
Option E (time based contract), Option C (target contract) and partially
in Option G (term contract).
The staff rates are effectively the price charged for staff on a time basis. They
will include for all costs to the Consultant including basic salary, any addi-
tional payments or benefits and social costs such as insurances or pension
payments. Office expenses, including rental and heating, non-recoverable
staff time and administrative staff who are not chargeable, together with the
Consultant’s general overheads and profit, should also be allowed for in the
staff rates.
The staff rates can conveniently be established in one of three ways
. rates for named staff,
. rates for categories of staff or
. rates related to salaries paid to staff.
The choice between these alternatives will depend on the type of services to
be carried out. Where the services are to be provided by one person or a few
staff identified in advance, individual rates for those staff would be most
appropriate. If it becomes necessary to change staff, a new rate is readily
negotiated based on different salary and other matters. Rate adjustments for
inflation, if necessary, can be based either on actual salary adjustments or by
using Option X1: Price adjustment for inflation.

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 Explanatory notes

If the services are to be carried out by a larger number of staff, but having
clearly defined duties or responsibilities, the second method of defining staff
rates is appropriate. The services of the supervisor on a large site is an
example. The various posts can readily be categorised, and hourly, daily or
weekly rates given for staff in each category. If price adjustment for inflation
is needed, Option X1 is used.
If neither of these methods is suitable, staff rates should be linked to salary.
This method has wide application and does not artificially reduce or increase
the payments made. The difficulties of categorisation are avoided, but care
needs to be taken to define which staff time is recoverable and which is not.
The staff rates would then be stated as a multiplier on salary.
In this third method, the Employer has least control over costs. Under Options
C, E and G, provision is made for forecasts at specified intervals by the Consul-
tant, with explanations of changes since the last forecast (subclause 21.5).
Many Employers have their own model for defining salaries and multipliers for
staff and for identifying who may allocate time and who is included in the
multiplier.

Communications 13
13.1 The phrase ‘in a form which can be read, copied and recorded’ includes a
letter sent by post, telex, cable, electronic mail, facsimile transmission, and
on disc, magnetic tape or similar electronic means.
13.3 Unless the contract states a period for reply to a particular communication, a
reply has to be made within the period for reply. Where a variety of different
communications is to be handled, e.g. requests for information, acceptance of
contractors’ designs, general correspondence, different periods for reply may
be necessary. If so, they can be separately listed in the Contract Data.
13.4 The PSC contains a number of situations in which the Employer must either
(13.8) accept or reject a document which contains proposals submitted by the
Consultant. The Consultant carries the risk of the Employer withholding accep-
tance because the proposal does not comply with the Scope or for a reason
stated in the contract. Withholding acceptance for any other reason is a
compensation event (subclause 60.1(8)). This arrangement gives the
Employer freedom to withhold acceptance for any reason but limits the Consul-
tant’s risk associated with this freedom. The Employer should ensure that the
Scope states his requirements clearly, especially in areas which could directly
affect his interests, e.g. his procurement strategy for further contracts for
design, supply, construction, etc.
13.5 This subclause provides for extending the period for reply by agreement.
13.6 The Employer must decide the period during which the Consultant must keep
the various documents he has used in doing his work. This period is entered
in part one of the Contract Data.
13.7 The requirement to separate notifications from other communications is
included to avoid important matters being missed.

Early warning 15
15.1 The intention of this subclause is to oblige each Party to warn the other of
anything which could affect the outcome of the contract as expressed in the
six bullets and then to promote co-operation between the Parties to mitigate
any adverse effects. Early warning matters are recorded in the Risk Register.
An early warning may often be associated with the notification of a future
compensation event. For instance, the Consultant may give early warning of a
probable change in the law (Option X2) and notify a compensation event at
the same time. However, if the change is only a possibility, an early warning
on its own may be appropriate and the notification of a compensation event
deferred. Where a compensation event has already been notified, an early
warning notice is not necessary.

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 Guidance notes and flow charts for the Professional Services Contract

In contrast, the Employer may instruct a change in the Scope and notify it as
a compensation event under subclause 60.1(1). Both Parties are then aware
of the instruction, assessments will be provided under the compensation
event procedure and no early warning should be necessary.
Subclauses 61.5 and 63.5 provide a sanction for failure by the Consultant to
give early warning of a matter when he became aware of it by reducing the
payment due to him for any related compensation events.
It is probable that the Employer will require additional reporting by the Con-
sultant – for example on any changes to potential construction costs. Such
additional requirements should be stated in the Scope.
15.2 These subclauses provide a procedure for the Parties to meet following an early
15.3 warning and to co-operate in finding solutions and deciding actions.
15.4 Decisions made at the risk reduction meeting are recorded in the Risk
Register.

Ambiguities and 16
inconsistencies 16.1 This subclause is intended to ensure that action is taken as soon as possible
to deal with ambiguities and inconsistencies which are noticed in the contract
documents. There is no stated precedence of documents and the Employer
has the responsibility of instructing resolution of the problem. An instruction
which results in a change to the Scope or a change to a previous decision
would be a compensation event (subclause 60.1 (1) or (7)). Also, in Option
G, an instruction which corrects a mistake in the Task Schedule is a compen-
sation event under subclause 60.2.

Illegal and impossible 17

requirements 17.1 A change to the Scope in order to resolve a matter which requires the Consul-
tant to do anything which is illegal or impossible is a compensation event
(subclause 60.1(1)).

Prevention 18
18.1 This subclause is designed to deal with what is commonly referred to as ‘force
majeure’ events, that is, the kind of events which neither Party can prevent or
control.

MAIN OPTION CLAUSES

Option G: Term contract

Identified and defined 11
terms 11.2 Work is carried out by the Consultant only after the Employer has instructed a
(21) Task under subclause 55.5.

The other main Option clauses in Section 1 are definitions concerning

payment. Guidance on these is included in Section 5.

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 Explanatory notes

2 The Parties’ main responsibilities

This section sets out the Employer’s and the Consultant’s main responsibil-
ities. Other sections deal with particular responsibilities appropriate to the
section heading.

CORE CLAUSES

The Employer’s obligations 20

20.1 This subclause relates to the compensation events stated in subclause
60.1(3).
20.2 The authority to change the Scope or a Key Date belongs exclusively to the
Employer. Neither the Consultant nor the Adjudicator can change these.
20.3 This subclause recognises the professional nature of the services being
provided. If the Employer’s instructions cannot be complied with, the Consul-
tant should advise the Employer of the fact and suggest alternative measures
to achieve the Employer’s requirements.

The Consultant’s 21
obligations 21.1 This subclause states the Consultant’s basic obligation.
21.2 This subclause states the level of skill and care required of the Consultant. It
follows that a Defect may not necessarily be the liability of the Consultant.

People 22
22.1 The key persons named in the Contract Data should be the persons named by
the Consultant and accepted by the Employer to do the jobs most critical to
Providing the Services. The Consultant does not have the right to replace a key
person at will and can only replace him if the replacement is acceptable to
the Employer. If the Employer’s reason for not accepting a proposed replace-
ment for a key person is not the reason stated in this subclause, a compensa-
tion event occurs (subclause 60.1(8)).

Working with the Employer 23 The duty of the Consultant to co-operate with Others has been expressed in
and Others 23.1 the PSC in general terms only.
23.2 On large projects there may be several consultants and other organisations
Details of these and the services they are required to provide should be
stated in the Scope. On some projects the lead consultant, who is responsible
for co-ordinating the work of all other consultants, should also be identified in
the Scope.
It is important that planning and programming of the work of the various
consultants and Others are carried out before the start of the contract. The
Consultant is not responsible for the failure of other parties to carry out their
work in accordance with the Accepted Programme unless the failure is caused
by the Consultant not co-operating. The exchange of information on health and
safety matters is particularly important in order to comply with the law as well
as with the contract.
23.3 This subclause provides the Employer with a remedy when the Consultant fails
to meet a Key Date. It is limited to the additional cost incurred by the
Employer, as stated.

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 Guidance notes and flow charts for the Professional Services Contract

Subconsulting 24
24.1 These subclauses permit the Consultant to arrange for parts of the services to
to be provided by Subconsultants, provided the Employer accepts the proposed
24.3 Subconsultant and the subcontract conditions to be used. Acceptance of the
Subconsultant cannot be withdrawn later, providing his appointment complies
with these subclauses, but the Consultant is responsible for the Subconsul-
tant’s performance under subclause 24.1.
The PSC may be used by a Consultant to appoint a Subconsultant if it is
adapted as explained in Appendix 4.

