Written by Tom MacSwayne, Trainee Solicitor in Construction, Energy and Projects
On the 26 July 2022, NEC published the final form of clause X29 for the NEC suite of contracts; otherwise known as the Climate Change Clause. Various versions of this clause have now been produced to allow its incorporation across the NEC4 forms of contract. A copy of these clauses and the associated guidance can be found on the NEC website.
This post provides a summary of the main provisions within the clause along with some of our initial thoughts surrounding its incorporation and operation.
The key points introduced by the clause are:
- Climate Change Requirements (CCRs) – Under Clause, X29 a contractor is required to comply with the Climate Change Requirements which are to be set out in the Scope documents. Failure to comply with the CCRs will be considered a breach of the contractor’s obligations. Moreover, a failure to comply with a CCR in relation to works will be considered a defect which the contractor must rectify.
- Climate Change Plan (CCP) – The Contractor will be required to set out its strategy for meeting the CCRs. The CCP should identify project stakeholders, roles, timescales, key milestones, tools and tasks to achieve the requirements. Unlike the consultation draft, there is no clause allowing for deemed acceptance if the project manager fails to respond to the Contractor’s CPP. Instead, the NEC promotes a spirit of mutual trust and co-operation under sub-clause 10.2.
- Contractor’s Proposals – Following on from the semantics of co-operation, a contractor may request changes to the project Scope documents to reduce the projects/assets climate impact over its lifecycle.
- Performance Table – The clause brings with it an optional performance management scheme, which allows the Client to financially incentivise/penalise the Contractor to meet stated performance targets.
It will be interesting to see the uptake of this clause and the level of CCRs that parties are willing to accept.
Contractors will need to quickly familiarise themselves with the standard CCRs that could be incorporated into the Scope documents. Failure to do so, could see reduced profit margins resulting from defective works or falling short of the financial incentives set out in the performance table.
There is no doubt that the decarbonisation of the construction industry is an important issue that must be resolved. As the United Kingdom moves closer to an ESG model of accountability, we believe clauses like X29 could well become the new norm.