The NEC4 suite of contracts was revealed earlier this summer amid much fanfare, with NEC making its global ambitions clear. We consider how NEC is targeting international projects and regions where FIDIC has traditionally been widely used.
Building on UK success
NEC says the NEC4 update is “evolution and not revolution”. This is perhaps no surprise given the success of NEC3 in the UK. It has been widely adopted as the UK public sector contract of choice, boasting use on the largest UK infrastructure projects of recent times, including London Crossrail and the 2012 Olympics.
Building on NEC3’s success in the UK, NEC4 retains the key principles of previous editions. The ethos is one of partnering, risk sharing and pro-active project management by the client (via the project manager) embodied by the NEC philosophy of “mutual trust and co-operation”.
Further, as the NEC are keen to point out, its approach of using plain English and the present tense, makes NEC contracts both easy to translate and easy to understand by those who speak English as a second language.1 This feature is retained for NEC4.
NEC4 changes targeting international use
So, if the underlying principles are the same, and NEC has always been suitable for international use, what has changed?
While there are new additions to the suite including a Design Build and Operate (DBO) form and an alliance contract, there is no major overhaul.
Instead, there is an active shift to make NEC4 more user-friendly internationally. Terms have been updated to provide familiarity for new users. Gone is some of the old terminology. “Employer” is replaced with “Client”. “Works Information”, “Service Information” and “Goods Information” are replaced and “Scope” is used throughout.
The common law concept of “indemnity” has been removed from the risk and insurance section because it has a specific meaning under English law. It is replaced with references to “recovery of costs” from the party “liable”. Other provisions commonly found in international contracts have been added such as one that deals with bribery and corruption.
There is a new dispute avoidance option W3, to be used where the UK mandatory adjudication legislation does not apply. It involves the formation of a dispute avoidance board (DAB) with the power to make non-binding recommendations. Again, this is consistent with an appeal to international clients, who may be more familiar with DAB processes such as those under FIDIC.
Is NEC4 destined for world domination?
In many regions, such as the Middle East, FIDIC has long been the go to contract. While NEC4 is no major overhaul, NEC is using its latest update as a platform to focus its marketing internationally and to challenge the FIDIC strongholds.
Will this marketing strategy reap success? A browse of the NEC website reveals NEC already has impressive endorsements from the governments of Hong Kong and South Africa. Further, NEC cites increasing use of its contracts in public projects in jurisdictions including Australia and New Zealand. Yet, it is noticeable that these are all English-speaking and largely common law countries.
World domination may still be some way off, but we will watch with interest to see if with its savvy marketing and renewed emphasis on international projects the NEC is able to make ground on FIDIC on the global stage.