Other responsibilities 25
25.1 The Employer should state in the Scope what approvals he has obtained.
Under this subclause the Consultant is required to obtain any other approvals
which are necessary. If the Consultant is required to report on the status of
the approvals he is required to obtain, this should also be stated in the
Scope. If for some reason obtaining approvals is delayed, the Consultant (or
Employer) should give early warning under subclause 15.1 and the Accepted
Programme may need to be changed. If approvals cannot be obtained, e.g.
planning permission is refused, the Consultant should notify the Employer of
an illegality or impossibility under subclause 17.1, after which action lies with
the Employer.
25.2 Where the Consultant needs access to a person, place or thing in order to
Provide the Services, the Employer is required to provide it by an access date
in accordance with the contract.
Provision is made in part one of the Contract Data for the Employer to list the
accesses which the Consultant will need and state the access date which has
been arranged for each.
Provision is also made in part two of the Contract Data for the Consultant to
state any additional accesses he will require together with the relevant access
dates.
During the course of the contract, access dates later than those stated in the
Contract Data may be agreed by the Parties and included in the Accepted
Programme. A compensation event is triggered under subclause 60.1(2) if an
access is provided late.
25.4 Any specific health and safety requirements related to the Consultant’s
activities in providing the services should be stated in the Scope. These are
additional to any obligations the Consultant may have under national law.

MAIN OPTION CLAUSES

Option A: Priced contract with activity schedule

The Consultant’s 21
obligations 21.3 Forecasts of the total expenses are required for budget purposes, updated at
regular intervals. They enable the Employer to judge the likely final cost to him
of expenses which are additional to the Prices.

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 Explanatory notes

Option C: Target contract

The Consultant’s 21
obligations 21.4 Forecasts of the total Time Charge and expenses are required for budget
purposes. They enable the Employer to judge the likely final Price for Services
Provided to Date, the likely Consultant’s share and the likely cost to him of
expenses. Forecasts are updated at regular intervals.

Option E: Time based contract

The Consultant’s 21
obligations 21.4 Forecasts of the total Time Charge and expenses are required for budget
purposes. They enable the Employer to judge the likely final cost to him of the
services. Forecasts are updated at regular intervals.

Option G: Term contract

The Consultant’s 21
obligations 21.4 Forecasts of the total Time Charge and expenses are required for budget
purposes. They enable the Employer to judge the likely final cost to him of the
time based items and the expenses for the Tasks instructed before the date
of the forecast. The lump sum prices for the other items in the Tasks are
additional to the forecasts.

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 Guidance notes and flow charts for the Professional Services Contract

3 Time

CORE CLAUSES

Starting, Completion and 30

Key Dates 30.1 The Completion Date (defined in subclause 11.2(3)) may be of minor impor-
tance in some professional services contracts, but in others it can be critical
in co-ordinating the work of several consultants.
Provision is made in the Contract Data for the completion date
. to be specified by the Employer in part one or
. to be tendered by the Consultant in part two.
The Completion Date may be changed from the completion date as a result of
a compensation event.
It is essential that a completion date is stated in the contract in either part
one or part two of the Contract Data. If this is not done, the time effects of
compensation events cannot be applied.
30.2 The Employer is responsible for certifying Completion, as defined in subclause
11.2(2), within one week of it being achieved.

The programme 31
31.1 Provision is made for a programme either agreed at the Contract Date or to
be prepared by the Consultant and submitted at an early stage in the contract.
In the latter event the Employer is required to respond within two weeks
(subclause 31.3), but if the reply is non-acceptance, the Consultant is
required to re-submit within the period for reply.
The Accepted Programme as defined in subclause 11.2(1) is an important
document for administering the contract. It enables the Employer and the
Consultant to monitor progress and to assess the effects of compensation
events. It identifies when particular actions are needed from the Parties.
31.2 This subclause lists the information which the Consultant is required to show
on each programme submitted for acceptance. Further information to be
shown on the programme for a specific contract should be stated in the Scope
(see Table 2).
The starting date is the date when the Consultant can start work on the
services and is used in subclause 50.1 to fix the payment assessment dates
throughout the contract.
31.3 This subclause gives the reasons why an Employer may decide not to accept a
programme. Any failure by the Employer to accept a programme for reasons
other than those stated in this subclause is a compensation event unless the
programme does not comply with the Scope (subclause 60.1(8)).

Revising the programme 32

32.1 This subclause lists the matters which are to be shown on a revised
programme. It should record the actual progress achieved on each operation
and the re-programming of future operations. It should also show the effects
of implemented compensation events. If a compensation event affects the
timing of future operations, a revised programme indicating the effects is to
be submitted as part of the alterations or even a Consultant’s quotation
(subclause 62.2). The alterations to or the revised programme should also
show proposals for dealing with delays, Defects and any changes proposed by
the Consultant.

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 Explanatory notes

Instructions to stop or not 33

to start work 33.1 This subclause gives the Employer authority to control the stopping and re-
starting of the Consultant’s work for any reason. An instruction given under
this subclause constitutes a compensation event, but if it arises from a fault
of the Consultant, the Prices are not changed (subclause 61.4).

Acceleration 34
34.1 Acceleration means bringing the Completion Date forward. This differs from
34.2 usage in many contracts where ‘acceleration’ means speeding up the work to
ensure that the Completion Date is achieved. These subclauses allow the
Employer to obtain a quotation from the Consultant for acceleration. There is
no remedy if it is not produced. Acceleration can only be achieved by agree-
ment between the Parties. It cannot be imposed on the Consultant without his
agreement.

MAIN OPTION CLAUSES

Option A: Priced contract with activity schedule

The programme 31
31.4 This subclause enables the timing of payments to be related to the
programme.

Option C: Target contract

The programme 31
31.4 This subclause relates the make-up of the Prices (the target) to the
programme.

Option G: Term contract

The programme 31
31.5 This subclause enables the timing of payments within each Task to be related
to the programme.

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 Guidance notes and flow charts for the Professional Services Contract

4 Quality

CORE CLAUSES

Quality management 40
system 40.1 These subclauses provide for the Consultant to operate a quality management
to system to the extent required by the Scope.
40.3
The Employer decides the extent of the quality management system. On one
extreme he may require no quality management system at all. On the other
extreme he may require the operation of a fully certified quality assurance
system under ISO standards. The quality management system required of the
Consultant should recognise the equivalent requirements on other consultants
or contractors and be compatible with them.
If the Consultant fails to provide the quality statement and quality plan as
required by the Scope (subclause 40.2), the Employer may, as a last resort,
terminate the Consultant’s appointment in accordance with subclause 90.3.

Correcting Defects 41
41.1 The period between Completion and the defects date is stated in the Contract
Data. The length of the period will depend on the type of services being
provided, but will normally be between six months and a year. This subclause
requires each Party to notify the other of each Defect found until the defects
date. The Consultant is required to notify uncorrected Defects at Completion
(subclause 11.2(2)) and any new Defects he becomes aware of after
Completion and until the defects date, which is the cut-off date for the Consul-
tant’s responsibility to correct. The final sentence preserves the Employer’s
rights in relation to Defects which are not discovered until after the defects
date.
41.2 This subclause requires the Consultant to correct all Defects, i.e. so that the
services are in accordance with the Scope (subclause 11.2(5)). It does not
require any admission by the Consultant of responsibility for the Defect but
enables the services to be corrected with appropriate urgency to minimise
disruption to the Employer’s project (see Figure 6). Correction by the Consul-
tant of a Defect for which he is not liable under the contract constitutes a
compensation event (subclause 60.1(12)). This subclause also states the
action that the Employer may take if the Consultant fails to correct a Defect in
accordance with the contract.

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 Explanatory notes

Figure 6. Notifying and correcting Defects.

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 Guidance notes and flow charts for the Professional Services Contract

5 Payment

The payment mechanisms for the four main Options are distinguished mainly
by the use of two key terms
. the Prices and
. the Price for Services Provided to Date.
Each term is defined in subclause 11.2 for each main Option.

The Prices
Option A The lump sum prices for each of the activities in the Activity
(11.2(18)) Schedule.
Option C As Option A.
(11.2(18))
Option E The Time Charge.
(11.2(19))
Option G The Time Charge for items described as time based on the
(11.2(20)) Task Schedule and the lump sum price in the Task Schedule
for each other item.

The Price for Services Provided to Date

Option A The Consultant is paid the lump sum prices for activities
(11.2(15)) from the Activity Schedule which have been completed at
the assessment date. It is important that the Consultant,
when compiling the activity schedule, defines activities,
completion of which can be clearly recognised.
Option C Payment to the Consultant is as Option E. The Prices are the
(11.2(16)) target and are compared with the Time Charge at the time
of final payment to determine the Consultant’s share (clause
54).
Option E The Consultant is paid the Time Charge for services carried
(11.2(16)) out.
Option G The Consultant is paid, for each Task, the Time Charge for
(11.2(17)) time based work completed and a proportion of the lump
sums representing the proportion of work completed.
The following notes on Section 5 apply to the general and international use of
the PSC. The key periods affecting the procedure for payments are illustrated
in Figure 7, which should be referred to in conjunction with the notes.
On contracts in the United Kingdom to which the Housing Grants, Construction
and Regeneration Act 1996 Part II applies, Option Y(UK)2 should be incor-
porated. Reference should then be made to the separate notes on Option
Y(UK)2, which include references to the necessary modifications and addi-
tions to core clauses.

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 Explanatory notes

Figure 7. Payment Periods.

