20 November 2018

NEC4 – part one

The new NEC4 contract has been in existence now since June 2017.  A year on, we are now seeing it being used, so is it useful to remind ourselves of the changes.

Some of the key changes are explored below, this briefing looks at the main changes which do not relate to cost.

Design and Build Option
This is very welcome. It has the two key elements;

A clause requiring the Contractor/Sub-contractor to act with reasonable skill and care (rather than the default NEC position of fitness for purpose) and PII provisions. Please note with regard to fitness for purpose there has always been the Option X15 which, if used, converts the fitness for purpose clause into a reasonable skill and care clause.

This D&B option is very welcome as the lack of it has caused problems either in having to draft amendments or cause problems to parties on later on down the line, particularly where Option X15 was not included.

Dispute Resolution
There is a new dispute resolution process. It is not compulsory in the UK, but my inclination would be to include it. It requires senior representatives (typically it would be at least one director from each party) to meet within four weeks of a request to do so to deal with a dispute. The senior people should be independent, to the extent that they have not been involved in the project.

There are a number of reasons why such process may help to avoid a dispute escalating; the senior representatives will have less emotion invested in the project and get paid, the senior representatives may well be able to see the bigger picture in reaching a resolution.

Two stage contracting
These provisions allow for the Contractor to be involved in the project and get paid prior to start on site and execution of the contract itself. The start on site would effectively be stage two. Stage one is the planning preparation stage where the Contractor gets the opportunity to liaise closely with the design team to allow for planning, costing etc. This should hopefully reduce issues and CEs through the stage two works.

During stage one the Contractor gets paid on Option C or E basis. The costs are closely monitored and this could be a real chance for some innovative changes to improve the construction process.

The acceptance of the first programme by the PM has been a big problem over the years. A new provision means that if the PM fails to respond by accepting or rejecting the Contractor’s programme, then the Contractor can use deeming provisions in order to get the programme treated as having been accepted by the PM. These deeming provisions are similar to those used with the CE process in NEC3.

There is nothing preventing the parties agreeing to voluntarily implement many of the NEC4 changes within an NEC3 or other contract. However, it is often the case that parties are far more willing to use a process if it is set out in the contract and it is far more likely to succeed in such circumstances. To that extent, I think these changes must all be welcomed by everyone involved in the construction process.