I am the project manager on a project using the NEC3 Engineering and Construction Contract (ECC) option A (priced contract with activity schedule). Secondary option X16 (retention) has also been incorporated. A retention-free amount has been agreed with the contractor and the agreed retention after that amount is 3%.
Take over certificates have been issued for some areas that have been handed over and are now being occupied by the employer. The project is anticipated to achieve completion on a date in the near future. Option X5 is not used in the contract and I am treating these ‘taken over areas’ as similar to ‘partial possession’.
The contractor has requested for half retention to be released for the areas taken over by the employer. However, my understanding of the contract is that release of half retention is only linked to the completion of the whole of the works, or the employer taking over the whole of the works. I cannot find any clause that states retention can be reduced upon some areas being taken over by the employer, unless these areas are the sections identified within option X5. Will it therefore be correct to advise the contractor that half retention will only be released following the issue of the certificate of completion, with the remaining half to be released after the issue of the defects certificate?
The contractor has also requested confirmation that the defects period for these areas should start from the take over certified date, but again I can find no reference in the contract that states this. The guidance notes for option X5 state that completion of a section of the works does not affect the defects date, which is defined by reference to completion of the whole of the works. While I am aware that I am not able to use this as a reference (as the contract does not use option X5), I am wondering if the same notion will apply for areas taken over?
Answer
Your understanding is correct as to when retention is released. However, completion of take over are two different things with different tests, and using words from other contracts such as ‘partial possession’ will not help. Completion is about what state the works are in – see clause 11.2(2). Take over is about who is using the works – see clause 35. Take over is important to the contractor because up until that time it remains liable for any damage to the works – see the fourth main bullet of clause 80.1
The contract is clear that the defects date is the stated number of weeks after the completion of the whole of the works – see the entry in contract data part one. It is not dependent upon take over at all, and nor is it dependent upon completion of part of the works.
Equally the release of the first half of the retention in option X16 is dependent upon the completion of the whole of the works, or the date when the employer takes over the whole of the works. The remaining retention is released once the defects certificate has been issued, which in turn will be dependent upon the defects date – see clause 43.4.