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 Guidance notes and flow charts for the Professional Services Contract

CORE CLAUSES

Assessing the amount due 50

50.1 This subclause determines the assessment dates. The subsequent dates
when payment is due are calculated from the date when the Employer
receives the Consultant’s invoice (subclause 51.1). The first assessment date
is decided by the Consultant, preferably after discussion with the Employer, to
suit the internal procedures of both Parties. The Employer states the assess-
ment interval in the Contract Data. The first main bullet determines the final
assessment date which allows time for the correction of any Defects notified
just before the defects date and subsequently for the assessment of the
payment due from the Consultant of any Defects which remain uncorrected
(subclause 41.2).
50.2 The Consultant is required to make an assessment of the amount due at each
assessment date. He is required to submit an invoice for the change in the
amount due since the previous invoice and provide the details stated in the
Scope to show how the amount due has been calculated.
50.3 The main part of the amount due is the Price for Services Provided to Date, as
defined for each main Option in subclause 11.2.

Expenses The amount due also includes the expenses incurred by the Consultant in
Providing the Services. The items of expenses are defined in part one and part
two of the Contract Data. The Employer should complete part one for any
expenses for which he wishes to state the amount to be paid. The Consultant
should complete part two for any additional expenses and the amount of
payment he requires. Any expenses not so defined are not reimbursed to the
Consultant, who must therefore make due allowance for them in pricing his
offer, i.e. in the lump sums, staff rates, etc. Only expenses stated in the
Contract Data are payable in addition to the Price for Services Provided to
Date in all payment options.
Items of expenses which may be included in the Contract Data are photo-
copies, telephone, facsimile and package costs, postage, travel and hotel
costs. Details of travel costs by public transport or private car should also be
included as required.
Expenses should also include disbursements, which are fees and charges
paid by the Consultant on behalf of the Employer. Any such items which the
Employer requires the Consultant to arrange for and pay, e.g. fees for planning
applications or advertising for site staff, should be listed as expenses in the
Contract Data.
Pricing of expenses may be expressed in various forms. These include
. at net cost
. at cost plus . . . . . . . . . percent
. lump sums and rates
. percentage of the Prices.

Payment 51
51.1 Set-off is not specifically mentioned in this subclause. Thus if the Employer
has a legitimate claim against the Consultant the normal law of set-off will
apply.
51.3 Where the Employer is not in agreement with an invoice submitted by the
Consultant, he has to
. pay the amount he does not dispute and
. explain to the Consultant why and where he disagrees.

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 Explanatory notes

The Consultant then has to correct the invoice to the Employer’s assessment
or provide further information to justify the invoice already submitted. While
the disagreement is being resolved the Employer should pay what he
considers the proper amount in respect of the services provided. This will
include substituting his assessment for the Consultant’s invoice in respect of
that part of the services he disagrees with. If he fails to make payment he will
be liable to pay interest to the Consultant on any delayed payment (subclause
51.4).
51.5 The interest rate stated in part one of the Contract Data should comprise a
reliable annual base rate applicable to the territory in which the work is to be
done plus a percentage (recommended to be at least 2%) to represent the
current commercial rates. Simple interest at the interest rate applies for
periods of less than one year.

MAIN OPTION CLAUSES

Option A: Priced contract with activity schedule

Accounts and records 52
52.1 This subclause requires the Consultant to keep records of expenses and
entitles the Employer to inspect them if he so wishes.

The Activity Schedule 53

53.2 An activity schedule which contains items which do not represent the Consul-
tant’s proposed activities and methods of working will create difficulties in
determining payments due. Thus it is important that the Activity Schedule
should relate directly to the programme (also subclause 31.4) and always be
compatible with it.
53.3 This subclause states the reasons which the Employer can give for not
accepting changes to the Activity Schedule (in addition to non-compliance
with the Scope) without creating a compensation event (subclause 60.1 (8)).
For instance, any change in Prices should not upset the balance of pricing
which existed in the original Activity Schedule. The total of the Prices must not
be changed except by implemented compensation events.

Option C: Target contract

Accounts and records 52
52.2 This subclause requires the Consultant to keep records of Time Charge and
expenses and entitles the Employer to inspect them if he so wishes.

The Activity Schedule 53

53.2 It is important that the Activity Schedule should relate directly to the
programme and always be compatible with it.
53.3 This subclause states the reasons which the Employer can give for not
accepting changes to the Activity Schedule (in addition to non-compliance
with the Scope) without creating a compensation event (subclause 60.1(8)).
For instance, any change in Prices should not upset the balance of pricing
which existed in the original Activity Schedule. The total of the Prices must not
be changed except by implemented compensation events.

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The Consultant’s share 54

54.1 Subclause 54.1 states how the Consultant’s share is calculated. Subclause
54.2 54.2 states the main principle of target contracts whereby the Consultant
receives a share of any saving and pays a share of any excess when the final
Price for Services Provided to Date (PSPD) (Time Charge) is compared to the
target (the total of the Prices).
For example, assume that the Contract Data states that
. The Consultant’s share percentages and the share ranges are
Share range Consultant’s
share percentage
less than 80% 15%
from 80% to 90% 30%
from 90% to 110% 50%
greater than 110% 20%
If at Completion of the whole of the services the total of the Prices (having
been adjusted for compensation events) is £100,000, the Contract Data
table becomes in effect
Final PSPD Consultant’s
share percentage
less than £80,000 15%
from £80,000 to £90,000 30%
from £90,000 to £110,000 50%
greater than £110,000 20%
Examples of possible outcomes are
a) Final PSPD ¼ £75,000
Saving under total of the Prices ¼ £25,000
Comprising three increments
less than £80,000 ¼ £5,000 @ 15% ¼ £750
£80,000 to £90,000 ¼ £10,000 @ 30% ¼ £3,000
£90,000 to £110,000 ¼ £10,000 @ 50% ¼ £5,000
————
Consultant’s share ¼ £8,750
(paid by Employer)
b) Final PSPD ¼ £95,000
Saving under total of the Prices ¼ £5,000
Comprising one increment
£90,000 to £110,000 ¼ £5,000 @ 50% ¼ £2,500
————
Consultant’s share ¼ £2,500
(paid by Employer)
c) Final PSPD = £115,000
Excess over total of the Prices = £15,000
Comprising two increments
£90,000 to £110,000 ¼ £10,000 @ 50% ¼ £5,000
greater than £110,000 ¼ £5,000 @ 20% ¼ £1,000
————
Consultant’s share ¼ £6,000
————
(paid to Employer)
The other potential source of profit for the Consultant is within the staff rates
used to calculate the Time Charge. The Consultant’s share percentages should
be determined in a particular contract to provide the appropriate level of
incentive to the Consultant to minimise the final PSPD. The extent of financial
risk to the Parties in the event of the final PSPD exceeding the total of the
Prices, can be varied between two extremes.

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 Explanatory notes

. A guaranteed maximum price to the Employer can be achieved by stating

the Consultant’s share percentage to be 100% above that price.
. A limit to the deduction from the total Time Charge (the final PSPD) paid
to the Consultant can be achieved by stating the Consultant’s share
percentage to be 0% above a stated share range.
Reference should be made to CIRIA Report 85 for further information and
guidance on the working of target contracts.
54.3 Payment of the Consultant’s share is made in two stages. Firstly, a preliminary
54.4 assessment is included in the payment due following Completion of the whole
of the services. Secondly, a final assessment is included in the final payment
made after the defects date.
Interim payments of the Consultant’s share are not provided for. There are two
main reasons for this.
. The Prices tendered by a Consultant have the main purpose of estab-
lishing the total of the Prices (the target). It is not intended that their
build-up should provide a realistic forecast of cash flow. They are there-
fore unlikely to be comparable with the PSPD at any interim stage.
. Forecasts of both the final PSPD (Time Charge) and the final total of the
Prices would be extremely uncertain at early stages of the contract. Any
delays in assessing compensation events would further distort the calcu-
lation.
The danger of serious underpayment or overpayment of an interim Consul-
tant’s share has therefore led to the policy of an estimated payment on
Completion which is corrected at assessment of the final amount due.
Nevertheless, provision is made in subclause 92.3 for the assessment of the
Consultant’s share if there is a termination.

Option E: Time based contract

Accounts and records 52
52.2 This subclause requires the Consultant to keep records of Time Charge and
expenses and entitles the Employer to inspect them if he so wishes.

Option G: Term contract

Accounts and records 52
52.2 This subclause requires the Consultant to keep records of Time Charge and
expenses and entitles the Employer to inspect them if he so wishes.

Assessing Tasks 55
55.1 The actions to be taken by the Employer to initiate the assessment of a
proposed Task are stated in this subclause.
If all the items in the proposed Task are on the task schedule, the Consultant’s
estimate will be straightforward. It is therefore most important that the task
schedule prepared by the Employer to be priced by the Consultant in his bid is
as comprehensive as possible in the list of items of services which the
Employer is likely to require to be carried out.
However, if a proposed Task includes items not on the task schedule, these
items are assessed as compensation events – subclause 55.2.
55.2 This subclause states how delay damages are assessed. Note that delay
damages can be introduced into a Task Order if Option X7 has been included
in the contract.

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6 Compensation events

Compensation events are events stated in the contract which, if they occur,
entitle the Consultant to be compensated for any effect which the event has
on the Prices and on the Accepted Programme (subclause 62.2). The assess-
ment of a compensation event is always based on its effect on both the Time
Charge and on the Accepted Programme. Compensation events may entitle
the Consultant to additional payment and possibly additional time in which to
carry out the services. In some specific cases they may result in a reduced
payment to the Consultant.

