NEC4 – The Key Changes – A detailed review…

Prior to the launch of the NEC4 last year, our May 17 blog provided a summary of the key changes between the NEC3 and NEC4.

One year on and following ongoing requests, we thought it would be useful to add a further layer of detail to the changes introduced and how they have been received by the industry so far.

During the 2017 annual NEC seminar the panel confirmed this contract was to be an “evolution not a revolution” and having spent the last year working with the contract in detail, we agree they have achieved exactly that.

It is important to remember these changes are based upon industry feedback (via the NEC User group and other industry forums) and key changes to delivery methods.

One of the key intentions of the drafting team was to seek to reduce the volume of Z clauses incorporated into the contract.

So what are the key changes?

Compensation Events
• The introduction of a Compensation Event to compensate the contractor for costs in preparing quotations which are not implemented or accepted.
• The option for the parties to introduce additional Compensation Events within the Contract Data which negates the requirement for additional Z clauses.

Payment Provisions
• A change in payment provisions now requires the contractor to make a periodic assessment and application and failure to do so will result in no payment being made.

Programme
• The deeming provision has now been extended to include the programme. If the project manager fails to respond within prescribed time periods, the programme will be deemed as accepted.

Defined Cost Assessment
• Within the cost-based contracts (C, D, E and F) the contractor is allowed to review the Defined Cost. In addition, the deeming provision applies if the PM fails to reply within the prescribed time periods.

Dispute Resolution
• A tiered four-week escalation and negotiation period has been introduced to encourage the settlement of disputes prior to the instigation of formal proceedings.

This process includes a compulsory settlement meeting with senior representatives of each party.

Note: Where the Housing Grants Construction and Regeneration Act applies (W2) this process is consensual.

Contractor Proposals
• There are new provisions within the contract which allow proposed changes by the contractor including acceleration and a change in Scope.

Terminology Changes:
There have been some changes to the contract terminology to align the contract wording with the industry ‘standard’. The key changes are:
• “Employer” becomes “Client”
• “Risk Register” becomes “Early Warning Register”
• Works descriptions have become “Scope”
In addition, the wording is now gender neutral.

Additional Core Clauses
• Bribery and Corruption have now been added as a core clause and the provisions in the event of.
• Transfer of benefits has been added as a core clause.
• Quality Management requirements have been added.
• Confidentiality and Publicity have also been covered in a new core clause.
Additional Contracts
In addition to the changes there are two new forms of contract:

Alliance Contract
The Alliance contract provides a performance base as the foundation for the terms with alliancing best practice and an integrated risk/reward model to motivate the parties to work in the best interest of the project.

Design, Build and Operate Contract (DBO)
The DBO contract provides a life cycle delivery solution which makes provision for the services before and after the construction works.

Should you wish to obtain further information regarding NEC contracts or the changes from the NEC3 to NEC4 contracts please get in touch at info@kjtaylorconsulting.com or call on 0115 9336131.

The NEC Users Group is also a great way to get involved and provide industry-specific feedback.

Please note. The information provided on this website is NOT LEGAL ADVICE and is for information purposes only. No action or inaction should be taken due to this information or any reliance placed upon this information. Please note where legal advice is required this should be obtained by an appropriate qualified legal practice and no information provided within this website should form the basis of any legal, contract or commercial decision. K J Taylor Consulting Ltd. are commercial quantity surveyors and not construction legal advisors.