In the case of a construction contract, a contractor agrees to build, and the client agrees to pay for the service. Whilst this is a simple concept, it is often incredibly complex in practice. The exact terms of one agreement can be infinitely different to the next, with complex construction projects needing robust and detailed provisions. To simplify contracts, reduce disputes and improve efficiency, the use of standard forms is widespread in the industry. These forms are sets of standard terms applicable to all projects, avoiding consultants having to draft, discuss and debate the details of every agreement, and allowing the industry to become familiar with the administration of these commonly used contract terms.
Faithful+Gould are invested in the NEC and are currently building on our experience with this contract by training more staff to become NEC accredited practitioners.
What is NEC?
The New Engineering Contract (NEC) is a relatively new form of standard contract, the first edition published in 1993 and the NEC3, which is currently the most widely used NEC version, was released in 2005. By comparison, another popular standard form, the JCT, was first published over 60 years before in 1931.
Over the last few years, it would have been difficult to miss the rise in popularity of the NEC in the industry, with not only large complex infrastructure projects such as Crossrail using it exclusively across its supply chain, but also smaller refurbishment projects which would once have been the preserve of the JCT Intermediate and Minor Works contracts. This increase in NEC usage has necessitated consultants having to upskill with the NEC.
The comment I most often hear from NEC newcomers is that the contract is “too heavy on administration”. This is a criticism often directed at the famous NEC ‘early warning process’. This contractual requirement often evokes in people an image of issuing confrontational formal letters to Clients citing problems, generating overcomplicated risk registers and chairing difficult meetings.
The NEC forms are agreements based on the principles of good management and best practice.
My response to this criticism is simple; in practice, on any project regardless of scale, what do you do when you are concerned an issue might occur? Do you ignore it in the hope that it doesn’t happen? Do you wait for it to happen and subsequently end up fixing an expensive problem? No, you raise the risk, discuss options to manage it and proactively work with the team to mitigate or improve the situation.
Calling this an ‘early warning process’ doesn’t make it more difficult, it simply gives best practice a name. The NEC is based on formalising best practice to reduce disputes and make the delivery of construction projects more efficient; that is a key the reason for it being one of the contract forms of choice throughout the industry.
The Benefits of NEC
The NEC is not perfect, but in practice, no contract ever is or can be. The success of a contract and that of the overall project will always be driven by the skills, knowledge and experience of the team implementing the agreement, with the choice of contract ideally being the best fit for the Client and project requirements. But that said, it is difficult to see how contractually requiring a proactive approach can be a negative.
From the outset of the agreement the parties know that programme, budget and risk need to be managed throughout the life of the project, as opposed to the project team not understanding the true position of the project until completion. If this requires more administration than had previously allowed for on similar previous projects, then conversely it could be argued that prior contracts were possibly too light on administration.
These proactive contract terms and standards are hugely beneficial to the construction industry at large.
Faithful+Gould are invested in the NEC and are currently building on our experience with this contract by training more staff to become NEC accredited practitioners. This investment is not just beneficial as there is a clear need for NEC practitioners who have the skills, knowledge and experience to implement best practice in the industry, but also because the NEC contract strives for collaboration, open and honest communication and proactive risk management, principals that benefit not only individual projects, but the construction industry as a whole.
The NEC forms are agreements based on the principles of good management and best practice. As such, Faithful+Gould as responsible, professional consultants are already market leaders in working with this contract.