CORE CLAUSES
Compensation events 60.1
Changing the Scope (1) Variations to the services are effected by an Employer’s instruction to change
the Scope. The authority given to the Employer to make such changes is
covered by subclause 20.2. A change to the Scope may amend some detail of
the services to be provided or impose a change in the way the services are to
be carried out.
When Option G has been chosen the Employer should state in his instruction
whether a change to the Scope applies generally to the affected items in the
Task Schedule or only to the items in a particular Task.

Failure to provide access (2) This compensation event arises when the Employer fails to provide access in
accordance with subclause 25.2.

Failure by the Employer or (5) Although the Consultant is required to co-operate with Others, if necessary by
Others arranging meetings with them (subclauses 23.1, 23.2), any failure by them
to perform constitutes a compensation event. Thus a failure by a service
company not subcontracted to the Consultant to provide details of its services
in time would constitute a compensation event. The Employer will define in the
Scope the extent of the interface between the Consultant and Others and the
extent to which the Consultant is entitled to rely upon the performance of
Others.

Withholding acceptance (8) Various clauses give reasons why the Employer may not accept a submission
or a proposal from the Consultant. Withholding acceptance for any other
reason is a compensation event.

Correction of an (9) Under subclause 61.6 (see later notes) the Employer may state assumptions
assumption to be used in assessing a compensation event. If he later notifies a correction
to these assumptions, the notification is a separate compensation event.

Employer’s breach of (10) This is an ‘umbrella’ clause to include breaches of contract by the Employer
contract within the compensation event procedure.

Unforeseen events (11) The events listed in this subclause sometimes come into the category of
‘force majeure’ in certain jurisdictions. The Employer carries the financial risk
of such events.

Correcting Defects (12) Not all Defects are the Consultant’s liability under this contract. Those Defects
which arise notwithstanding the fact that the Consultant has exercised the
skill and care described in subclause 21.2 are the Employer’s responsibility.
Correction of these Defects is a compensation event.

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Notifying compensation 61
events 61.1 This procedure would apply to those compensation events which are due to an
action of the Employer. When the event occurs, the Employer notifies the
Consultant and instructs him to submit quotations. Where the compensation
events results from the Consultant’s fault or where quotations have already
been submitted, quotations are not instructed. However, in order to avoid
doubt in such cases, it is advisable that when the Employer notifies the
compensation event, he should give his reason for not instructing quotations.
The Consultant is required to act on the instruction or changed decision.
61.2 This subclause deals with the situation where the Employer is considering
issuing an instruction or changing a decision but first requires to know what
effect this would have on the Prices and the Accepted Programme – for
example when he is considering a change to the Scope under subclause
60.1(1). He has the authority to instruct the Consultant to submit quotations
as a first step.
61.3 This procedure would normally apply to the compensation events not covered
by those in subclause 61.1. These are events which arise from
. a failure by the Employer to fulfil his obligations,
. the Employer withholding an acceptance for a reason not stated in the
contract or
. a happening not caused by either Party.

It would also apply to an event which the Employer has not notified under
subclause 61.1.
In such cases the Consultant initiates the procedure by notifying the Employer.
The stated time limit is intended to expedite the procedure so that dealing
with compensation events a long time after they have occurred is avoided. The
wording of this clause has been amended because in the second edition the
two week period was too short to be realistic in some cases and as stated it
did not prevent late notification of compensation events.
61.4 This subclause lists four tests which the Employer applies to an event notified
by the Consultant in order to decide whether or not to instruct the Consultant
to submit quotations. If the Employer decides that the event does not pass
any one of the tests he notifies the Consultant and no further action is
required unless the Consultant disputes the decision and refers it to the
Adjudicator under the dispute resolution Option. The subclause also states a
procedure which provides for a situation where the Employer fails to respond
within the time limits stated. The Consultant may notify the Employer accord-
ingly, which effectively provides the Employer with a two week ‘period of grace’
to respond. If this produces no action from the Employer, the event notified by
the Consultant is deemed to be a compensation event.
61.5 The Employer should include in an instruction to submit quotations, his
decision on whether or not the Consultant gave an early warning which an
experienced consultant could have given.
61.6 In some cases, the nature of the compensation event may be such that it is
impossible to prepare a sufficiently accurate quotation. In these cases, quota-
tions are submitted on the basis of assumptions stated by the Employer in his
instruction to the Consultant. If the assumptions later prove to be wrong, the
Employer’s notification of their correction is a separate compensation event
(subclause 60.1(9)).
Apart from this situation, the assessment of compensation events cannot be
revised (subclause 65.2). The reason for this strict procedure is to motivate
the Parties to decide the effects of each compensation event either before or
soon after it occurs. Since each quotation can include due allowance for risk
(subclause 63.6) and since the early warning procedure should minimise the
effects of unexpected problems, the need for later review is minimal.

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Quotations for 62
compensation events 62.1 There may be several ways of dealing with a compensation event and its
consequences. The procedure in this subclause enables the Employer to
consider different options. For instance it may be more beneficial to the
Employer to have the services carried out under the existing programme at a
greater cost than an alternative of delaying the services but at a lower cost.
Quotations include both time and money implications as, in most situations, it
is impossible to consider each in isolation.
62.2 Quotations are based on an assessment of Time Charge and time arising
from the compensation event. A build-up of each quotation is to be submitted
by the Consultant. If re-programming of remaining work is required, the quota-
tion should include alterations to the Accepted Programme.
62.3 The time limits are intended to promote efficient management of the contract
procedures. The four categories of reply by the Employer are listed. The third
category may result from the Employer deciding not to proceed with a
proposed change to the Scope. This may happen when the cost of the change
is too high or the delay too great. The Employer has absolute discretion in
such a case on whether to proceed. The fourth category applies when the
Employer decides that the Consultant’s quotation is not acceptable.
62.4 This procedure permits revision of quotations. In practice this will usually
follow discussion between the Employer and the Consultant on the details of
the submitted quotations. Again, a time limit for submission of the revised
quotations is stated.
62.5 This provision permits extension of the time for submitting quotations. It would
be used where the consequences of a compensation event may be complex.
62.6 The procedure in this subclause is designed to deal with a situation where the
Employer does not reply within the time stated in the contract or a longer
agreed time. Failure by the Employer to respond to a quotation within the
stated time results in ‘deemed’ acceptance.

Assessing compensation 63
events 63.1 Assessment of compensation events is based entirely on their effect on the
Time Charge and time. If some or all of the work arising from a compensation
event has already been done, the Time Charge should be readily assessed
from records. Forecasting future Time Charges is less straightforward. Esti-
mates of resources and productivity rates are required. For Options C and E,
the Consultant is paid for the compensation event on an actual time basis.
However, the quotations are used for budgeting purposes in providing the fore-
casts under subclause 21.4 and in Option C for changing the total of the
Prices to be used in calculating the Consultant’s share (clause 54).
63.2 The Prices can be reduced only when expressly permitted in the contract.
63.3 No compensation event can result in a reduction in the time for carrying out
the services, i.e. an earlier Completion Date.
The first stage in assessing whether the Completion Date should be delayed as
a result of a compensation event is to adjust the programme to take account of
the compensation event with any appropriate adjustments to staff time risk
allowances (subclause 63.6). Any float in the programme before planned
Completion is available to mitigate or avoid any consequential delay to planned
Completion. If planned Completion is delayed, the Completion Date is delayed
by the same period. If planned Completion is not delayed, the Completion Date
is not changed. The same rule applies to assessing the delay to a Key Date.
63.4 This subclause restricts the rights of the Parties in assessing the effects of a
compensation event.

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63.5 The Consultant’s duty to give an early warning is stated in subclause 15.1.
The sanction if the Consultant fails to give early warning is stated in this
subclause. It is possible that early warning could have allowed actions to be
taken which would have reduced costs and saved time. It is important that the
Employer notifies the Consultant of his decision that early warning should
have been given (subclause 61.5) so that the Consultant knows the correct
basis for his assessment.
63.6 Allowances for staff time risk must be included in forecasts of Time Charge
and time. The value of the allowances is greater when the work is uncertain
and there is high chance of a Consultant’s risk happening. It is least when the
uncertainties are small.
63.7 This subclause protects the Employer against inefficiency on the part of the
Consultant. The reference to changing the Accepted Programme is made so
that it is clear that the Consultant is expected to alter his arrangements when
necessary.
63.8 This subclause expresses the ‘contra proferentem’ rule, which interprets an
ambiguity or inconsistency against the party responsible for drafting the docu-
ment in which it occurs.
63.9 If the Employer instructs a change to the Scope, the Condition of the Consul-
tant’s work to meet a Key Date (as described in the Contract Data) may be
affected. The Condition may need to be changed.
63.10 It is possible that a compensation event may require some work to be done by
a category of person which is not included in the list in Contract Data part
two. In this subclause the Consultant is required to propose staff rates for
such people.
63.11 The first of these deductions avoids the Employer having to pay for costs
which the Consultant should have insured against. If the Consultant does not
insure as required by the contract, such costs are at his own risk. The second
deduction makes certain that the Consultant does not receive double payment
as a result, for example, of insurance which he has voluntarily taken out or
from insuring for a greater cover than required by the contract.

