7/9/13

The NEC at a Glance | MDA Consulting

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The NEC at a Glance

Although the Third Edition of the New Engineering Contract (NEC3) has been available for some time, many Employers still use the Second Edition (NEC2). There are several import- ant revisions to the NEC2 which we shall highlight without going into too much detail and, hopefully, this will help those familiar with the NEC as well as those who have not used the NEC before. The six main Options are retained in exactly the same broad structure as in the NEC2. The Secondary Options are now referred to as Options X1 and upwards as opposed to Options G and H. The CDM (Construction (Design & Management)) and Trust Funds Options (Options V and W) from the NEC2 have been dropped. New Options such as Partnering, Limitation of Liability and Key Performance Indicators and Options X12, X18 and X20 are introduced. For matters only in the UK, HGCRA (Housing Grants, Construction and Regeneration Act (1996, UK)) and 3rd party rights are now catered for in Option Y (UK) 2 and 3. In addition to revisions to the Black Book (The Main Contract), there are revisions to the Short Form, the Professional Services Contract, the Adjudicators Contract and the Subcontract. A new Term Contract and a Framework Contract have also appeared in the NEC3 suite. The flow charts have been retained and are simply revised. The NEC2 consisted of nine core clauses, with core Clause 9 regulating Disputes and Termination. In the NEC3, core Clause 9 covers Termination, Dispute Resolution is removed to a new bolt on provision that fits between the Main Option Clauses and the Secondary Option Clauses referenced Option W1 and W2. Some major changes to the Black Book include: Introduction of the concept of Key Dates in Clause 11.2 (9). A Risk Register is introduced in Clause 11.2 (14). Clause 12.3 now recognizes the need for very clear steps to be taken by the parties to change the provisions of the conditions of c ontract. Clause 19 (Prevention) introduces the concept of Prevention which seems to be heading more towards a Force Majeure type of situation but without calling it that. Clause 33.1 is amended to include access to and use of each part of the Site under the umbrella of possession. Clause 68.1 (2) reflects the change through amending the compensation event. Section 4 remains substantially un-amended other than Employers rights remain intact if a defect is not found by the Supervisor (Clause 43.3 amendments) and the Contractor is recognized as perhaps being unable to correct defects for want of access (amended Clause 45).
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7/9/13

The NEC at a Glance | MDA Consulting

Actual Costs are dead having been replaced by Defined Costs. Clause 52.1 has been amended to adopt the more readily understood term Defined Costs but frankly, it does not seem to make a lot of difference to the operation of the contract. The reference point for Defined Costs is the Shorter Schedule of Cost Components. Clause 61.3 is introduced, enforcing a contractual time bar into the application of compensation events. By amendment to clause 61.4 a failure of the Project Manager to reply to a compensation event notification within a further 2 weeks means that he is deemed to have accepted it. New Clause 62.6 provides that if the Project Manager does not reply to a quotation within the time period allowed then the Project Manager is deemed to have accepted the quotation. New Clause 64.4 provides that if the Project Manager does not assess a compensation event, then again there is a deemed acceptance of the Contractors quotation by the Project Manager. In respect of these deemed acceptances there is a requirement for the Contractor to notify and a further period of 2 weeks within which the Project Manager can act and so remedy the situation. The Contractor now does not need to supply a method statement with each operation identified in the programme. The method statements required with the first programme are now simply statements. Only principal Equipment (as opposed to the Equipment and other resources) must be identified. By application of a new clause 11.2 (8) separate fee percentage is applied to subcontracted works as opposed to a direct fee percentage applied to Defined Costs of other work. New clause 11.2 (17) significantly widens the definition of a subcontractor. Costs of Contractor owned Equipment (previously an interpretative minefield) are now to be assessed at open market rates. Under Options A and B, the Project Manager and the Contractor are now permitted to use rates and lump sums to evaluate compensation events rather than Defined Cost provided they agree. Overall, the NEC as an international standard form has been improved by the amendments but there are still some danger areas and some lost opportunities.

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