19 February 2014 | Comment | Article by Iwan Jenkins
The use of the NEC contract is growing in both the public and private sectors.
The recent National Construction Contracts and Law Survey 2015, issued by the NBS, has highlighted an increasing use of the NEC form of building contract in the construction industry, almost tripling in the past five years.
The following are key differences between the JCT Design & Build 2015 form of building contract (‘the JCT Contract’), and the NEC Engineering and Construction Contract Option C form of Contract (‘the NEC Contract’).
The JCT Contract is a fixed price lump sum contract. NEC Option B offers a fixed price lump sum contract but Options C and D are target cost contracts.
2. Provisional sums
The JCT Contract contains provisional sums, whilst the NEC Contract does not.
3. Cost scrutiny
In a JCT contract there may be some cost scrutiny via the contract sum analysis and tender negotiations but the NEC contract has an open book procedure with the key concepts of defined cost and disallowed cost.
4. Ground Risk
In the JCT contract ground risk is with the contractor. However, the NEC contract uses the ICE forseeability test in relation to ground conditions.
5. The programme
The JCT contract does not have a programme as a contractual document. The programme is at the heart of the NEC ethos. It is a contractual document and to be regularly updated. The NEC contract also has key concepts such as float, completion float and time risk allowances.
In relation to payment, the JCT contract payment section is clear, is all in one section (clause 4) and easy to follow. However, in relation to the NEC contract it is located in three different locations – clause 5, Y(UK)2 and Contract Data Part 1.
7. Extension of time/loss and expense
In relation to extensions of time and loss and expense, the JCT contract has relevant matters and relevant events and time and money are dealt with as separate concepts. The NEC contract has the compensation event and it deals with both time and money. The ethos of compensations events is that they are dealt with in real time as much as possible and this is very much process driven. The compensation events also have a condition precedent nature, and failure to notify the compensation event within the 8 week period can have dire consequences.
The JCT contract contains comprehensive detail in relation to insurances at clause 6 and Schedule 3. In relation to the NEC contract, the insurance detail is very brief and contained at clause 84 of the contract. The NEC contract is silent on some insurances. The missing insurances relate to existing buildings insurance and adjacent property insurance, and need to be included in the additional insurances section of the Contract Data Part 1.
9. Design risk
The JCT contract has a clear interaction between the Employer’s Requirements and Contractor’s Proposals and there is extensive drafting in the JCT. The NEC contract however simply states a contractor is to design the parts of the works which the Works Information states he is to design. The Works Information contains far more than Employer’s Requirements. There is guidance as to what the Works Information should contain and it is dangerous and bad practice to simply re-badge a JCT Employer’s Requirements document as an NEC Works Information document.
10. Employers Requirements/Works Information
The Works Information contains far more information than a JCT Employers Requirements as it is a shorter contract and leaves the some of the detail to the Works Information. Simply re- badging a JCT Employers Requirements as an NEC Works Information is dangerous as the terminology and level of detail required is different.
If you have any queries in relation to JCT Design & Build contracts and/or the use of the NEC contract, please do not hesitate to contact me.