The Employer’s 64
assessments 64.1 The four circumstances in which the Employer assesses a compensation
event are stated. The first and third derive from some failure of the Consultant
to fulfill an obligation under the contract. The second and fourth derive from
the Employer not accepting a submission from the Consultant. The Employer is
motivated to make a fair and reasonable assessment in the knowledge that
the Consultant may refer the matter to the Adjudicator who may change the
assessment.
64.2 This subclause states the circumstances in which the Employer is to use his
own assessment of the programme for the remaining work in his assessment
of a compensation event. This is a major incentive for the Consultant to keep
his programme up to date.
64.3 This subclause allows the Employer the same time to make his assessment
as the Consultant was allowed for his.
64.4 The procedure in this subclause is designed to deal with a situation where the
Employer does not assess a compensation event within the time stated in this
contract or a longer agreed time. The Consultant may notify the Employer
accordingly, which effectively provides the Employer with a two week ‘period of
grace’ to respond. If this produces no action from the Employer, the quotation
submitted by the Consultant is treated as having been accepted.

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Implementing 65
compensation events 65.1 This subclause should be read in conjunction with subclause 65.3 for Options
A and C, with subclause 65.4 for Option E and with subclause 65.5 for Option
G.
Implementation is achieved by the Employer changing the Prices and the
Completion Date and the Key Dates in accordance with the assessment, of
which he has notified the Consultant. In the case of Option G, changes to the
final total of the Prices and the programme for a Task are also included.
65.2 This subclause emphasises the finality of the assessment of compensation
events. If the records of resources on work actually carried out show that
actual Time Charge and timing are different from the forecasts included in
the accepted quotation or in the Employer’s assessment, the assessment is
not changed. The only circumstances in which a review is possible are those
stated in subclause 61.5.

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7 Rights to material

CORE CLAUSES

The Parties’ use of 70

material 70.1 Under this subclause, the Consultant retains rights over material provided by
him, but the Employer may use it for the purposes stated in the Scope. If
Option X9 is used, the effect is to transfer these rights to the Employer, with
any exceptions being stated in the Scope. The subclause is drafted in general
terms and may not involve such rights as designers’ copyright. The Consultant
may reasonably insist that any re-use of material which he provides is entirely
at the Employer’s risk, unless the Employer obtains prior verification by the
Consultant. The Consultant may further seek indemnity from the Consultant
against claims arising from such re-use. This emphasises the importance of
the drafting of the Scope, to make clear liabilities for use or re-use by the
Employer of material produced by the Consultant. In England and Wales, legal
recognition of the right to use material or of the transfer of its ownership can
only be achieved if stamped documentary evidence is provided and Stamp
Duty is paid.
70.2 The Consultant may use any material provided by the Employer, but this is
restricted to the extent necessary to Provide the Services.
70.3 Confidentiality is achieved by the provisions of this subclause. The Consultant
may, however, publicise certain information, provided he obtains the
Employer’s agreement under subclause 71.1.
70.4 The Consultant may use material produced under this contract for other work.
Exceptions are stated in the Scope.

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8 Indemnity, insurance and liability

CORE CLAUSES

Indemnity 80
80.1 This subclause protects the Employer in the event that the Consultant
infringes the rights of Others who may seek redress from the Employer.
‘Others’ are defined in subclause 11.2(7). The only exception is when the
Employer himself provides things for the Consultant’s use.

Insurance cover 81
81.1 Three main types of insurance are required.
(a) Professional indemnity insurance
This is the first insurance stated in the Insurance Table, and provides an
indemnity in respect of any sum which the Consultant may become
legally liable to pay arising out of claims made against him during the
period of insurance as a result of any neglect, error or omission in
carrying out his professional activities.
The amount of cover is to be stated in the Contract Data. In some circum-
stances, some insurers insist on a maximum sum for any one claim and
in the aggregate on the period of insurance.
The period for which insurance cover is required is also to be stated in
the Contract Data. Claims in respect of professional indemnity insurance
normally have to be made during the period of insurance. Claims cannot
normally be made after the period of insurance even though the act of
neglect may have taken place during the period of insurance. Thus, in
dealing with the period of cover, it is desirable that the policy is kept in
force after completion of the services to deal with claims made in respect
of negligent acts which do not manifest themselves until some time
after. To provide adequate cover in these circumstances, the period
stated should be the relevant legal limitation period after Completion.
(b) Public liability insurance
This is the second insurance in the Insurance Table and indemnifies the
Consultant against his legal liability for damages arising from bodily
injury to or death of a person (other than the Consultant’s employees) or
loss of or damage to third party property occurring during the period of
insurance. In this type of insurance, the act of neglect leading to liability
has to take place during the currency of the policy, but claims can be
made afterwards. Hence there is no need to maintain the policy after
Completion.
(c) Employer’s liability insurance
The third insurance in the Insurance Table provides indemnity for legal
liability for bodily injury to or death of the Consultant’s employees arising
out of or in the course of their employment. This insurance is compulsory
in the United Kingdom, the statutory provisions requiring insurance for a
minimum of £2 million for each occurrence. Elsewhere in the world other
regulations may apply, requiring workmen’s compensation-type coverage
or participation in state social security schemes. Insurance cover may
terminate on Completion.

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 Explanatory notes

If the Employer provides property for the use of the Consultant in providing the
services, he may require the Consultant to insure it for the period during which
it is being used by the Consultant. Any such requirements should be stated in
the Contract Data, with cover being for the replacement value of the property.
In some circumstances it may be more appropriate and convenient for the
Employer to effect some of the Consultant’s insurances, for example by taking
out a project insurance policy covering contractors and consultants. In addi-
tion, it is likely that other consultants and contractors will be required to carry
their own insurances covering certain risks. Where these are relevant to the
risks taken by the Consultant under this contract, they should be listed in the
Contract Data. Examples are contractor’s works and third party liability insur-
ances and the Employer’s own building insurances.
81.2 Insurers and brokers will generally not release copies of consultants’ insur-
ance policies. It is normal, however, for the Consultant to provide a certificate
from his broker confirming that he does hold the insurances. In the same way,
the Employer is required to provide a certificate on request confirming that he
holds the necessary insurances.

Limit of liability 82
82.1 The Consultant’s total liability to the Employer (i.e. the maximum the Employer
could recover for the Consultant’s negligence) will be the amount stated in the
Contract Data. This will normally be the amount of the insurance cover. When
setting any limit higher than the insurance cover, the consequences on the
work of the Consultant will need to be recognised (see Contract Data under
‘Optional statements’). The Consultant’s total liability is fully described, and
excludes five matters. Further limitations of the Consultant’s liability may be
introduced by incorporating Option X18.
82.2 If the Consultant is found to be legally liable along with others, the Consul-
tant’s liability to the Employer is limited to his proportionate failure. If, for
example, a court were to conclude that a supervisor appointed as a Consultant
under the PSC to supervise a construction contract was 15% liable and the
contractor 85% liable for the Employer’s losses, the maximum the Employer
could recover from the Consultant would be 15% of his losses up to the limit
of insurance or other figure stated.

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 Guidance notes and flow charts for the Professional Services Contract

9 Termination
This section describes the circumstances under which the Parties may termi-
nate the Consultant’s appointment and the subsequent procedures.

Termination 90
90.1 Both the Employer and the Consultant have limited rights of termination of
to appointment of the Consultant under the core clauses. The Employer effectively
90.3 may terminate whenever he no longer requires the services. He may also
terminate if a Consultant is substantially in breach of contract. The Consultant
may terminate if a payment has not been made within eight weeks after
serving a notice that payment is overdue.
In any event either Party may terminate on the insolvency of the other. The
terms used in subclause 90.1 for insolvency are those current in English law,
but the subclause allows for their equivalent in other jurisdictions.
Secondary Option X11 provides for termination at will by the Employer (see
guidance note on Option X11). There is no equivalent right for the Consultant.
90.4 The event described is commonly known as ‘force majeure’ in certain jurisdic-
tions. The subclause entitles the Employer to terminate if the event prevents
the Consultant from completing the services or delaying Completion by thirteen
weeks or more.

Procedures on termination 91
91.1 This subclause covers the work required following termination to achieve an
orderly close-down of the Consultant’s services. It includes for the assignment
of a subconsultancy, but it should be recognised that the co-operation of the
Subconsultant would be required to complete the services satisfactorily.
It is possible that in certain circumstances material provided by the Consultant
is later revised by the Employer for purposes which are not appropriate but
over which the Consultant has no control. If such circumstances are likely to
occur, liability of the Parties should be made clear in the contract.
After termination, the Consultant must hand over to the Employer all material
he was preparing for him under the contract, but the Consultant is entitled to
keep the material until he has been paid. Any dispute over the amount of the
final payment would be subject to adjudication.

