The New NEC3 Suite of Contracts – What Has Changed?
In April 2013, an updated version of the entire NEC3 suite of contracts was released as a complete box set. The previous versions of the NEC3 suite of contracts (the June 2005 editions) can no longer be purchased from the NEC website, although they may still be available from independent retailers for some time to come. It is best practice for users of NEC3 contracts to ensure they use the updated April 2013 version of the contracts wherever possible for new projects going forward.
What Has Changed?
The NEC3 new box set does not contain any radical changes to the established NEC3 wording. The new box set is described by the NEC3 publishers as “more comprehensive than ever before, complete with a host of innovative new features and essential updates”. It includes amendments to take into account growing new industry practices, such as the use of BIM, as well as a much larger range of guidance booklets which are clearly intended to make the NEC3 suite even more user-friendly.
Construction Act Amendments
When the amendments to the Housing Grants, Construction & Regeneration Act 1996 came into force on 1 October 2011, the NEC publishers released a loose-leaf set of amendments via the NEC website which had to be specifically incorporated into each NEC3 contract. To save NEC3 users the trouble of having to download the correct set of amendments from the NEC website and ensure they are properly incorporated into the contract, the loose-leaf amendments have now been incorporated into the wording of the April 2013 edition of each contract. The Construction Act amendments largely only affect Option W2 and Option Y(UK)2, and anyone who wishes to check exactly what changes have been made can do so using the amendments table at the beginning of each contract.
Other Drafting Changes
The NEC publishers have taken the opportunity to make some other very minor changes to the drafting of the NEC3 suite. For example, clause 63.14, which allowed the parties under the Engineering & Construction Contract Option A to agree to use rates and lump sums to assess compensation events instead of Defined Cost, has now been added to Options C, E and F. There have also been some minor amendments to correct drafting inconsistencies. All drafting changes are identified in an amendments table at the beginning of each contract, however, the vast majority of NEC3 users are unlikely to notice any difference in the April 2013 suite.
BIM
In recognition of the increasing use of BIM in construction projects and the Government’s commitment to promoting its use, a new “How to use BIM with NEC3 contracts” guide has been published as part of the box set. The guide explains how BIM should be incorporated into the NEC3 standard forms (for example, any technical requirements relating to the use of BIM under the Engineering & Construction Contract should be incorporated into the Works Information). It also suggests additional clauses which can be added into the some of the main NEC3 contracts to facilitate the use of the Construction Industry’s Council’s recently published “BIM Protocol”. The CIC BIM Protocol is not included within the guide, but can be downloaded from the CIC’s website (www.cic.org.uk).
Project Bank Accounts
A new Option Y(UK)1 has been added to the Engineering & Construction Contract and Subcontract, Professional Services Contract, Term Service Contract and Supply Contract to allow for the use of project bank accounts. A project bank account is a collective account which the Employer pays into and from which the Main Contractor and all Subcontractors receive payments at the same time. The purpose of a project bank account is to eliminate lengthy delays in payments being made to Subcontractors. Project bank accounts are rare in the private sector, but are increasing in popularity in the public sector, hence the decision to include a standard clause facilitating their use. As with all the Option clauses, Option Y(UK)1 is optional and will only apply if the parties so agree.
Professional Services Short Contract
The NEC3 Professional Services Contract was previously the only contract in the NEC3 suite which did not have an alternative “Short” form to use on simple projects. To remedy this discrepancy, the NEC publishers have developed the Professional Services Short Contract (“PSSC”) in conjunction with the Association of Project Managers. The PSSC is a very simple document, consisting of just 8 pages of contract conditions, together with Contract Data and other ancillary project-specific forms. The PSSC also comes with its own set of guidance notes and flow charts to assist in putting the contract together and administering it correctly.
Guidance Notes
In addition to the new BIM guidance booklet (see above), the new NEC3 box set also contains 6 other guidance booklets:
- How to write the ECC (Engineering & Construction Contract) Works Information;
- How to use the ECC communication forms;
- How to write the PSC (Professional Services Contract) Scope;
- How to use the PSC communication forms;
- How to write the TSC (Term Service Contract) Service Information; and
- How to use the TSC communication forms.
The ECC Works Information, PSC Scope and TSC Service Information are all extremely important documents. It is the content of those documents that dictates the rights and responsibilities of the Contractor (or Consultant). Disputes under NEC3 contracts often arise because the Works Information (or similar) is deficient. The guidance on how to write the ECC Works Information (and similar guidance for the PSC Scope and TSC Service Information) will be extremely useful for people faced with the heavy responsibility of putting together those documents. The guidance includes drafting advice and suggestions as to what should be included within the Works Information (or Scope/Service Information).
The guidance on the use of communication forms is likely to prove invaluable, particularly for inexperienced users of NEC3 contracts who can often be overwhelmed by the amount of communication which is required. These three guidance booklets set out suggested template forms of communication and notification to be given by the parties under the contract, including template payment certificates, template early warning notices, template risk registers and template compensation event notifications. They also contain samples of Contract Data for those unsure how to fill them in.
NEC3 In-House Training
NEC3 contracts are markedly different from many other standard forms of contract, not only in terms of the way they are drafted but also in terms of their culture and contractual processes. It is essential for inexperienced NEC3 users to ensure they obtain a good understanding of the contracts in order to help minimise the risk of problems and disputes.
Are you new to NEC3 contracts or interested in gaining a better understanding of how they work?
Hawkswell Kilvington provides in-house training sessions on NEC3 contracts which give delegates a detailed overview of how they work in practice. The sessions are interactive and feature practical case studies which allow delegates to test and apply their knowledge. The content of the training session can also be tailored to suit the particular needs and circumstances of your business. To find out more please email Jonathan Hawkswell – jhawkswell@hklegal.co.uk
This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.