HIGHLIGHTS FROM THE NEC4 CONFERENCE HELD IN LONDON TODAY
Hot off the press: The Bowmans construction team provide real-time feedback on the long-awaited launch of the next generation of NEC contracts, NEC4, from the NEC User Group Annual Conference, being held in London today.
The changes are primarily designed to enhance NEC3, respond to feedback from industry and bring innovation.
Here are some highlights:
- Four new forms of contract have been introduced. The Design Build Operate (DBO) Contract and the Alliance Contract are attracting the most attention from industry.
- The DBO Contract provides a more integrated approach to the procurement of solutions which look beyond the design and build phase, to the ongoing operation and maintenance of an asset. It encourages longer term thinking through whole-life costing and operational phase performance metrics.
- The Alliance Contract introduces an innovative new way of contracting involving a team-based, multi-party contract. This allows for an integrated project team to work closely together in the pursuit of common objectives, sharing in risk and reward and adopting a methodology which reduces disputes – including the controversial “no blame, no claim” principle. The Alliance Contract will be published in draft form after today’s conference for industry consultation and is expected to generate substantial debate.
In addition to the new contracts, the following new NEC4 features are generating a lot of discussion at the NEC User Group Conference today:
Dispute resolution: The introduction of a consensual first step in the dispute resolution procedure to enable parties to negotiate a solution before any formal proceedings commence (which is mandatory unless the UK Construction Act applies). A Dispute Avoidance Board option is also now available, similar in form and nature to the FIDIC equivalent.
Defined Cost and Contractor Payments: There are various measures to encourage ongoing consultation and “checking” of the Defined Cost, as the works progress, rather than waiting until the end of the works to assess the Contractor’s costs and entitlements. Similarly, there is now a deadline for the Project Manager to confirm his final assessment of the payment due to the Contractor. If the deadline is missed, the Contractor can issue his own final assessment which will be conclusive unless disputed within four weeks. These are all measures that place pressure on the parties to resolve payment issues as they arise, rather than deferring them for resolution much later in the process.
Early Contractor Involvement: An early contractor involvement procedure is now available as an option. This enables Employers to benefit from the Contractor’s involvement much earlier in the process, providing input and support for design development and related tasks.
Reducing Z-Clauses: Some of the amendments will reduce the overuse of Z clauses – a common practice in the use of NEC3 where Employers and Contractors need to amend the standard terms to address project specifics. For example, additional compensation events can now be added to the contract by specifying them in the Contract Data. A new secondary option for the adoption of Information Modelling is also now available.
Simplification is a key theme: This can be seen in the more streamlined regime governing the Schedules of Cost Components and the determination of Defined Cost and Disallowed Cost. Included in this is the creation of one fee percentage by combining previously separate fee percentages for the Contractor’s and the Sub-Contractor’s works. Similarly, a deeming provision applies where the Project Manager fails to confirm acceptance of the Contractor’s programme. The aim is to avoid the uncertainty and delay typically caused where a Project Manager “sits” on the approval of a programme.
Overall, the feedback on NEC4 appears, so far, to be positive. There is consensus among NEC User Group members at the conference that the new suite of contracts is capable of bringing more clarity, simplicity and flexibility, thereby enhancing project delivery and the efficiency of projects.
Our next NEC4 newsflash will comment on what the new NEC4 Alliance Contract has to offer, using insights gained from the participation of the Bowmans’ construction team in the industry consultation process.