On 22 June 2017, the NEC4 suite of standard form contracts will be officially launched at the NEC Users’ Group’s Annual Seminar. This new suite will replace the popular NEC3 suite, which was first published back in 2005.
Evolution of the NEC3 suite
In the 12 years since the NEC3 contracts were released, those contracts have been endorsed by various UK government bodies and used widely on major infrastructure projects, primarily in the UK but also internationally. Some high profile UK projects procured using NEC3 contracts include the 2012 London Olympics, Heathrow Terminal 2, HS2 and Crossrail.
Key features of the NEC3 contracts include their modular nature and the fact they specifically envisage the project as a collaborative process between the parties and oblige the parties to act in a spirit of mutual trust and co-operation. This is intended to get away from the more traditional, adversarial approach often taken by the parties in construction projects, and therefore avoid disputes. The NEC3 contracts are also notable for their distinctive drafting style, including the use of plain English and present tense, which is intended allow the contracts to be understood by people whose first language is not English.
According to the publishers of NEC, the new NEC4 suite will not depart from these fundamental principles but will instead build upon the existing NEC3 contracts. The rationale for developing the NEC4 suite was to respond to user feedback, industry developments and user practice. The NEC commented that as expectations in the market have changed, so the NEC3 suite needed to evolve in order to meet the demands of future users. In particular, the NEC wanted to address the increasing use of client drafted “Z clauses” by adding in a range of new optional provisions. The NEC also wanted to make the contracts more suitable for international use.
Although the new NEC4 contracts have not yet been published, the publishers of NEC have released some information about the changes that can be expected. The most notable feature of the new suite is the addition of two brand new standard form contracts, a Design, Build and Operate Contract (DBO) and an Alliance Contract.
The DBO Contract will combine the responsibility for designing, constructing, operating and maintaining the works all procured from a single contractor. The NEC has stated that this will allow clients to “procure a more integrated whole-life delivery solution” which “reflects the increasing demand for contracts extending into the operational phase”.
The NEC has stated that the Alliance Contract, to be published initially in consultation form, will be a “multi-party collaborative contract based upon an integrated risk and reward model” and suited for use on “large complex projects”. This new contract departs from the previous NEC contracts in that it is a single contract that allows multiple participants to come together under one contract. The intention of the Alliance Contract is that the participants will “work together to achieve the client’s objectives and share in the risks and benefits of doing so”.
Other features of the NEC4 suite include new secondary options for:
- building information modelling (BIM);
- consensual dispute resolution;
- a dispute avoidance board (DAB);
- collateral warranties;
- contractor’s proposals (i.e. value engineering);
- bribery and corruption clauses; and
- quality management.
The NEC has also tried to standardise the terminology used across the NEC4 contracts in order to bring those contracts closer together.
Although the NEC3 contracts are used widely within the UK, they have not yet proved to be as popular internationally as some of the other standard form contracts in the market. It will be interesting to see whether this changes with the release of the new NEC4 suite, which was specifically developed with increased international use in mind.
We will provide further updates on the NEC4 contracts once they have been published.