Payment on termination 92
92.1 These subclauses set out how the final payment from the Employer to the
92.2 Consultant is assessed following termination. The Consultant is paid the
amount he was already due plus any other costs to which he is committed. If
the termination is due to the insolvency or default of the Consultant, the
Employer is entitled to deduct from those costs the forecast additional cost to
him of completing the services. This would include the costs of appointing a
replacement consultant.

MAIN OPTION CLAUSES

Option C: Target contract

Payment on termination 92
92.3 Following termination of an Option C target contract, the Consultant’s share is
assessed at that time in accordance with clause 54 using the Price for
Services Provided to Date at termination and the total of the Prices for the
work done as set out in the Activity Schedule.

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Professional Services Contract

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 Flow charts

FLOW CHARTS

13 and 14 Communications and acceptance Sheets 1 and 2 61

15 Early warning 63
16 Ambiguities and inconsistencies 64
17 Illegal and impossible requirements 65
18 Prevention 66
20 The Employer’s obligations 67
21 The Consultant’s obligations 68
22 Key people 69
23 Working with the Employer and Others 70
24 Subconsulting Sheets 1 and 2 71
25 Other responsibilities Sheets 1 to 3 73
30 Completion and Key Dates Sheets 1 and 2 76
31 The programme 78
32 Revising the programme 79
33 Instruction to stop or not to start work 80
34 Acceleration 81
40 Quality management system 82
41 Correcting Defects Sheets 1 and 2 83
50 Assessing the amount due 85
51 and Payment, and dates for payment under Sheets 1 and 2 86
Y(UK)2 Option Y(UK)2
51 Payment when Option Y(UK)2 does not apply 88
52 Accounts and records 89
53 The Activity Schedule (Options A and C only) 90
54 The Consultant’s share (used only with Option C) 91
55 Assessing Tasks (Option G only) Sheets 1 and 2 92
60 Compensation events Sheets 1 to 3 94
61 Notifying compensation events Sheets 1 to 3 97
62 Quotations for compensation events Sheets 1 and 2 100
63 Assessing compensation events Sheets 1 to 4 102
64 The Employer’s assessments Sheets 1 and 2 106
65 Implementing compensation events 108
70 The Parties’ use of material 109
80 Indemnity 110
81 Insurance cover 111
82 Limit on the Consultant’s liability 112
91 and 92 Procedures and payment on termination Sheets 1 and 2 113
94 Termination Sheets 1 to 4 115
W1 Dispute resolution procedure W1 Sheets 1 to 5 119
W2 Dispute resolution procedure W2 Sheets 1 to 6 124
X1 Price adjustment for inflation Sheets 1 to 3 130
X3 Multiple currencies 133
(used only with Options A and G)
X4 Parent company guarantee 134
X5 Sectional Completion 135
X9 Transfer of rights 136
X10 Employer’s Agent 137
X12 Partnering Sheets 1 and 2 138
X13 Performance bond 140
X18 Limitation of liability 141
X20 Key Performance Indicators 142
Y(UK)3 The Contracts (Rights of Third Parties) Act 1999 143

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PREFACE

These flow charts depict the procedures followed when using the NEC3 Profes-
sional Services Contract (PSC). They are intended to help people using the
PSC to see how the various PSC core clauses and Options come together to
produce clear and precise sequences of action for the people involved.
The flow charts are not part of any contract. Much of the text and many of the
words taken from the PSC itself are abbreviated in the flow charts. The flow
charts depict almost all of the sequences of action set out in the PSC. Many
of the sequences interact, and because of this, users of the flow charts will
often have to review more than one sheet in order to track the full sequence
of actions in one area.

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ABBREVIATIONS USED IN THE FLOW CHART BOXES

FC 61 Flow chart for clause 61

FC X5 Flow chart for secondary Option X5

E Employer
C Consultant
SC Subconsultant

CD Contract Data
CE Compensation event
PAF Price Adjustment Factor

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Legend

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APPENDIX 1

Sample form of agreement

This agreement is made on the . . . . . . . . . . . . . . . . . . . . . . . . day of. . . . . . . . . . . . . . . . . . . . . . . . .20 . . . . . . . . . . .

between . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (name)

of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(company/organisation) (the Employer)

and . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (name)

of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(company/organisation) (the Consultant)

The Employer will pay the Consultant the amount due and carry out his duties in accordance with the conditions of
contract identified in the Contract Data.

The Consultant will Provide the Services in accordance with the conditions of contract identified in the Contract
Data.

Signed by . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

On behalf of (Employer) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

and . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

On behalf of (Consultant) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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 Appendices

Alternative if agreement is executed as a deed under English law


When the Employer is an individual:

Executed as a deed by

............................................. (signed) Signature of Witness . . . . . . . . . . . . . . . . . . . .

............................................. (Employer) Name of Witness . . . . . . . . . . . . . . . . . . . . .


When the Employer is a company:

Executed as a deed by

............................................. (signed)

............................................. (name of Director)

............................................. (signed)

............................................. (name of Director or Company Secretary)

†
When the Consultant is an individual or partnership:

Executed as a deed by

Name of individual or Signature Name of Witness Signature

partner

...................... ...................... ...................... ......................

...................... ...................... ...................... ......................

...................... ...................... ...................... ......................

...................... ...................... ...................... ......................

(Note: All partners to sign except where one is authorised as signatory by deed)

†
When the Consultant is a Company

Executed as a deed by

............................................. (signed)

............................................. (name of Director)

............................................. (signed)

............................................. (name of Director or Company Secretary)


Delete one of these
†
Delete one of these

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APPENDIX 2

Contract Data – worked example

Introduction

The following example shows how the Contract Data should be completed for
a contract with a particular selection of decisions made by the Employer. It
follows that not all the possible optional statements are included in the
example. The guidance notes included under ‘Basis of the appointment of a
Consultant’ are expanded by illustration.
The Contract Data for a particular contract must be prepared specifically for
that contract. When re-typing or otherwise preparing the basic format, it is most
important that the text printed in the PSC is not changed because it has been
designed to read correctly with the relevant clauses in the PSC. The correct text
for each statement is identified in the example by the font in this main text.
Contracts for the provision of professional services by a consultant are some-
times prepared as the outcome of negotiation during which the potential
Consultant is already advising the Employer on the proposed contract between
them. It is nevertheless important to recognise the three basic stages of this
process, which become clearly separate when an employer is seeking bids in
competition from several consultants. With respect to the preparation of the
Contract Data for a contract under the PSC, these three stages are
a) Employer prepares an enquiry comprising a completed part one and a
prepared format for part two,
b) bidding consultants prepare their offers by completing part two and
c) a contract is made between the Employer and the successful Consultant.
The example assumes that this process is followed, and the entries made at
each stage are identified by the following fonts.
a) European Grain plc
b) PM Services Ltd
c) Ms. I. Arkwright
The example also assumes that the following decisions have been made by
the Employer
. main Option A has been chosen together with Option W2 and secondary
Options X1, X2, X3, X4, X8, X9, X10, X11, Y(UK)2 and Z,
. the completion date for the whole of the services,
. a programme is not to be identified in the Contract Data,
. the period for payment of accounts is three weeks (as subclause 51.1),
. the amount to be paid for certain expenses, and the Consultant to quote
for others,
. the Consultant is to provide additional insurances,
. the Consultant’s liability is not limited to the amount of his insurances and
. the tribunal is arbitration.
It is recommended that when an optional statement is used in Contract Data
part one it is inserted under the appropriate section of the PSC, as illustrated
in the example.

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Part one – Data provided by the Employer

1 General . The conditions of contract are the core clauses and the clauses for main Option
Choose a main Option and the
. . dispute resolution Option W2
.A, . . . . and secondary Options X1,
. . . . . X2,
. . . . . X3,
. . . . . .X4,
. . . . .X8,
. . . . .X9,
..... secondary Options appropriate to the
contract, which must be compatible with
X10,
. . . . . . . . .X11,
. . . . . . . .Y(UK)2 . . . . . . .Z. . . of the NEC3 Professional Services Contract
. . . . . . . . . . . . and
June 2005 (with amendments June 2006). the chosen main Option. See GNs on
‘Contract strategy’ and ‘Basis of the
appointment of a Consultant’.

. The Employer is
The Employer’s legal name. Employer’s postal address (subclause
13.2) including postcode, telephone and
Name European
. . . . . . . . . . . . . .Grain
. . . . . . . . plc
............................................................. facsimile numbers for the purpose of the
contract (not necessarily the registered
Address Long
. . . . . . . .Acre
. . . . . . .Industrial
. . . . . . . . . . . . . .Estate
...................................................... address).
Spearshead
...................................................................................
Bristol
. . . . . . . . . .BS8
. . . . . . 2LR
...................................................................
Tel
. . . . . . . . . . . . . . 567890
01234 . . . . . . . . . . . . .Fax
. . . . . . 01234
. . . . . . . . . 678905.
.........................................

