Challenging the building sector’s perceptions about NEC contracts

Kelvin Hughes, author of NEC4: A Guide for Better Delivery of Projects in the Building Sector, discusses his book and the advantages of NEC4 contracts. 

I have been involved with the NEC contracts since 1995, just after they were first launched. I was initially involved in directly promoting use of the, then newly launched, NEC contracts and I was Secretary to the NEC Users Group in its first 10 years. I have since managed many NEC contracts; I have provided nearly 2,000 training courses on their use, and I have written several books on the contracts. 

Over the years, when speaking to building clients about their potential use of NEC contracts, the response often was, and in many cases still is, “NEC contracts are for civil engineering projects. We only carry out building projects, so NEC contracts are not appropriate for us”. 

My new book NEC4: A Guide for Better Delivery of Projects in the Building Sector sets out to open-up discussion about the suitability of using NEC4 contracts for building projects, and to effectively demonstrate that NEC4 contracts are at least as suitable, and probably better than, the contracts that are traditionally being used for building projects.  

So what is the difference between a building project and a civil engineering project? 

These are my own definitions:  
"A building project designs and constructs the enclosures in which we live and work” 
"A civil engineering project designs and constructs the infrastructure that supports the enclosures, including transport and service networks." 

In terms of the appropriate contracts to use for building or civil engineering projects, the purpose of any construction contract is to establish, define, regulate and allow the parties to manage the following aspects of the project:

• Quality: what is the project?
• Time: when is the project to be completed?
• Price: how much is the project costing the Client, and how is it paid?
• Risk: who owns the risks of achieving the above three aspects, and how are these risks managed?  

So what is in the content of a building contract that only makes it suitable for use on building projects? Or a civil engineering contract that only makes it suitable for use on civil engineering projects?  

NOTHING…apart from the party that administers the contract. For example:

• JCT Building Contracts administers contracts for architect.
• ICE/ICC Civil Engineering Contracts administers contracts for engineers. 

NEC4 simply has a Project Manager or a Service Manager to manage its contracts on behalf of the Client.   

Why do I consider NEC4 to be a more advantageous contract to use than those contracts considered traditional building contracts? 

1. The NEC4 family
 
NEC4 offers a wider range of contracts than other contract families:

• The Engineering and Construction Contract and the Engineering and Construction Short Contract, and their subcontracts, are used for any project, and now supplemented by the Design Build and Operate Contract and the Alliance Contract.
• The Term Service Contract, the Term Service Short Contract, and now the new Facilities Management Contract are used for medium to long term services such as maintenance, and of course for facilities management.
• The Supply Contract and the Supply Short Contract are used for engaging suppliers to provide goods and services.
• The Framework Contract is used for long term frameworks. 
• The Professional Service Contract and the Professional Service Short Contract, together with the Professional Service Subcontract, are used for engaging suppliers of professional services.
• The Dispute Resolution Service Contract is used for engaging an Adjudicator to decide a dispute between parties. 

2. Flexibility through main and secondary options

NEC contracts provide greater flexibility than other contracts through their main and secondary option clauses. The main options provided flexibility in terms of how tenders are priced and how the Contractor is paid. The secondary options continue that flexibility by allowing additional contract provisions to be introduced.   

3. Provisions specific to NEC contracts, and which are not included within traditional building contracts 

1. Early Warnings: The early warning provisions including early warning meetings and Early Warning Registers provide dynamic tools for parties to continuously identify and manage potential risks to Price, Completion, Key Dates and quality.  
2. Programme: Comprehensive requirements for submission and acceptance and revising of the programme allow continual full and transparent visibility of what the Contractor needs, and what the Client team is to provide, in order that contractual obligations can be met.
3. Compensation events: Compensation events providing continuous pricing of time and cost of changes and other events arising, rather than the traditional lengthy variation, extension of time, loss and expense and final account provisions within traditional contracts. 

In conclusion, and bearing in mind the above, building practitioners should surely be asking themselves, “why are we not using NEC contracts”? 

Kelvin Hughes is a senior Partner at KH Consultants LLB and has over 45 years’ experience in the construction industry, including 18 years in commercial management with major contractors, then the past 28 years as a consultant, including a four-year senior lectureship at the University of Glamorgan (now “University of South Wales”). He has been a leading authority on the NEC contract since 1996, and has advised and run over 1,700 in-house and public courses worldwide on NEC, FIDIC, JCT, IChemE and other local international contracts, from Introduction up to Masterclass level. He was previously Secretary of the NEC Users’ Group and is the author of seven previous titles on the NEC suite of contracts.

To find out more about NEC contracts in the building sector, read Kelvin Hughes' book NEC4: A Guide for Better Delivery of Projects in the Building Sector in Print or as an eBook.