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A complete suite of contracts

The NEC3 April 2013 edition and the NEC4 suite of contracts consists of multiple different
contracts, guidance notes, flow charts, etc. which can be purchased. Individual agreements,
such as the Engineering and Construction Contract, Engineering and Construction Sub
Contract, Professional Services Contract can be purchased separately from the RICS Shop .

The main forms of contract in the NEC3 and NEC4 comprise:

- the Engineering and Construction Contract ;

- 6 optional forms of main contract, depending on which procurement/pricing route is
used - see main option clauses ;
- the Engineering and Construction Short Contract ;
- the Engineering and Construction Subcontract and Short Subcontract ;
- Professional Services Contract and Professional Services Short Contract ;
- the Adjudicator's Contract ;
- Term Service Contract and Term Service Short Contract ;
- Supply Contract and Supply Short Contract ;
- Framework Contract;
- a series of ?how to? guides which aim to help users improve both the setting up and
management of their NEC3 contract;
- guidance notes and flow charts for every form of contract; and
- procurement and contract strategies.

The NEC4 suite of contracts also has the following new contracts:

- Term Service Subcontract;

- Professional Service Subcontract;
- Design Build and Operate Contract;
- Alliance Contract.

The NEC4 Design Build and Operate Contract (DBO) is a new form under which the
Contractor can take responsibility for design, construction, operation and/or maintenance of
the works. It is intended to be a flexible contract in which the operational services can be
provided before, during and after the works are completed. These operational services can
range from basic FM services to obligations to operate the works to achieve specified
performance levels. Its key features include:

- it generally follows the NEC approach and structure;

- it is based on the Term Service Contract as the core contract with ECC elements
added;
- the payments can be split between the construction works and operational services;
- there can be a mix between a cost and price based strategy in the Price List;
- these are targets for performance against the Operational Requirements and the
payments to the Contractor can be adjusted depending on their performance in
meeting these Operational Requirements.

The new NEC4 Alliance Contract has currently only been published initially in consultative
form. It is a multi-party contract that is intended to provide a fully integrated delivery team for
complex projects.

It generally follows NEC principles but has a number of changes to address its multi-party
nature. Its key features include:

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- Partners (i.e. members of the delivery team) can be added or removed.

- All liabilities are shared between the Client and the Partners, save for those caused
by the wilful default of the Partners and (if the Client chooses) third-party claims.
This is intended to align the incentives and risks for all parties.
- An Alliance Board manages the Alliance on behalf of its members. The decisions of
the Alliance Board have to be unanimous but then they bind all members of the
Alliance.
- An Alliance Manager is to be appointed who is responsible for the majority of roles
reserved to the Project Manager and the Contractor under the NEC4 ECC. There
are relatively limited matters reserved to the Client. For example, the Alliance
Manager assesses the payment due and this is then checked and certified by the
Client.
- It is a cost reimbursable contract with limited grounds for disallowing costs but with
risk and reward depending on whether the Alliance Objectives are met.
- Payment is made via a project bank account.
- It includes a single Contract Data (rather than a split between the Client?s Contract
Data and the Contractor?s Contract Data).
- There are no provisions for dispute resolution proceedings ? although the right to
adjudicate would be implied by statute in any contract covered by the Construction
Act 1996. The intention of the drafters is that any dispute is resolved by negotiation,
potentially with third party support but that the Alliance would be brought to an end if
a dispute could not be amicably resolved.

There should be an agreement within the NEC3/NEC4 to cover every possible procurement
route, whether it be a target cost or lump sum, whether the works are designed by the
contractor/subcontractor, for every member of the professional team and the adjudicator, for
engineering, construction, refurbishment, infrastructure, etc. works, and even if the works are
carried out outside of the UK.

With a large number of different documents and options, working your way round the
NEC3/NEC4 can be difficult, so start with the NEC3/NEC4 guidance notes and the
NEC3/NEC4 flow charts.

Understanding the format

The following comments relate to the NEC3 and NEC4 Engineering and Construction Contract
(ECC) but apply equally to the other NEC3/NEC4 suite of contracts.

The NEC3 uses a unique numbering system. Section 1 is headed 'General' and the first clause
in this section is clause 10, followed by clause 11, 12, etc.

There is a page break between each section. Then section 2 is headed 'The Contractor's main
responsibilities' and the first clause in this section is clause 20, followed by clause 21, 22, etc.

The NEC3/NEC4 is drafted in the present tense. For example Clause 13.5 states:

'The Project Manager may extend the period for reply to a communication if the Project
Manager and the Contractor agree to the extension before the reply is due. The Project
Manager notifies the Contractor of the extension which has been agreed.?

There are no cross-references, so no attempt to refer one sub-clause to another sub-clause.

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The NEC3/NEC4 tries to be clear and words such as 'fair' and 'reasonable' are avoided, with
sentences kept short. However, the NEC3/NEC4 reflects a new approach towards construction
and engineering projects by creating new terms and phrases and accordingly terms such as
'loss and expense' and 'practical completion' do not appear. The NEC3/NEC4, instead, refers
to 'compensation event', 'access dates', 'Accepted Programme', etc.

The simplicity of the language used has received some criticism from the courts. In Anglian
Water Services Limited v Laing O?Rourke Utilities Ltd [2010] EWHC 1529 , the judge
commented that interpreting the NEC was made more difficult because of the language used
and the drafting seems to 'represent a triumph of form over substance?. In Atkins Ltd v
Secretary of State for Transport [2013] EWHC 139 , the judge commented that ? ? there are
some siren or other voices which criticise these Conditions for some loose language, which is
mostly in the present tense, which can give rise to confusion as to whether and to what extent
actual obligations and liabilities actually arise.?

The Contract Data section of the NEC3/NEC4 needs to be completed with information that is
unique to the project. It includes the identities of the Employer/Client, Contractor, etc. Where a
term is defined in the Contract Data, it is referred to throughout the contract using italics.

Where a term is defined at Core Clause 11.2 and is a generic term that applies to all
NEC3/NEC4 contracts, the term has initial capital letters ? for example the definition of the
'Parties'.

Every communication '... is communicated in a form which can be read, copied and recorded.
Writing is the language of this contract.' (Core Clause 13.1 in NEC3/NEC4)

Bear in mind that all changes to NEC3/NEC4 have to be signed by the parties (Core Clause
12.3 in NEC3/NEC4). If you wish to include additional documents within the NEC3/NEC4 they
have to be referred to and the amendment signed.

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