. The Adjudicator is
Leave blank until the Parties have
jointly agreed an appointee. At Contract
Name .Ms.
. . . . . I.
. . . .Arkwright
......................................................................... Date, state the Adjudicator’s name,
postal address with postcode, telephone
Address Solva
. . . . . . . . and
. . . . . Smith
. . . . . . . . Project
. . . . . . . . . .Management
.................................................... and facsimile numbers for the purpose
Meadow of the contract. See GN on subclause
. . . . . . . . . . . House,
. . . . . . . . .Goode
. . . . . . . .Road
....................................................... W2.2(1).
Exeter
. . . . . . . . .EX8
. . . . . . .6LN
...................................................................
tel
. . . . 01567
. . . . . . . . . . 23456
. . . . . . . . . . . . fax
. . . . .01567
. . . . . . . . . .78901.
..........................................

. The services are

Describe the services briefly for their
general identification.
Project
. . . . . . . . . . . management
. . . . . . . . . . . . . . . . . .of
. . . extensions
. . . . . . . . . . . . . . .to
. . . .unloading
. . . . . . . . . . . . . and
. . . . . . distribution
. . . . . . . . . . . . . . . . facilities
. . . . . . . . . . . . at
......
Long
. . . . . . . . Acre
. . . . . . . .Works.
........................................................................................

. The Scope is in
State references of the documents
containing the Scope. See GN on ‘Basis Document
of the appointment of a Consultant’ and . . . . . . . . . . . . . . .ref
. . . . .XX90.
....................................................................................
Table 2. Subclause 13.1.
. The language of this contract is English.
...........................................................

. The law of the contract is the law of England and Wales.

.....................................................
Subclause 12.2.
. The period for reply is 2
. . . . . . . . . . . . . . weeks.
GN on subclause 13.3.
. The period for retention is 2
. . . . . . . . . . . . . . years following Completion or earlier
termination. GN on subclause 13.6.

. The Adjudicator nominating body is

Institution
. . . . . . . . . . . . . . . of
. . . .Civil
. . . . . . .Engineers.
..............................................................................

. The tribunal is arbitration.

...................................................................................

. The arbitration procedure is the latest edition of the ICE Arbitration

......................................................
Procedure.
...............

. The place where arbitration is to be held is London.

...........

. The person or organisation who will choose an arbitrator

. if the Parties cannot agree a choice or

. if the arbitration procedure does not state who selects an arbitrator
is Institution
. . . . . . . . . . . . . . .of
. . . Civil
. . . . . . . Engineers.
...........................................................................
. The following matters will be included in the Risk Register
As
. . . . .shown
. . . . . . . . .in
. . . Document
. . . . . . . . . . . . . . .ref
. . . . .XYZ
. . . . . . . dated
. . . . . . . . .20
. . . .June
. . . . . . .2005.
....... If Option Z is used, refer to GN on
Option Z and state the conditions here
. The additional conditions of contract are Clauses Z1 to Z6 as in document
............................................... with reference numbers using prefix ‘Z’.
Grain
. . . . . . . . . Additional
. . . . . . . . . . . . . . .GA
. . . . . .12
. . . .dated
. . . . . . . . 20
. . . . June
. . . . . . . .2005.
..................................................

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2 The Parties’ main responsibilities . The Employer provides access to the following persons, places and things

access to access date

GN on subclause 25.2. Long acre works and Employer’s Agent 5 July 2005.
. .................................................... ................................

. The Employer’s Agent is If Option X10 is used.

Name See GN on Option X10.

.Mr.
. . . . . .E.
. . . .X.
. . . .E.
. . . .Cutive
................................................................
Address Long
. . . . . . . .Acre
. . . . . . .Industrial
. . . . . . . . . . . . . .Estate
......................................................
Spearshead
...................................................................................
Bristol
. . . . . . . . . .BS8
. . . . . . 2LR.
...................................................................
If Option X10 is used.
. The authority of the Employer’s Agent is
See GN on Option X10.
all
. . . . .actions
. . . . . . . . . .by
. . . . the . . . . . . . . . . . . . .stated
. . . . . Employer . . . . . . . . .in
. . . this
. . . . . .contract.
................................................
If Option X8 is used, the details of any
. The collateral warranty agreements are collateral warranty agreements should be
referred to here and appended to the
Agreement reference Third party Contract Data.
NXT/Door-1 Adjacent Properties plc. See GN on Option X8.
..................................................... ................................

3 Time . The starting date is 5 July 2005.

............................................................................
. The Consultant submits revised programmes at intervals no longer GN on subclause 31.2.
If no programme is to be identified in than 5 weeks.
part two of the Contract Data. See GN ...........
. The Consultant is to submit a first programme for acceptance within
on subclause 31.1.
3. . . . . . . . . . . . . . weeks of the Contract Date.
If the Employer decides completion date.
. The completion date for the whole of the services is
GN on subclause 30.1.
.30
. . . .June
. . . . . . .2006.
............................................................................................

4 Quality . The quality policy statement and quality plan are provided within

Subclause 40.2. .3. . . . . . . . . . . . . weeks of the Contract Date.

Subclause 41.1.
. The defects date is 26
. . . . . . . . . . . . . . . . .weeks after Completion of the whole of
the services.

5 Payment . The assessment interval is a calendar month.

.................................................................
Can be any period but preferably not
. The currency of this contract is pounds sterling (£).
............................................................ longer than five weeks. See GN on
subclause 50.1.
. The interest rate is 2
. . . . . % per annum above the
GN on subclause 51.5. base
. . . . . . . . . . . . . . . . . . . . . . . . . . . .Lloyds
lending rate of . . . . . . . . . .Bank
. . . . . . . .plc.
..........................................................
. The expenses stated by the Employer are
If the Employer states any expenses and
item amount the amount to be paid.
car mileage 40p per mile See GN on subclause 50.3.
................................. ...........................
rail travel standard class fare.
................................. ...........................

. The Consultant prepares forecasts of the total expenses

at intervals no longer than .12

. . . . . . . . . . . . . . . weeks.
. The Employer will pay for the items or activities listed below in the GN on clause 52.
currencies stated
items and activities other currency total maximum payment
payment in the currency
Consultancy on design Euros Euros 30,000.
............................. .................... .............................
If Option X3 is used.
of loading equipment
........................................................................................................ See GN on Option X3.
. The exchange rates are those published in

Financial Times on 1 June 2005.

..................... .........................................................................
If Option X1 is used.
. The index is the Retail Prices Index.
See GN on Option X1. ................................................................

6 Compensation events . The law of the project is Law of England and Wales.
.........................................................................
If Option X2 is used.
See GN on Option X2.

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 Appendices

8 Indemnity, insurance and liability . The amounts of insurance and the periods for which the Consultant
maintains insurance are
event cover period following
Completion of the
whole of the
services or earlier
termination
failure of the .£5m
............................ 6. . .years
..................
Consultant to use the in respect of each claim, GN on subclause 81.1.
skill and care normally without limit to the
used by professionals number of claims
providing services similar
to the services
death of or bodily injury to GN on subclause 81.1.
.£5m
............................ 12
. . . .months
.................
a person (not an employee in respect of each claim,
of the Consultant) or loss without limit to the
of or damage to property number of claims
resulting from an action
or failure to take action
by the Consultant GN on subclause 81.1.
death of or bodily injury .£2m
............................ 12
. . . .months
.................
to employees of the in respect of each claim,
Consultant arising out of without limit to the
and in the course of their number of claims
employment in connection
with this contract

. The Employer provides the following insurances

Liability for loss of or damage to property The replacement cost until the
(except survey equipment) provided by the property is returned to the
Employer for the use of the Consultant. Employer.
GN on subclause 82.1. . The Consultant’s total liability to the Employer for all matters arising
under or in connection with this contract, other than excluded matters, is
limited to
the
. . . . . amount
. . . . . . . . . . . of
. . . .the . . . . . . . . . . . . . . . . . professional
. . . . .Consultant’s . . . . . . . . . . . . . . . . . indemnity
. . . . . . . . . . . . . . insurance
. . . . . . . . . . . . . .cover
.................
. The Consultant provides these additional insurances
If the Consultant is to provide additional
1. Insurance against liability insurances see GN on subclause 81.1.
. . . . . . . . . . . for
. . . . . loss
. . . . . .of
. . . .or
. . . damage
. . . . . . . . . . . .to
. . . survey
. . . . . . . . . .equipment
...................
provided by the Employer
....................................................................................................
Cover is .replacement
. . . . . . . . . . . . . . . . .cost
......................................................................
Period of cover until . . . . . . . all
. . . . .the
. . . . .equipment
. . . . . . . . . . . . . . is
. . . .returned
. . . . . . . . . . . .to
. . . .the
. . . . .Employer
.....................
Deductibles are .nil
............................................................................

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 Guidance notes and flow charts for the Professional Services Contract

Part two – Data provided by the Consultant

. The Consultant is

Name PM
. . . . . . Services
. . . . . . . . . . . . Ltd
.............................................................
Bidding consultant to state legal name
Address Enterprise
. . . . . . . . . . . . . . .Way
................................................................ and postal address (with postcode) for
the purpose of the contract.
Bristol
...............................................................................
See subclause 13.2.
BS90
. . . . . . . . 6PM.
.......................................................................

