The NEC form of contracts are widely used in the UK and internationally; for example in Hong Kong. Whilst a lot of attention and guidance has been given/produced as to "how to use NEC contract", there are very few examples of guidance and tips as to "how not to use an NEC contract".
Below are a few examples of how not to use an NEC contract:-
As a client:
- Use NEC because its trendy, rather than because you truly buy into its philosophy.
- Believe that it will solve all your project delivery problems.... it won't.
- Choose the wrong option/contract for the given circumstances, most commonly a "full" form when a short one will do.
- Choose the wrong payment option given the contract size, complexity and risk profile. Most commonly, this is a target cost arrangement with the Client and/or the Contractor not appreciating the complexities and overheads of doing open book reimbursement.
- Allow a person who doesn't understand NEC to draft lots of Z clauses. You may well end up with verbose and ambiguous contract clauses that undermine all three objects of the NEC suite of contracts. This significantly increases the likelihood of a failed contract and disputes.
- Understaff the contract with people who have traditional attitudes and are re-active, rather than having the proactive approach required.
- Don't start the contract properly – i.e. training, project organisation and a delegation process such as cloud based NEC computer systems etc. Instead, just believe that it will happen somehow.
- Trust in the buzzword of collaboration and have a touchy-feely abstract workshop, where hard contract/project management issues are not addressed.
- Rely on clause 10.2 and solely "act in a spirit of mutual trust and co-operation" at first, rather than following 10.1 where you "act as stated in this contract" enhanced by a "spirit of mutual trust and co-operation".
As a Contractor:
- Don't bother putting together a decent programme for acceptance. This will lead to subsequent difficulties in updating and agreeing compensation events – this will also affect other areas, such as collaborating and early warning, etc.
- Only warn as a "set up" for a compensation event. This undermines the effectiveness of NEC for mitigating the effects of risks and issues.
As a Project Manager
- Either don't bother looking at the programme submitted by the Contractor or, if you do and it is lacking, just accept it regardless. This will lead to subsequent difficulties in updating and agreeing compensation events – this will also affect other areas, such as collaborating, e.g., early warning etc.
- Treat an early warning as a "set up" for a compensation event and/or reject notification of issues as they have happened. This undermines the effectiveness of NEC for mitigating the effects of risks and issues.
Where the Contractor or the Project Manager try to be precisely wrong as opposed to approximately right about the assessment of compensation events, it will lead to the retrospective benefit of hindsight assessment of compensation events. This will also lead to higher costs and disputes.
We discussed How NOT to use an NEC Contract and How NOT to Mediate in our June 2021 webinar with Dr Jon Broomand Nicolas Baatz KC (retired) of Atkin Chambers. Click hereto view the webinar and detailed notes.
How can Barton Legal help?
At Barton Legal we have extensive experience in all the standard contract forms, including JCT as well as NEC, IChemE, and FIDIC.
We believe that an increased understanding of contractual terms and the roles and responsibilities of all parties ensures a successful conclusion to a project, which is why we always use plain English and ensure you understand and can apply the terms of your contract.
Our aim is to reduce legal gobbledegook and increase collaboration between parties to increase the prospects of completing your project on time and on budget.
We place great emphasis in the early stages of the contract on understanding and preparing thoroughly, in order to avoid costly disputes later.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.