Key Contract Terms

Glossary of Key Terms: RIAI, PWC & NEC Construction Contracts in the UK & Ireland

Navigating the complexities of construction and infrastructure projects in the UK & Ireland requires a clear understanding of the specific terminology used within common contract forms. The RIAI (Royal Institute of the Architects of Ireland), PWC (Public Works Contract), and NEC (New Engineering Contract) suites each have their own language and defined terms that dictate roles, responsibilities, risks, and procedures.

This glossary provides definitions for key terms frequently encountered in these contracts, aiming to enhance clarity for Employers, Contractors, Subcontractors, Consultants, and other stakeholders involved in Irish construction contract terminology. Understanding these terms is crucial for effective contract administration, risk management, and dispute avoidance.

(Note: These definitions are for general guidance. The specific meaning and application of any term will always depend on the precise wording within the relevant contract document itself. Always refer to your specific contract.)

General / Common Terms

• Architect/Engineer: The professional typically responsible for design and often acting as the contract administrator (especially in traditional RIAI contracts) or fulfilling specific roles defined by the contract.

• Claim: A formal assertion by one party against another seeking entitlement under the contract, usually for additional time (Extension of Time) or money (Loss and Expense, Compensation Event costs, damages).

• Client / Employer: The party procuring the works or services. Referred to as 'Employer' in RIAI and PWC forms, and 'Client' in NEC4.

• Contractor: The party contracted by the Client/Employer to carry out the construction works.

• Defects Liability Period (or Defects Correction Period - NEC): A period after Practical/Substantial Completion during which the Contractor is obliged to return to site and rectify defects notified by the Architect/Engineer/Supervisor.

• Dispute Resolution: The processes outlined in the contract for resolving disagreements that cannot be settled through negotiation (e.g., Conciliation, Adjudication, Arbitration).

• Extension of Time (EOT): An additional period of time granted to the Contractor to complete the works, typically relieving them from liability for liquidated damages for that period, due to specific delaying events recognised under the contract.

• Liquidated Damages (LDs): A pre-agreed sum payable by the Contractor to the Employer for each day/week of delay beyond the contractual Completion Date (if the Contractor is culpable). Must be a genuine pre-estimate of the Employer's likely losses.

• Practical Completion / Substantial Completion: The stage at which the works are certified as essentially complete and fit for occupation or use by the Employer, although minor defects may still require rectification. This typically marks the start of the Defects Liability Period and the release of half the retention fund.

• Quantity Surveyor (QS): A professional advising on construction costs and contracts, often involved in measurement, valuation, payment certification, and claims assessment.

• Retention: A percentage of money withheld from interim payments made to the Contractor as a form of security for the Employer against defects or non-completion. Typically released in two halves (at Practical Completion and following the end of the Defects Liability Period).

• Subcontractor: A party engaged by the Contractor to carry out a portion of the works.

• Variation / Change Order: An instruction issued by the Architect/Engineer/PM/ER altering the scope, quality, or timing of the works defined in the original contract.

RIAI Contract Terms

• Architect's Instruction (AI): A formal written instruction issued by the Architect under the terms of the RIAI contract, e.g., to vary the works or expend provisional sums.

• Final Certificate: The certificate issued by the Architect at the end of the project (after the Defects Liability Period) confirming the final amount due between the Employer and Contractor and certifying that works are complete in accordance with the contract.

• Loss and Expense: Financial claims made by the Contractor for costs incurred due to disruption or delay caused by matters for which the Employer is responsible under the contract (distinct from the valuation of variations).

• Nominated Subcontractor: A subcontractor selected by the Architect/Employer, with whom the main Contractor is instructed to enter into a subcontract.

PWC (Public Works Contract - Ireland) Terms

• Compensation Event (PWC - Clause 10.3): Specific events listed in the contract (Schedule Part 1K) which, if they occur and impact the cost or time for completing the works, may entitle the Contractor to an adjustment to the Contract Sum and/or an Extension of Time, subject to notification and assessment procedures. Note: The definition and process differ significantly from NEC Compensation Events.

• Conciliation (PWC - Clause 13.2): The mandatory first formal step in dispute resolution under most PWC forms, involving a neutral Conciliator facilitating settlement or issuing a recommendation.

• Dispute Management Procedure (PWC - Clause 13.1): An initial step before conciliation where disputed Employer Representative determinations are referred to a Project Board (composed of Employer and Contractor representatives) for review and negotiation.

