New NEC4 alliancing contract - "A new breed of contract"

At the recent NEC Annual Users Conference, keynote speaker, Lord Adonis, warned attendees that government funding for future infrastructure projects will always depend on the perceived success of those currently on the books. He stressed, therefore, that once given the green light by government, it is up to those delivering these projects to demonstrate efficient delivery (both in terms of time and budget) achieved through true collaboration.

Timely, then, that the NEC used its 25^th anniversary conference to launch the new (and its first) NEC4 Alliancing Contract. In a packed workshop held on the new contract, it was feted by members of the NEC’s drafting panel, Ross Hayes and Robert Gerrard, as “a new breed of NEC contract”, whilst the general consensus in the room of users was that it is “not for the faint hearted”.

“A new breed of contract”?

Alliancing contracts are the “new kid on the block” of major construction and infrastructure contracts. They have been around in bespoke forms for some time, having been particularly popular in Australia, for example, and the NEC’s publication follows on from the publication of the ACA’s Framework Alliance Contract last year.

It is a multi-party contract with major stakeholders to works forming an “alliance”. These are likely to include the client, contractor, key subcontractors and consultants. NEC considers this a shift away from its other contracts because it takes principles of partnering beyond the traditional two-party contract by binding all key players on a construction project together, thus sharing risks equally.

Parties to the contract form an Alliancing Board, who make the decisions around the delivery of the contract. This is very different from a two-party contract which is driven by the client. The Alliancing Board then appoints an Alliancing Manager who is responsible for the day-to-day running of the contract.

For regular users of NEC contracts, the contract will be recognised as a further extension of the NEC’s partnering approach in which all parties share the “pain and gain” in the hope that there will be a shift away from site-based blame culture, so that works can progress without conflict where unforeseen problems arise. Most notably the parties come together to form their own objectives and the collective objectives of the project before working together to deliver these.

“Not for the faint hearted”?

As with all NEC contracts, they should only be adopted by clients who have the appropriate resources and experience to manage them. Problems arise where they are run (or amended) with the assumption that a JCT-style approach will work. It won’t. Further it should only be used by parties who truly want to partner with Contractors and who are comfortable enough to relinquish control over direction of the works to the Alliancing Board.

The Alliancing Manager will be central to ensuring the success of the contract, bearing the responsibility for the delivery of multi-party objectives. It will therefore be crucial to ensure that an appropriate Alliancing Manager is appointed with the right expertise. Furthermore, the NEC is clear that the Alliancing Contract will not be suitable for all works projects as the level of contract administration and collegiate objective making will only be appropriate where proportionate to the value/risk of the works.

For more information

If you have any questions relating to the topics raised in this article, please contact Alistair Smith.