The next generation of NEC contracts – the NEC4 suite – is due to be launched on 22 June 2017 at the NEC Users' Group Annual Seminar 2017.
Delivering the announcement at the Society of Construction Law's (SCL) Annual Conference on 3 March, Matthew Garratt, Commercial Director of Thames Tideway Tunnel project at Costain, confirmed that "no babies are being thrown out with the bathwater" with this set of amendments: the new suite of contracts is an evolution from the NEC3, rather than a revolution.
It has been 12 years since the NEC3 was released and feedback and ideas on best practice since then have been used to improve the suite of contacts to further promote teamwork and collaboration. Changes to the Engineering and Construction Contract (ECC) are explained in the booklet "NEC4 - The next generation - an explanation of changes and benefits" but most of the changes will apply to the full suite of NEC4 contracts.
Here is a summary of the key features based on information provided at the SCL conference.
- Changes to the terminology include: gender neutral language; reference to the "Employer" as the "Client"; "Scope" is to be used uniformly for those documents that describe the work to be carried out; and "Risk Register" is to become "Early Warning Register".
- The drafting team was conscious that the new suite of contracts will be used across the world. Plain English and the present tense is used throughout NEC4 to ensure that the terms can be easily translated and understood by those whose first language is not English.
- Recognising that improvements often come through the supply chain, NEC4 will offer secondary options to enable the parties to identify opportunities to improve the outcome of the project. For example, the Contractor can suggest changes to the Scope that reduce cost or propose acceleration to achieve early completion.
- A common approach to Defined Costs will be achieved by ensuring the Professional Services Contract (PSC), Term Service Contract (TSC) and Supply Contract (SC) use Defined Costs in the same way as the ECC.
- A new "NEC4 Design, Build and Operate Contract" (DBO) is to be introduced, which will combine "responsibility for usually disparate functions – design, construction, operation and/or maintenance, procured from a single supplier". (Note: the DBO is not designed as a Design-Build-Finance-Operate (DBFO) contract).
- A new "NEC4 Alliance Contract" (ALC) will be issued in consultation form and will suit "clients who wish to enter into a single collaborative contract with a number of participants in order to deliver a project or programme of work." The ALC will differ from other NEC4 contracts in that it will be a multi-party contract but will follow, where possible, the same principles and structure as the other contracts.
- Secondary options, including professional indemnity insurance requirements, will be introduced to support design and build contracting, as will clauses to deal with intellectual property rights. The Contractor's design duty will be aligned with the industry standard to use the skill and care normally used by professionals designing similar works.
- A four-week period for escalation and negotiation of a dispute prior to the start of formal proceedings will be introduced – and will be mandatory if dispute resolution option "W1" applies but consensual where option "W2" applies (in the UK where the Housing Grants, Construction and Regeneration Act 1996 (as amended) (HGCRA) applies).
- The ECC will also include a dispute avoidance option "W3" for use if the HGCRA does not apply. Under this option, disputes can be referred to a Dispute Avoidance Board nominated by the parties at the time of contract formation. The board will become familiar with the project, help the parties solve issues that arise and give non-binding recommendations.
- New procedures will be introduced to encourage the checking and agreement of Defined Costs and Disallowed Costs as the work progresses. There will also be a procedure for the issue by the Project Manager of the final assessment of payment which is designed to encourage collaboration and bring finality and certainty of payment into the contracts.
Other changes include: a new option to incorporate the NEC's 2015 Early Contractor Involvement (ECI) provisions; an option to support the use of BIM; a Contractor obligation to prepare and issue a quality management system and plan; anti-bribery and corruption provisions; confidentiality and assignment provisions; and a facility to include additional compensation events. In addition, changes are made to: the Schedules of Costs Components and fee (including simplifications designed to make the contracts easier to set up and use); and changes to the way the Contractor's programme is treated.
The drafters are confident that: "Users 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 nature of the NEC4 suite, it is likely that it will soon take the place of NEC3.