. The key persons are

Name .Ms.
. . . . . .K.
. . . .Smithson
....................................................................
Job .Project
. . . . . . . . . . Manager
....................................................................
Responsibilities In
. . . . charge
. . . . . . . . . .of
. . . .the
. . . . .project
........................................................
Qualifications MSc,
. . . . . . . . .MIMechE
......................................................................
Experience .3. . years
. . . . . . . . as
. . . .Project
. . . . . . . . . . .Manager,
. . . . . . . . . . . . . .4. . years
. . . . . . . . as
. . . .Assistant
. . . . . . . . . . . . .PM.
............

Name .Mr.
. . . . . .V.
. . . .Green
....................................................................
Job .Chief
. . . . . . . .Designer
......................................................................
Responsibilities Supervising
. . . . . . . . . . . . . . . . .design
. . . . . . . . .of
. . . .plant
.................................................
Qualifications PhD,
. . . . . . . . FICE
.......................................................................
Experience .10
. . . .years
. . . . . . . .design
. . . . . . . . .of
. . . .process
. . . . . . . . . . plants.
...........................................

. The staff rates are

name/designation rate
Ms. K. Smithson (PM) £75 per hour
.......................................... ........................................... Bidding consultant to quote staff rates
Mr. V. Green (Chief Designer) £65 per hour for the different categories (or names) of
.......................................... ........................................... staff.
Mr. W. Jones (Estimator) £60 per hour
.......................................... ........................................... See GN on subclause 11.2(13).
Ms. J. Brown (Planner) £60 per hour
.......................................... ...........................................
Assistants £35 per hour.
.......................................... ...........................................

. The expenses stated by the Consultant are

item amount
Subsistence (as authorised away from
If the Consultant states the expenses and home address) £80 per night
the amount to be paid. (These can be in ................................................ ...........................................
addition to those stated by the Employer Printing of drawings £5.50 per A1 size print.
in the Contract Data part one.) ................................................ ...........................................
. The following matters will be included in the Risk Register
See GN on subclause 50.3
As
. . . . .shown
. . . . . . . . . in
. . . Document
. . . . . . . . . . . . . . .ref
. . . . .RR1.
.......
. The Employer provides access to the following persons, places and things

access to access date

Designers of loading equipment 12 July 2005.
GN on subclause 25.2 ................................................ ...........................................

. The activity schedule is AS 1. If Option A or C is used, bidding

....................................................................... consultant to state reference of his
priced activity schedule.
. The tendered total of the Prices is £93,400 (ninety three thousand four
.......................................................
See GN on activity schedule.
.hundred
. . . . . . . . . . .pounds
. . . . . . . . . . sterling)
..................................................................................

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APPENDIX 3

Adaptation for subcontracts where a Contractor is employed under the ECC and wishes to appoint a Consultant
under the PSC
The adapted PSC can be used for a subcontract by a Contractor employed under the ECC wishing to appoint a
Consultant to provide professional services (ECC subclause 26.3), e.g. design. In these circumstances the following
guidance is given.

Additional conditions
The following clauses should be added under the PSC Option Z.
Z1 In these conditions of contract and the Contract Data, the following terms are amended as shown.

Term in PSC Term to be used in subcontract

Contract Data Subcontract Data
Employer Contractor
Consultant Subcontractor
Subconsultant Subsubcontractor
Contract Date Subcontract Date
this contract this subcontract
subcontract subsubcontract
law of the contract law of the subcontract
language of this contract language of this subcontract
currency of this contract currency of this subcontract

Z2 In these conditions of contract the periods of time in the subclauses stated are changed as follows.

PSC subclause Time in PSC subclause Time in subcontract

subclause
51.1 three weeks four weeks
61.3 eight weeks six weeks
62.3 first sentence two weeks one week
62.3 second sentence two weeks four weeks
W1.3 top section of the Adjudication Table the second occurrence of four weeks three weeks
W1.3 second section of the Adjudication Table the second occurrence of four weeks three weeks
W1.3 third section of the Adjudication Table the second occurrence of four weeks three weeks
W1.4(3) second sentence four weeks three weeks
Option Y(UK)2 seven days fourteen days
Y2.2 first sentence

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 Guidance notes and flow charts for the Professional Services Contract

Other matters to be considered

Scope The PSC guidance notes are wholly relevant. The Contractor should pay parti-
cular attention to his preparation of the Scope and ensure that his obligations
in the main contract with respect to the subcontracted services are properly
undertaken by the Subcontractor.

Subcontract Data The following basic information about the main contract should be included in
the Subcontract Data (as in the Engineering and Construction Subcontract).
. Title of the works
. The Employer
. The Project Manager
. The Supervisor
. The Adjudicator

Main Option The main Option chosen for the PSC subcontract need not be the same type
as the main Option in the ECC main contract. For example, a Contractor
employed on an ECC Option E cost reimbursable contract may require design
work to be done on a PSC Option A activity schedule subcontract.

Time periods As well as the periods of time adjusted in the Option Z additional conditions
suggested above, other time periods are to be stated in the Subcontract Data
(e.g. the period for reply). The Contractor must ensure that these periods are
adequate for him to be able to comply with the main contract.

Termination In order to provide for the possibility of the main contract being terminated, the
Contractor will usually wish to include the PSC Option X11 in the subcontract.

Disputes Provision for joint adjudication of disputes is made in PSC subclause W1.3(4a)
and (4b) or W2.3(3a) and (3b). The main contract Adjudicator should be
identified in the Subcontract Data.

Insurance The Employer’s risks remain and the Contractor passes those of his risks under
the ECC to the Consultant (Subcontractor) where they apply to the subcontract
services. Double insurance is effectively avoided since the insurance premiums
payable by the Contractor under the main contract (ECC) will reflect the propor-
tion of the services which are subcontracted.
Where the Consultant is likely to complete Providing the Services some time
before the ECC Completion Date and defects date, careful consideration will
need to be given to the periods for which insurance by the Consultant is
required. Where Option X15 is not included in the main contract (ECC), the
standard of care required of the Consultant is a matter of negotiation between
the Contractor and the Consultant. The PSC provides for ‘the skill and care
normally used by professionals providing the services similar to the services’.
The Consultant will be required to provide employer’s liability insurance,
to cover his own employees, since the latter would not be covered by the
Contractor’s insurance.

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APPENDIX 4

Adaptation for subcontracts where a Consultant is employed under the PSC and wishes to appoint a Subconsultant
under the PSC
The adapted PSC can be used for a subcontract by a Consultant employed under the PSC wishing to appoint a
Subconsultant to provide part of the services (subclause 24.3). In these circumstances the following guidance is
given.
Additional conditions
The following clauses should be added under the PSC Option Z.
Z1 In these conditions of contract and the Contract Data, the following terms are amended as shown.

Term in PSC Term to be used in subcontract

Contract Data Subcontract Data
Employer Consultant
Consultant Subconsultant
Subconsultant Subsubconsultant
Contract Date Subcontract Date
this contract this subcontract
subcontract subsubcontract
law of the contract law of the subcontract
language of this contract language of this subcontract
currency of this contract currency of this subcontract

Z2 In these conditions of contract the periods of time in the subclauses stated are changed as follows.

PSC subclause Time in PSC subclause Time in subcontract

subclause
51.1 three weeks four weeks
61.3 eight weeks six weeks
62.3 first sentence two weeks one week
62.3 second sentence two weeks four weeks
W1.3 top section of the Adjudication Table the second occurrence of four weeks three weeks
W1.3 second section of the Adjudication Table the second occurrence of four weeks three weeks
W1.3 third section of the Adjudication Table the second occurrence of four weeks three weeks
W1.4(3) second sentence four weeks three weeks
Option Y(UK)2 seven days fourteen days
Y2.2 – first sentence

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 Guidance notes and flow charts for the Professional Services Contract

Other matters to be considered

Scope The PSC guidance notes are wholly relevant.

Subcontract Data The following basic information about the main contract should be included in
the Subcontract Data.
. Title of the services
. The Employer
. The Adjudicator

Main Option The main Option chosen for the PSC subcontract need not be the same as that
chosen for the main contract. For example, a Consultant employed on an Option
E time based contract may decide to appoint a Subconsultant on an Option A
priced subcontract with activity schedule.

Time periods As well as the periods of time adjusted in the Option Z additional conditions
suggested above, other time periods are to be stated in the Subcontract Data
(e.g. the period for reply). The Consultant must ensure that these periods are
adequate for him to be able to comply with the main contract.

Termination In order to provide for the possibility of the main contract being terminated, the
Consultant will usually wish to include the PSC Option X11 in the subcontract.

Disputes Provision for joint adjudication of disputes is made in PSC subclause W1.3(4a)
and (4b) or W2.3(3a) and (3b). The main contract Adjudicator should be identi-
fied in the Subcontract Data.

Insurance The Employer’s risks remain and the Consultant passes those of his risks
under the PSC to the Subconsultant where they apply to the subcontract
services. Double insurance is effectively avoided since the insurance
premiums payable by the Consultant under the PSC will reflect the proportion
of the services which are subcontracted to the Subconsultant.
Where the Subconsultant is likely to complete Providing the Services some
time before Completion of the Consultant’s services, careful consideration will
need to be given to the periods for which insurance by the Subconsultant is
required.
The Subconsultant will be required to provide employer’s liability insurance
to cover his own employees, since the latter will not be covered by the Consul-
tant’s insurance.

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