According to the NEC Contract Board, the introduction of the NEC4 suite of contracts is a “positive development, and existing users of NEC3 will recognise that NEC4 build upon the content of NEC3, in a way which can be described as evolution not revolution”. The changes made to the NEC4 suite of contracts have been brought about as a “direct result of feedback from industry, to support methods and provide solutions which clients [the new NEC terminology for “employer”] are demanding.”
The key changes will include:
- Contractor’s proposals – either party may propose opportunities to improve the outcome of the project. In particular, the contractor may propose changes to the "scope" (the new NEC terminology for the works information, service information or goods information) which reduces cost and/or promotes acceleration to achieve early Completion
- Defined cost – the professional services, term service and supply contract now use defined cost in the same way as the Engineering and Construction Contract (ECC)
- Finality of assessments – provisions have been introduced to the costs based contracts (main options C-F) for reviewing and accepting the contractor’s defined cost, culminating in the issue of a final assessment, which becomes conclusive if not challenged by either party within 4 weeks of issue
- Consensual dispute resolution – a 4-week period for informal dispute resolution has been introduced, which is mandatory where option W1 applies and optional where option W2 applies (used in the UK where the housing grants, construction and regeneration act 1996 applies)
- Early contractor involvement - a new secondary option to incorporate the NEC's 2015 Early Contractor Involvement (ECI) provisions has been included. This allows the appointment of the Contractor at an early stage to participate in the development of design and proposals
- Changes in terminology, including the new definition of “Scope” referred to above and replacing “employer” with “client"
The other key changes incorporate amendments that are commonly made to current NEC3 contracts. These include:
- Design and build option – a new secondary option catering for design and build procurement. In particular, there will be provisions dealing with professional indemnity insurance, a market standard duty of care, intellectual property ownership and a licence to use copyright material
- Collateral warranties – a new secondary option, which allows for the provision of collateral warranties by the contactor
- BIM – a new secondary option supporting the use of BIM
- Quality management – the contractor is required to prepare and issue a quality management system and plan
- Additional compensation events – NEC4 contracts will facilitate the incorporation of additional compensation events, which will enable clients to alter the standard risk profile
- Anti-bribery and corruption provisions
- Confidentiality and publicity provisions; and
- Assignment provisions – a provision has been introduced to allow the assignment of the benefit of or any rights under the contract to another party.
As part of the NEC4 suite, the NEC will be introducing two new contracts:
(a) The Design Build Operate (DBO) contract under which contractors will bear responsibility for design, construction, operation and/or maintenance of a project; and
(b) The Alliance Contract (ALC), to be published initially in consultation form, under which clients can enter into a single collaborative contract with a number of participants in order to deliver a project.
It is the NEC Contract Board’s view that "[u]sers who are familiar with NEC3 contracts will have no trouble moving to NEC4. The style, layout, terminology and key project management processes that run through in NEC contracts remain."
Given the evolutionary (rather than revolutionary) nature of the NEC4 suite of contracts, we anticipate that clients (in the NEC4 sense) will switch to using NEC4 contracts sooner rather than later. However, the extent to which the NEC4 contracts can/will be used without amendment to the legal terms remains to be seen.