• Employer's Representative (ER): The individual or entity appointed by the Employer to administer the PWC contract, issue instructions, make determinations, and certify payments.

• Payment Schedule (PWC - Schedule Part 1E): The part of the contract specifying details related to interim payments, including valuation dates and payment periods, subject to compliance with the CCA 2013.

• Programme (PWC - Clause 4.8/4.9): The detailed programme submitted by the Contractor showing the sequence and timing of works, which must meet specific requirements and be reviewed by the ER. It is a key tool for managing progress and assessing delays.

• Standing Conciliator: A conciliator appointed at the start of high-value PWC projects (>€10m mandatory, €5m-€10m optional) who remains involved throughout to assist with early dispute avoidance and acts as the conciliator for any formal disputes.

• Works Requirements: The documents detailing the Employer's requirements for the project, including specifications, drawings, and constraints, forming a core part of the PWC contract.

NEC (NEC3/NEC4) Terms

• Accepted Programme: The Contractor's programme that has been formally accepted by the Project Manager under the contract. It is a critical management tool used for assessing progress and the time impact of Compensation Events.

• Activity Schedule (Options A & C): A list of activities prepared by the Contractor, priced to form the basis for interim payments under NEC Options A (Priced Contract) and C (Target Contract).

• Bill of Quantities (Options B & D): A list of items giving quantities and descriptions of the work, priced by the Contractor, forming the basis for interim payments under NEC Options B (Priced Contract) and D (Target Contract).

• Compensation Event (CE - NEC Clause 60.1): One of a list of specific events defined in the contract which, if it occurs and is notified correctly, entitles the Contractor to be compensated for its effect on Prices (cost) and the Completion Date (time). Examples include Client instructions changing the Scope, failure to provide access, or unforeseen physical conditions. Note: The definition, scope, and assessment process differ significantly from PWC Compensation Events.

• Core Clauses: The fundamental clauses that apply to all NEC contracts regardless of the Main Option chosen.

• Defined Cost: The cost components defined within the contract (using Schedule of Cost Components or Short Schedule of Cost Components) used to assess the price adjustment for Compensation Events, particularly under Options C, D, E & F.

• Dispute Resolution Options (W1, W2, W3): Contract options specifying the dispute resolution procedures (e.g., Senior Representatives, Adjudication, Tribunal). W2 is typically used in the UK (HGCRA applies); W1 where statutory adjudication doesn't apply or for non-payment disputes in Ireland; W3 introduces a Dispute Avoidance Board.

• Early Warning Notice (EWN): A formal notice given by either the Contractor or the Project Manager as soon as they become aware of any matter which could increase cost, delay completion, or impair performance. Triggers an Early Warning meeting to discuss mitigation.

• Fee Percentage: The percentage added to Defined Cost to cover head office overheads and profit, stated in the Contract Data. Used in assessing Compensation Events and under cost-reimbursable/target options.

• Key Dates: Dates specified in the Contract Data by which the Contractor must meet specific conditions or complete certain sections of work. Failure can lead to cost consequences but not necessarily liquidated damages unless linked to Sectional Completion under Option X5.

• Main Options (A-F): The different primary pricing mechanisms available under the NEC ECC (e.g., Option A: Priced contract with activity schedule, Option C: Target contract with activity schedule, Option E: Cost reimbursable contract).

• Project Manager (PM): The individual or entity appointed by the Client to manage the NEC contract on their behalf. Has extensive responsibilities for issuing instructions, accepting programmes, assessing Compensation Events, certifying payments etc. Must act as stated in the contract, sometimes impartially.

• Risk Register (Early Warning Register in NEC4): A register of identified Early Warning matters, recording potential risks and agreed actions to mitigate them.

• Scope (Works Information in NEC3): The documents specifying and describing the works the Contractor must provide, including specifications, drawings, and constraints.

• Secondary Options (X, Y, Z): Optional clauses chosen at contract formation to tailor the contract, covering aspects like inflation, delay damages (X7), performance bonds (X13), limitation of liability (X18), UK-specific payment rules (Y(UK)2), or bespoke amendments (Z clauses).

• Supervisor: The individual or entity responsible for monitoring the quality of the works, checking compliance with the Scope, witnessing tests, and notifying Defects.

Disclaimer: This glossary provides general explanations of common terms. The precise meaning and application will always depend on the specific wording and context within your individual contract. Always refer to the contract documents for definitive interpretations. Kiltoom Advisory provides expert advice on specific contractual matters.