The new edition of the New Engineering Contract (“NEC”) suite of contracts was launched this June: the NEC4. Rather than comment on the new contracts and changes introduced by NEC4 the purpose of this article is to address key failings often seen in the preparation and amendment of these standard forms of contract, whether the NEC3 or NEC4.
In this article the NEC is referred to generally and references are also made to the following two contracts from within the NEC suite: the Engineering and Construction Contract (“ECC”) and the Professional Services Contract (“PSC”)
Five key errors are made either singly or more often together when NEC document packages are collated.
• Incorrect use of the main pricing options • Misunderstanding the role of the Works Information, Site Information and Contract Data • Structuring amendments to the core and optional clauses incorrectly • Inconsistent language and drafting style to the NEC • Incorrect incorporation of specification
Incorrect Use of the Main Pricing Options
The most common problem is that monthly interim payments can be made as if the activity schedule used in Option A (Priced contract with activity schedule) is merely a breakdown of work to be undertaken similar to a contract sum analysis. It is not. The activity schedule (within Option A only) is a pricing document and the contractor’s entitlement to interim payments arises only when the activities listed in the activity schedule are completed. The document used to describe the works is the Works Information under the ECC. Consultants new to the NEC approach sometimes simply group the services they are to provide under Option A of the PSC as set out in the RIBA Plan of Work Stages with each stage representing an activity. Unless corrected this could have a hugely adverse impact on the consultant’s cash flow as some RIBA Work Stages take many months to complete on sizeable projects.
Confusion also arises when parties confuse the use of the activity schedule in Option C (Target contract with activity schedule) with its use under Option A. In Option C the Contractor is paid the Defined Cost plus the agreed Fee. In this Option the activity schedule is used to assess compensation events and as a management tool.
Misunderstanding the role of the Works Information and Site Information
The ECC Works Information Guidance is a good place to start to understand the different purposes of the Works Information, Site Information and Contract Data and the relationship between them. The information to be set out in the Works Information is defined in the ECC as information “which either