Out with the Old and In with the New – NEC3 v NEC4

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Although NEC4 contracts were published in 2017, it is surprising to see many companies continue to use NEC3 contracts, published in 2013.

So why is that?

There are many reasons, from saving time and cost in revising and negotiating the contracts, the parties’ familiarity with NEC3 contracts and their application, or it may just be the urgency of the project and requirement to enter into contract.

How does this impact parties?

Where older versions of the contracts are used, they are less likely to include provisions relating to updated legislation, the current construction industry standards and circumstances and events affecting them.

For an employer/client, this may mean the contractor may not be bound by the latest regulations and practices for health and safety and quality of works.

For a contractor/sub-contractor, if recent events have occurred and caused delays within the construction industry, which have not been referred to in the contract, it creates difficulties in claiming extensions of time for those delays and additional costs, where applicable.

Key differences between NEC3 and NEC4

  • Introduction of additional forms of contract e.g. Alliance Contract, Design Build and Operate, and the Facilities Management Contract.
  • Revised and new definitions such as:
  • Corrupt Act (prohibition of specific acts under the contract).
  • “Employer” has been replaced with “Client”.
  • “Works Information” is now “Scope”.
  • Replacement of the “Risk Register” with “Early Warning Register”, encouraging parties to notify the other of any events which may cause delays as soon as possible.
  • An event is only considered to fall within the definition of “Prevention” if it disrupts the “whole” works, making it difficult for contractors to claim an extension of time.
  • Inclusion of “Assignment” and “Disclosure” provisions:
  • Assignment – allows both parties to transfer the benefit of the contract to another party; and
  • Disclosure – requires parties to keep information confidential.
  • Clarity as to programme requirements and more emphasis on parties to be proactive through the introduction of deemed acceptance of a programme, where parties fail to act.
  • Greater emphasis on the quality of works and ensuring a system is in place to monitor quality, by replacing clause 40 “Testing and Defects” with “Quality Management”.
  • Introducing a process for payment of final account, including assessment dates.

NEC contracts were discussed during our webinar ‘NEC 4 to C or Not to C?’ with Bill Barton on 23 July 2020 and the supporting notes can be found here.

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