By Sarah Wilson, partner in the construction department at commercial law firm Watson Burton
Since it was introduced, the New Engineering Contract (NEC) has been widely used across the industry, becoming the contract of choice for Government and public-sector work, as well as being used extensively on other projects.
The NEC is a formalised system created by the Institution of Civil Engineers that guides the drafting of documents on civil engineering and construction projects for the purpose of obtaining tenders, awarding and administering contracts.
The contract was revolutionary when it was first introduced, requiring the parties to act in a “spirit of mutual trust and co-operation”. It is not the type of contract that can be signed and then put aside to gather dust. Instead, it is very much a management contract, setting out in clear language the procedures that need to be followed throughout the works. The aim is that no nasty surprises lie in wait for the developer and that payment is prompt and fair for the contractor. The latest version, NEC3 is now endorsed by governments and the industry worldwide and has a track record for delivering projects on time and on budget.
On June 22, the NEC will introduce NEC4, which has been created as a response to feedback from the industry. The new version focuses heavily on collaboration and generates opportunities for the sharing of cost savings.
The NEC has introduced two new contracts into its suite of contracts, one of which is the Alliance Contract, where all parties will sign up to one single contract and work (hopefully) as one genuine team, with the potential for shared cost savings acting as an incentive.
Focussing on collaborative working will encourage all parties to work together in achieving objectives, sharing both risks and benefits, which along with cost saving and fair payment will benefit the customer as well as the developer and contractor. I’m hoping this will act as a catalyst for the industry in the post Brexit period.
Another welcomed change is introduction of Dispute Avoidance Boards. The industry has a reputation for disputes which, to an extent, this is not wholly deserved. My experience is most people want to do a good job at a fair price. The reality is that construction is very different to manufacturing – there are far more uncertainties and on occasions, disputes arise. The Board helps parties find a solution to disputes. It also provides recommendations, but it is up to the parties whether they accept them or not. In my opinion, the involvement of a third party is very helpful in resolving disputes at an early stage.
Parties are free to continue using old versions of the NEC contract, but generally, the changes to NEC4 are a good balance, benefitting both parties. It will be interesting to see the full extent of changes when the contract is released and see how the industry reacts to using it, after all, the proof of the pudding is in the eating!
For more information on Constructing Excellence in the North East, please contact chief executive, Catriona Lingwood, on 0191 500 7880 or email firstname.lastname@example.org.