NEC4 suite of contracts
The new generation of NEC Contracts (NEC4) were launched on 22 June 2017. The intentions behind the key changes from the NEC3 were:
More evolution than revolution
The changes will impact on the management of NEC Contracts and flow across the suite. There have also been small changes in the terminology, such as changing "Employer" to "Client", "Work Information" to "Scope" and "Risk Register" to "Early Warning Register".
However, the ethos of the NEC, for the parties to act in the spirit of mutual good faith and cooperation, remains, as does the main structures of the contract form. Its use of "plain English" and the present tense is also retained and explains why terms such as "undertakings to others" are used instead of the usual "collateral warranties".
To address users' feedback
Some of the changes better reflect the construction industry's usual practices. The amendments to make the payment to the contractor conditional on the contractor's application and creating a final account process are likely to bring payment processes more in line with parties' current practices and have the potential to provide more certainty at the end of the project.
Reduction of Z clauses
Clauses to address assignment, bribery and corruption, confidentiality and collateral warranties, as well as listing additional compensation events in the Contract Data, have been introduced with the aim of trying to reduce the use of Z clauses. As a number of issues remain with the drafting, it is unlikely that there will be an end to Z clauses. By way of example, the new assignment provision allows the contractor to assign the benefit of the contract, and this is likely to be amended.
The inclusion of clauses on early contractor involvement and value engineering demonstrate the NEC's emphasis on collaboration between the parties.
The NEC4 Suite also contains the following new contracts:
- The Alliance Contract (currently in consultative form)
There will be a period of consultation before this form is published in January 2018. There are a number of issues with the drafting, which the Trowers & Hamlins team propose to raise with the NEC in the consultation period.
- The Design, Build and Operate Contract
This is intended to be a one stop shop under which the contractor designs and builds assets and then provides operational or maintenance services for a number of years after completion.
- The Term Services Sub-Contract and Professional Services Sub-Contract
Whilst the NEC3 has not been withdrawn, a general shift towards the use of NEC4 is expected. Users of the NEC suite should ensure familiarity with the changes, not just so that contracts are properly managed, but also to take these changes into account in the pricing of any tenders based on the NEC4 form.
This article is taken from Building Interest - Summer 2017.