‘Talking ’bout [the next] generation’: NEC announce the next generation of NEC contracts, NEC4

NEC have announced that the next generation of NEC documents will be made available this summer after the NEC annual seminar on 22 June 2017. This is the first major release of NEC documents since NEC3, first published 12 years ago. In that time, NEC3 has become one of the market leading standard forms of contract, and has been used on a number of high profile projects such as Crossrail and various London Olympic venues.

It is perhaps a sign of the evolution within the construction and engineering industries that this follows the update and release of the entire JCT suite in 2016.

NEC has provided a briefing as to what to expect from the new suite of documents; detailed below.

New form of contract – NEC4 Design Build Operate contract (DBO)

Perhaps the most significant development of this release of updated contracts is the production of a new DBO contract, intended for use in projects where the design, construction, operation and/or maintenance is to be provided by a single supplier. Whilst this concept is not new to the market, the use of the JCT Design and Build has been around for well over ten years, it does address what could have been seen as a gap in the NEC3 offering.

Contractors proposals

NEC4 contains new contractual processes for either the Contractor or the Project Manager to improve the outcome of the project, either by reducing cost or acceleration of completion. In both circumstances it is open to the Project Manager to accept or reject a proposal, or to request a quotation prior to making any such decision.

Dispute resolution

In the event that a dispute arises, NEC4 has introduced a four week negotiation period under which disputes are to be negotiated. If an agreement cannot be reached during this period, formal proceedings cannot be commenced until the expiry of the four weeks. The standard form of NEC4 contract will make this dispute resolution period mandatory except for contracts which fall under the Housing, Grants, Construction and Regeneration Act 1996, whereby the dispute resolution procedure is to be consensual between the parties (but of course cannot be binding due to the statutory right to refer to adjudication at any time).

Collateral warranties

The Scope of NEC4 contracts has been adapted to allow the Client to specify which Collateral Warranties will be required and under what form. This amendment will negate the need for various Z-clause amendments which is currently the case under NEC3. In addition to this, the NEC4 maintains the previous options for the contract to be subject to the Contracts (Rights of Third Parties) Act 1999.

Building Information Management (BIM)

NEC4 has been adapted to include secondary options to specifically support the use of BIM. As a reminder all Government building projects require works to be built to BIM level 2 with the intention that this will soon become commonplace in private projects. This is a way of ‘future proofing’ the NEC4.

Assignment

NEC4 now contains core clauses that allow for the assignment of the contract, which previously would have required Z-Clause amendment.

Terminology

A number of changes have been made to the terminology used throughout NEC4, most notably:

• Client is now used in place of ‘Employer’ throughout the suite for consistency.
• Scope is now used in place of various previous terms such as ‘Works Information’ (Engineering & Construction Contract), ‘Service Information’ (Term Service Contract) and ‘Goods Information’ (Supply Contract). Again this is to ensure consistent terminology throughout the suite.
• Early Warning Register is now used in place of ‘Risk Register’ in order to prevent any confusion with similar named documents outside of the contractual documents.

Conclusion

Until the documents are released in the summer, only broad brush comments can be made as to the benefits of these amendments. However, the NEC is highlighting that this is very much evolution opposed to revolution and that current users of the NEC3 will be able to move over to NEC4 with the minimum of fuss. There is nothing in the information released to date to doubt that will be the case.

If you would like any further information about the NEC4 suite of documents, please contact a member of the Construction & Engineering team.