On 27 November 2015, the NEC Panel published an additional clause for use with the NEC3 Engineering and Construction Contract where the Contractor is to be appointed on an early contractor involvement (ECI) basis. The clause is free to download from the NEC website.
The ECI concept was pioneered by the Highways Agency (now Highways England) in the early 2000s and has since been adopted by many other clients on major projects, albeit in a variety of different forms. The thinking behind ECI is that, by appointing the Contractor at an early stage of the project, he can contribute to the design development and planning process and can also add value in areas such as buildability, logistics (e.g. site access and materials storage), programming and sequencing of works, procurement of key trades and so on.
ECI is also seen as a powerful tool to facilitate collaboration and partnering among the key team members responsible for delivery of the project. It is similar in many respects to the two-stage tender process widely used by commercial developers, although some details of the arrangements (covering, for example, matters such as payment) are treated differently.
The new NEC3 clause closely follows the Highways Agency model. It can be used either where the Contractor is to be engaged on a design and build basis, or where he is to assist and advise the Employer’s team engaged to develop the design. Its key features include:
- payment on a cost reimbursable basis for work done during Stage 1, up to an agreed cap;
- a procedure for the submission of design details and pricing information at the end of Stage 1, leading to agreement of the Prices (lump sum or target cost) for the construction phase;
- the issue of a notice to proceed to Stage 2 once the Prices are agreed, with a right for the Employer to appoint a replacement contractor if agreement cannot be reached or the Contractor’s performance during Stage 1 is unsatisfactory;
- an optional provision whereby the Contractor is incentivised for achieving savings in the overall cost of delivering the project (including external costs such as land and consultancy fees), rather than simply by reference to construction costs; and
- ancillary provisions covering key people, use of the Contractor’s designs and so on.
As with all two stage procurement, the use of ECI carries risks for the Employer if the process is not rigorously managed. The most obvious concern is that the Contractor will become “embedded” and that, regardless of what the contract says, it will in practice be difficult to remove him from the project, even if the Prices prove difficult to agree. As a result, the Contractor is likely to be in a strong negotiating position and the Employer and his team are well advised to engage proactively during Stage 1, so as to monitor and drive implementation of the ECI ethos and to mitigate the risks as far as possible.
That said, ECI has been demonstrated to offer significant benefits to those clients who have embraced it in terms of speed of delivery, optimised designs and better working relationships.