NEC contracts in Wales
07I09
NEC contracts in Wales
On the 15th of
July 2009, the Deputy First Minister and Minister for the Economy
and Transport, Ieuan Wyn Jones, announced the launch of the first
Welsh National Transport Plan for consultation.
The Plan sets out the
Welsh Assembly Government’s objectives for the development of ‘a
modern and sustainable transport system for Wales’.
This leads us to ask, how
are these transport projects going to be procured and managed?
If current trends are
anything to go by, the increasingly popular NEC family of
construction and engineering contracts will be at the heart of any
such projects, just as in England and various other developed
countries around the world.
The NEC (New Engineering
Contract) isn’t new, but the most up to date version is NEC3,
published in 2005. The NEC is currently the construction contract
of choice for the UK Government on public projects and most
recently of the Olympic Development Authority.
So why is the NEC so popular? It was
designed with a number of clear objectives in mind:
- Simplicity – traditionally, construction contracts have been
complex, legalistic and difficult to understand, even for the
lawyers using them! The NEC contracts claim to use plain
language and avoid legal jargon.
- Flexibility – the NEC is built around a set of core
clauses. There are then a number of optional clauses, which
allow the contract to be tailored to a particular project or the
requirements of a particular employer. Finally, there is a
mechanism for amendments and additional clauses (the Z clauses),
which again help to tailor the contract, whilst retaining the
spirit of NEC.
- Pro-activity – perhaps the most significant objective is the
encouragement of pro-active project and risk management
with early-warning systems and project key dates. Its aim is
to foster a collaborative partnership between the parties and to
deal with issues up front.
In theory at least, NEC
has much to commend it, but it isn’t without its critics.
There are a number of issues which should be considered before the
NEC is used for any particular project:
- Over-simplicity – critics say that simplifying complex
construction arrangements inevitably leads to ambiguity and an
increased risk of disputes.
- Unintentionally adversarial – the mechanism by which
contractors are required to give an ‘early warning’ of events which
may impact adversely on cost or time and the serious consequences
of not doing this can sometimes damage the relationship between the
parties. Given that the intention of NEC was to be less
adversarial than traditional construction contracts, some say these
mechanisms do not sit comfortably with this aim.
- Not universally suitable – Although there are optional clauses,
which allow NEC to be tailored to particular situations; it is
debatable whether the contract is suitable for all types of
project. Large civil engineering and construction projects
are one thing but general construction projects are quite
another. Experience shows that the NEC perhaps works best
with the larger projects and parties who are familiar with it and
understand how it works.
On balance, the
prevailing view is that the NEC is a sound and workable model
contract. Whatever method of procurement and management is
adopted for the projects in Wales in the coming months and years,
one thing is for certain, NEC will be at the heart of it. As long
as it is used by experienced hands, it will have a good chance of
fostering a sound partnership and perhaps even bringing projects in
on budget and to time.
Hugh James will be
holding training on all aspects of NEC over the coming months to
assist you in achieving your project objectives on time and on
budget.
For more information contact:
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Ioan
Prydderch
Partner
Head of Construction, Projects and Energy
E ioan.prydderch@hughjames.com
T 029 20391127