Architect's Guide to NEC4

Frances Forward

• Publisher: RIBA Publishing
• Year: 2019
• eBook ISBN: 9781000701319
• Topic: Arquitectura
• Subtopic: Arquitectura general

This user friendly guide introduces, explains, and demystifies the NEC4 contract on a practical, work-based level. Made for architects by an architect, it explores the best approach to collaborative and contractual partnering work practices. Alongside explanations of the contracts and clauses, it presents the key areas of distinction from alternative standard form contracts and examines the integrated project management principles that bring the NEC4 contracts together as a whole. It's the perfect companion book for professionals who are new to the NEC contract family and former users trying to understand the latest updates.

1
Background to the NEC

Procurement strategy

Contract typology

Conventionally, the parameters of time, cost and quality have been assessed in relation to choosing the correct type of contract for individual projects on the following basis:

• time: design and construction duration and certainty of end date
• cost: overall price (fees and construction) and certainty of final account
• quality: specification standards and workmanship on site.

The procurement analysis of the relative importance of time, cost and quality has historically led inexorably to a decision as to whether a traditional, a design and build, or a management procurement route is appropriate. However, such analysis has also long been predicated on the convention that time will be somewhat compromised under traditional procurement routes, quality will be somewhat compromised under design and build procurement routes and cost will be somewhat compromised under management procurement routes. The arguments leading to this convention are well rehearsed and need not be examined in detail here, as their only real relevance in the context of the NEC is that they represent an outmoded and arguably superseded approach to procurement strategy.

A further subset of contract typology is the payment mechanism, which conventionally falls into the following categories:

• lump sum
• remeasurement
• cost reimbursable.

These generic payment mechanisms remain relevant in the context of the NEC, albeit the NEC offers greater sophistication in their implementation than earlier standard form contracts.

It should be noted that no type of standard form contract, including NEC4, offers either a ‘fixed price’ or a ‘guaranteed maximum price’ (GMP) payment mechanism; these being inventions of those who seek to amend standard form contracts, or draft bespoke contracts, to highly polarise risk allocation.

Contract form

Professional drafting bodies historically published standard form contracts based on traditional procurement strategy³ and subsequently responded to analysis of the so-called ‘time/cost/quality’ triangle by publishing additional design and build and management versions of their standard forms. Architects have long been used to providing clients with procurement advice and indeed are expected to advise on both a ‘Project roles table’ and a ‘Contractual tree’ at a relatively early stage in a project.⁴ This important advisory role should take account of the need for flexibility and further review.⁵

Project-specific strategies

Increasingly, a need has developed for contracts to respond to individual project requirements in a more finely calibrated manner; project sponsors simply can no longer accept that only ‘two-and-a-half’ out of the three parameters of time, cost and quality are adequately controlled. The resultant requirement for project-specific procurement strategies leads to what might be described as a hybrid procurement route. Such a route inevitably calls for much more flexible contracts than conventional procurement routes and this may partly explain the apparent growth in entirely bespoke construction contracts being drafted for important projects.

There is arguably a fourth procurement parameter that most 21st-century construction projects are required to take into account and that is risk. NEC4 sets out to offer a highly flexible format which responds to the ‘prototype’ nature of many construction projects and provides the ability to build up an appropriate contract. NEC4 enables a breakaway from conventional procurement analysis and there is no necessary compromise between time, cost, quality or risk management.

Genesis and philosophy of the NEC

Origins

The genesis of the NEC⁶ was an initiative in the mid-1980s by a new Legal Affairs Committee within the ICE⁷ in London. This initiative resulted primarily from a general dissatisfaction with ‘Victorian’ style standard form contracts within the construction industry, which had been conceived of prior to the commonplace requirement for complex multidisciplinary projects and which had become increasingly convoluted, in response to the perception of a ‘high-risk’ and ‘adversarial’ construction industry. The initial strategy for a ‘modern’ contract was developed by a small team led by Dr Martin Barnes,⁸ and a consultative version of the NEC was published in 1991; this was generally received with such enthusiasm that it was followed by an official first edition in 1993. The NEC received important endorsement in the UK Government/industry Latham Report⁹ of 1994 and the NEC second edition was published in 1995. The partnering ethos of the NEC contract was further endorsed in the UK Government/industry Egan Report’¹⁰ of 1998. A review of the NEC in use and users’ comments was undertaken by its drafting panel, under the auspices of its publishers,¹¹ and the third edition, NEC3, was published in 2005. Following extensive use of NEC3 by an expanding range of users, and a targeted review of those users’ findings in contemporary practice, NEC4 was published in 2017.

Application – what is in a name?

An important factor in the interest generated in the NEC was its applicability to a broad range of ‘engineering’ projects. This was ‘officially’ extended to include all construction projects, following the Latham Report, although the revised title ‘ECC’¹², intended to emphasise the range of applicability, never really captured end users’ imaginations and the original name ‘NEC’ largely prevailed. Ironically, the initial interest of architects in the NEC might have been greatly increased, and subsequent interest accelerated, had the title been revised to ‘Engineering and Building Contract’. The answer to ‘what is in a name?’ in this instance seems to be ‘quite a lot’!

There was also a clear intention that the NEC should be conceived as a contract that would be operable globally¹³ and the drafting is intended to facilitate diversity on a number of levels.

Guiding principles

The NEC approach encompassed the concept that both the legal and the management requirements of a diverse range of ‘modern’ projects could be met in a single document and that the avoidance of ‘legalistic’ language would assist in that aim.

The principles of risk theory and risk management were also important considerations, and an early decision was made that the contracting parties and their representatives should be required to act in a ‘spirit of mutual trust and co-operation’.¹⁴

The stated objectives of NEC are flexibility, clarity and simplicity, as well as providing a stimulus to good management. The key objectives in drafting NEC4 include providing a greater stimulus to good management and supporting new approaches to procurement which improve contract management – evolution, not revolution.¹⁵ In practice, the NEC approach offers a range of benefits which are key to its success:

• ‘pick-and-mix’ contract conditions, to suit both the Project and the Project Team
• plain English, giving both legal and project management rights and obligations equal status
• real-time project management, with contemporaneous decision-making
• cross-industry application, facilitating multidisciplinary working practices.¹⁶

The NEC contract family

The NEC family relationship for architects

It is pertinent to emphasise that the NEC has been designed for extremely flexible use patterns and different family members will therefore have different levels of significance, depending on the disciplines of users. Architects will tend to be interested in all the family members (see Figure 1); however, they are likely to have the closest relationship with the NEC4 Black Book Engineering and Construction Contract and the NEC4 Engineering and Construction Contract Short Contract in the context of building contracts, and with the NEC4 Orange Book Professional Service Contract in the context of consultants’ appointments.

The NEC4 Subcontract/Short Subcontract will also be significant for architects in the context of specialist design and installation. Historically, arc...

Table of contents

• Cover
• Title
• Copyright
• Contents
• About the author
• Introduction
• 1 Background to the NEC
• 2 Structure and content of NEC4
• 3 Contract machinery
• 4 Collaborative working with NEC4
• 5 International use
• 6 In conclusion: decisive features of NEC4
• Appendix: NEC4 ‘Toolkit’
• Index