New Engineering Contract (NEC)[1][2]

In 1986, Leading UK Project Management Consultant Martin Barnes was commissioned by the newly formed legal affairs panel of the Institution of Civil Engineers (ICE) to draft, ‘a radical new contract which would stimulate and not frustrate the application of good project management’. Hear more from Martin Barnes.

NEC Core principles[3]

All NEC4 contracts are designed around the following three principles:

  • They stimulate good management of the relationship between the two parties to the contract and, therefore, of the work involved in the contract.
  • They can be used in a diverse range of commercial situations, for a wide variety of types of work and in any location around the world.
  • They are clear, simple and written in plain English, using language and a structure which is straightforward and easily understood. 

How does NEC help regarding Fair and Sustainable Risk Allocation?[4]

NEC provides diverse payment and delivery models tailored to match the complexity and scale of projects: 
  • For straightforward work where a supplier can handle project risk: Clients can opt for a fixed price contract, ensuring cost certainty.
  • In complex or larger projects where both client and supplier agree to pool risk: Clients can use a Target Cost contract, sharing savings or overspends through a pain/gain mechanism.
  • When the client is best suited to manage risks: Clients use a Cost-Reimbursable Contract, in which suppliers receive their costs plus an agreed fee or a Management Contract, in which suppliers are paid a fee for managing the sub-contractors delivering the works.
  • These choices are further complemented by optional contract clauses allowing parties to address issues upfront, while also allowing contracts to reflect public policy priorities such as fair payment or local content provisions. The suite also supports framework contracts and design, build and operate options.

Standard forms of NEC Contracts[5]

  • NEC4: Alliance Contract
  • NEC4: Design Build and Operate Contract
  • NEC4: Dispute Resolution Service Contract
  • NEC4: Engineering and Construction Contract
  • NEC4: Engineering and Construction Contract Option A: priced contract with activity schedule
  • NEC4: Engineering and Construction Contract Option B: priced contract with bill of quantities
  • NEC4: Engineering and Construction Contract Option C:  target contract with activity schedule
  • NEC4: Engineering and Construction Contract Option D: target contract with bill of quantities
  • NEC4: Engineering and Construction Contract Option E: cost reimbursable contract
  • NEC4: Engineering and Construction Contract Option F: management contract
  • NEC4: Engineering and Construction Subcontract
  • NEC4: Engineering and Construction Short Contract
  • NEC4: Engineering and Construction Short Subcontract
  • NEC4: Framework Contract
  • NEC4: Professional Service Contract
  • NEC4: Professional Service Subcontract
  • NEC4: Professional Service Short Contract
  • NEC4: Supply Contract
  • NEC4: Supply Short Contract
  • NEC4: Term Service Contract
  • NEC4: Term Service Subcontract
  • NEC4: Term Service Short Contract

Which NEC4 Contract should I use?[6]

The principal NEC4 contracts, short contracts and subcontracts can be broadly grouped into works, services and supply.
Works contracts are suitable for engineering, construction and related undertakings in the built environment. Services contracts are designed for the hiring of professional services and longer-term facilities and maintenance contracts. Finally, supply contracts are suitable for the purchasing of anything from high-value construction plant and materials down to office stationery.
  • Works
    • The main works contracts are the NEC4 Engineering and Construction Contract (ECC), the NEC4 Engineering and Construction Short Contract (ECSC), and their related subcontract forms.
    • They are suitable for purchases such as the design, construction, refurbishment and decommissioning of buildings, structures, process plants and infrastructure – including everything from houses, schools, hospitals and leisure facilities to infrastructure for water, energy, transport, industry and waste.
    • ECC is structured in a modular, jurisdiction-neutral format and can be used regardless of the level of design responsibility the contractor holds.
    • In addition, the NEC4 Alliance Contract (ALC) is designed for integrated delivery teams; and the NEC4 Design Build and Operate Contract (DBOC) is for works contracts that extend into the operational phase.
  • Services
    • The NEC4 Professional Service Contract (PSC), Subcontract (PSS), and Short Contract (PSSC) are suitable for purchasing professional services such as engineering, architectural, project management and consultancy works.
    • For composite services such as asset management and maintenance we have the NEC4 Term Service Contract (TSC) suite, and for facilities management such as cleaning, catering, decorating, security, maintenance, and data processing there are the NEC4 Facilities Management Contract (FMC), the NEC4 Facilities Management Short Contract (FMSC), and related subcontracts.
  • Supply
    • Designed for contracting suppliers, NEC has the NEC4 Supply Contract (SC). It is for the supply of high-value goods and associated services such as transformers, generators, rolling stock, cranes, gantries, and complex plant.
    • The NEC4 Supply Short Contract (SSC) is perfect for lower risk items such as building materials and products, stationery, personal protective equipment and parts.

References

  1. https://www.neccontract.com/why-choose-nec/history ↩
  2. https://www.ice.org.uk/what-is-civil-engineering/infrastructure-projects/new-engineering-contract-nec#:~:text=The%20New%20Engineering%20Contract%20(NEC,aim%20to%20prevent%20costly%20disputes. ↩
  3. https://www.neccontract.com/why-choose-nec/how-nec-can-help ↩
  4. https://www.neccontract.com/why-choose-nec/nec-risk-allocation ↩
  5. https://www.neccontract.com/products/contracts ↩
  6. https://www.neccontract.com/why-choose-nec/which-nec4-contract ↩