NEC4 – a suitable birthday present?
I have never before seen buzz and excitement surrounding the release of a standard form construction or engineering contract. There is, however, a real buzz in the industry (or maybe it’s just us construction lawyers) surrounding the forthcoming release of the NEC4 form of contract.
Perhaps this buzz is down to the success the previous version of this form of contract, NEC3, has enjoyed in the industry since its release in 2005. NEC3 enjoyed success that can be measured by its large scale adoption by the industry (particularly on public projects) and the number of high profile and complex projects which have been delivered successfully under the form, including the London 2012 Olympic and Paralympic Games.
So, what can we expect from NEC4 when it is released on 22 June 2017, which happens to be my birthday? If any of my family or friends reading this are looking for a suitable birthday present, the NEC is offering a 10% discount on pre-orders …
"NEC4 is likely to be a popular form of contract given the success of its predecessor."
The NEC says that NEC4 is intended to build on the success of NEC3 and that NEC4 will retain the processes for collaboration, fair dealing and project management which contributed to the success of NEC3. The language used in NEC3 - present tense and “plain English” - remain in NEC4 which the NEC says leads to greater certainty and assists international users whose first language is not English.
One of the NEC’s stated aims of NEC4 is to ‘prevent litigation’. Jonathan More blogged recently on the very low number of reported cases on NEC3, compared to the high number of reported cases concerning; for example, JCT contracts. Jonathan said that NEC ‘evangelists’ maintain that the low number of reported cases suggest that the aim of the drafters of NEC3 for avoiding disputes has been met. I note, however, from his blog that Jonathan thinks this may be taking it too far and that the NEC may agree; they have stated the aim of preventing litigation instead of the previous aim of ‘avoiding disputes’, which is, in our experience, more realistic, having been involved in a number of adjudications under NEC3.
NEC4 will be available in a full suite of contracts, including the familiar engineering and construction contract (‘ECC’) and subcontract, framework contract, professional service contract, supply contract and term contract. What is new is a ‘design, build and operate’ contract, which is intended to allow NEC users to procure the design, construction and operation of projects. There is also an alliance contract, to be published in consultation form, which will be a multi-party contract where clients engage a number of parties under one contract to carry out works in collaboration.
The NEC4 ECC will contain all the core clauses and secondary option clauses, together with schedules of cost components and forms for contract data. Options A to F will be available, which match the options available in NEC3. A short version of the ECC will be available for less complex projects.
NEC4 will introduce changes in the terminology from NEC3, such as changing Employer to Client, Risk Register to Early Warning Register and Works Information to Scope. NEC4 will also introduce Contractor’s Proposals, which will allow the Contractor to propose changes to the Scope.
NEC4 is likely to be a popular form of contract given the success of its predecessor. We will provide more details of new provisions and any other changes when the NEC4 contracts are released. If you have any comments on the changes NEC4 will bring, or whether further changes could have been made to NEC3, please let us know by leaving a comment.