NEC3

2014-06-11T14:52:51Z

Christophercorr:

= Introduction =

NEC was first published in 1993 as the New Engineering Contract. It is a suite of construction contracts intended to promote partnering and collaboration between the contractor and client. It was developed as a reaction to other more traditional forms of construction contract which have been portrayed by some as adversarial.

In 1994, NEC was strongly recommended in the Latham Report (Constructing the Team) which investigated the perceived problems with the construction industry, describing it as ‘ineffective’, ‘fragmented’ and ‘incapable of delivering for its customers’, proposing that there should be greater partnering and teamwork.

The NEC contracts are intended to:
*Stimulate good management.
*Be clear and simple, written in plain English, in the present tense and without legal terminology.
*Be useable in a wide variety of situations from minor works to major projects.

The third edition, NEC3 was published in 2005.

NEC3 It is becoming more popular as ICE (The Institution of Civil Engineers) announced that it would not continue updating its own family of contracts but instead endorsed NEC3, and the UK government stopped updating the GCWorks contracts in favour of NEC3.

= Documents =

The suite of documents now includes:
*ECC Engineering and Construction Contract.
*ECSC Engineering and Construction Short Contract.
*ECS Engineering and Construction Subcontract.
*ECSS Engineering and Construction Short Subcontract.
*FC Framework Contract.
*TSC Term Service Contract.
*TSSC Term Service Short Contract.
*PSC Professional Services Contract.
*SC Supply Contract.
*SSC Supply Short Contract.
*AC Adjudicators Contract.

The ECC, PSC and TSC contracts offer a range of options:
*Option A: Priced contract with activity schedule.
*Option B: Priced contract with bill of quantities.
*Option C: Target contract with activity schedule.
*Option D: Target contract with bill of quantities.
*Option E: Cost reimbursable contract.
*Option F: Management contract.
*Option G: Term contract (for the appointment of a consultant based on a priced schedule of tasks).

Each contract is supported by guidance notes and flow charts describing the procedures to be followed.

NB In April 2013, an update suite of contracts was made available, including new guidance, a new Professional Services Short Contract, provisions and clauses for project bank accounts and a range of other changes. For full details see: [http://www.neccontract.com/news/article.asp?NEWS_ID=840&Type=News NEC Announces updated April 2013 Edition suite of contracts].

= Operation =

Using NEC3 requires that all parties enter into the contract with a collaborative mind set and that the procedures and terminologies are properly understood and adhered to. If parties have not used NEC3 before, great care must be taken to recognise that the terminology and key terms may be different from other forms of contract, with differences ranging from the fact that the contract administrator is replaced by a project manager, through to new terms such as compensation events, and a range of new procedures.

NEC3 has been reported as functioning successfully on the London 2012 Olympic Games, Crossrail and Heathrow, Terminal 5.

= Criticism =

NEC3 is not without its critics. It has been described as requiring too much expertise to operate, focussing too much on project management and generating too much paperwork. In 2010, Justice Edwards-Stuart described it as a “triumph of form over substance" (Anglian Water Services v Laing 2010).

The number of companies involved on a large building project and the length of supply chains means that capturing cost information in relation to compensation events takes a long time. More often than not the project manager has to decide whether or not to proceed with a variation based on estimates from the cost consultant which in due course get replaced by the actual cost. It has been argued that this practicality defeats the rationale of NEC3 in relation to cost control and decision making.

In addition, compensation events due to changes that are not caused by the contractor are reimbursed at cost and not related to tender pricing. The only basis for challenging these costs is unreasonableness. This can cause difficulties, for instance policing a factory overhead claimed for additional work in relation to items such as overtime and additional supervision and when goods are also being produced for other projects.

One very well-known London practice of cost consultants raises its fees substantially on NEC projects to cover the additional resources needed to administer the cost aspects of the system

= Find out more =

=== Related articles on Designing Buildings Wiki ===
*Atkins v Secretary of State for Transport.
*Bill of quantities.
*Contracts.
*Contract conditions.
*Cost reimbursable contract.
*Latham Report
*Management contract.
*NEC contract change management systems.
*Procurement route.
*Target cost.
*Tender.
*Term contract

=== External references ===
*[http://www.neccontract.com NEC Contracts].
*[http://www.neccontract.com/news/article.asp?NEWS_ID=840&Type=News NEC Announces updated April 2013 Edition suite of contracts].
*Construction Manager: [http://www.construction-manager.co.uk/management/its-widely-used-watch-out-necs-hidden-traps/ It's widely used, but watch out for NEC's hidden traps]. 4 July 2013.

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User:Christophercorr

2014-06-11T14:46:56Z

Christophercorr:

Designing Buildings - User contributions [en]

NEC3

User:Christophercorr