Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
Background of NEC contracts
NEC contracts are endorsed by the UK Cabinet Office’s Construction Clients’ Board, are recognised as supporting good practice by its Facilities Management Board, and are supported by the British Institute of Facilities Management. The Term Service Contract (TSC) is, for example, the form of contract for the Crown Commercial Services provision of total facilities management, and is the contract underlying the Department for Transport's Highways Maintenance Efficiency Programme (HMEP).
Changes to NEC contracts
Changes are being made to all of the contracts, and two new contracts are being brought into the suite: a new 'Design, Build and Operate' contract, and an 'Alliancing' form, which will be issued for consultation first. Ross Hayes, of Anthony Collins Solicitors, has been part of the drafting team for this new edition.
For many of you, it is the changes to the TSC that may be of most interest. It is extensively used for responsive repairs, highways services maintenance and facilities management (FM) contracts across the country. The changes reflect the experience gained from the considerable adoption of this contract since it was first published in June 2005. It was then only in its first edition, and its use in the last 12 years has highlighted a number of areas where clients and contractors have suggested changes.
Changes to the TSC
The first thing to say is that the NEC is not removing its support for the NEC3, and nor are we. NEC4 will be an “evolution” not a “revolution”. The new version brings in, as standard or as options, a number of enhancements which we have been adding for our clients for some time through bespoke amendments.
There are a number of changes relating to payment. The contractor is now required to provide an application for payment in advance of an assessment by the service manager. There is a new procedure for a final assessment (an “NEC final account”) shortly after the end of the contract, and an option is included for annual “final accounts”.
The new contract includes anti-bribery and corruption, and confidentiality clauses. The definition of actual cost used to calculate the cost of change in all contracts, and the payments in target cost contracts, has been significantly enhanced.
Another major addition to note is the addition of a “deemed to accept” clause for programmes and plans. There has been considerable concern that there was no sanction if the service manager did not accept or reject a programme or plan submitted for acceptance. Now, however, a failure to respond at all will mean that the plan or programme is treated as accepted, so it is important for service managers to respond within the contractual time periods.
Finally, there are a few changes in terminology, such as a change from “employer” to “client”. There is also a welcome change to gender neutral language.
Similar changes are included, where appropriate, in all the other contracts. As before, there is a consistency across the whole suite.
The NEC4 contracts will also reflect new construction developments such as the ability to include early contractor involvement (ECI) and building information modelling (BIM) in the Engineering and Construction Contract.
How does this affect you now?
Contracts let under the NEC3 will not be affected. Clients used to the NEC3 may choose to continue to use it for some time, especially if they have framework contracts in place or template forms set up. Clients using the NEC for the first time would be well advised to consider the new NEC4, especially for the TSC. In the short term, before the new form is published, clients will need to decide whether or not to adopt the NEC3 or wait for the NEC4. This will depend on whether the procurement timetable can be lengthened.
For further information
For advice on NEC contracts please contact Ross Hayes or Andrew Millross.
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