JCT vs NEC Contracts: The Key Differences

JCT and NEC are popular UK contract suites for construction and civil engineering projects. They’re both flexible and widely used. They use different approaches that suit different projects and clients. When you’re choosing a contract type, it’s important to understand the differences.

Overview of JCT and NEC contracts

You’ll learn the key differences between the two contracts in this article. If you want more information, check out our in-depth explanations of JCT contracts and NEC contracts. But, before we look at the differences, here’s a brief overview of each contract type.

JCT contracts: traditional structure and UK focused

The Joint Contracts Tribunal (JCT) is the old guard of UK construction contracts. It was formed in 1931 by the Royal Institute of British Architects (RIBA). Its first standard-form contracts were issued the same year, although they weren’t referred to as JCT contracts until 1977. JCT contracts are meant for building and construction but can be used on other projects. They’re very structured, with precisely defined roles and responsibilities. They’re also designed to be used in the UK. That means they’re tailored to British legal standards and construction practices. JCT contracts can be adapted for international use, but that’s complex and not recommended.

In JCT contracts most of the risk is allocated to the contractor. This can make them seem adversarial. Contractors tend to take a defensive approach, which affects relationships. JCT contracts are suited to projects with well-defined scope which is unlikely to change. They’re best for clients who prefer cost and risk predictability.

NEC contracts: progressive and internationally recognised

NEC contracts, on the other hand, are more modern. They were launched in 1993, and designed for flexibility and international use. NEC contracts encourage collaborative working, trust and risk sharing. Risk planning and monitoring takes place through the project Instead of being defined at the start. This leads to a more proactive outlook on risk. NEC contracts suit projects where flexibility and close working are key.

Key differences between JCT and NEC contracts

On the surface, NEC and JCT contracts do similar jobs. They provide a suite of standard-form contracts that set out terms between clients and contractors, and detail how projects will take place. But, they differ significantly in approach, structure and language. These differences have a major impact on how projects work. They affect project management styles, risk handling, payment terms and how contractual relationships are handled.

Let’s look at some key differences, and see how they could affect your projects.

Approach to risk allocation

When it comes to risk allocation, JCT contracts take a traditional approach. Risks are designated at the start of the process and usually assigned to the contractor. This approach means that the contractor bears most of the risk, and the client retains overall control. It creates an adversarial relationship and prioritises protecting the client’s interests. NEC contracts, on the other hand, emphasise shared risk management. They aim for balanced responsibility between parties and a ‘spirit of mutual trust and collaboration’.

Under an NEC contract, risks are not just specified at the start of the project. Clients and contractors must identify and manage risks throughout. This encourages collaborative working where both parties address challenges and work together to overcome them.

Clarity of remedies

If a problem occurs during a project, the two contract types deal with it differently. NEC contracts provide specified remedies for common critical issues, like a contractor applying for a late claim or a project manager failing to respond to a compensation event. These defined procedures mean disputes are usually resolved quickly, with all parties being clear on their rights and responsibilities. JCT contracts don’t specify remedies for common issues. They rely on existing case law precedents to find a resolution. This can be complex and time-consuming, and seriously impact project timelines.

Flexibility and project adaptability

NEC contracts are flexible and adaptable. They’re designed to allow constant modification throughout projects. Changes during the project are handled through compensation events. These consolidate time and cost impacts into a single event. This simplifies adapting the project to the changes. This flexibility is particularly useful for complex projects where scope adjustments are common. It allows the project to evolve without complex and time-consuming renegotiation.

JCT contracts are more rigid and prescribed. Mid-project changes are still possible, but implementing them is more complex. This rigidity can be an advantage to clients and contractors. It means that everything is set out from the beginning, and everyone knows what to expect from the project.

Language and clarity

The language used in each contract type is different. This might seem inconsequential, but it has a major effect on how the contracts are used and the relationships they encourage. JCT contracts are written in complex legal language. This makes them difficult to understand without specialised knowledge. The problem with using complex language is that the meaning can be unclear to anyone without a legal background. This can lead to misunderstandings, especially during disputes.

NEC contracts use plain English, to make them as accessible as possible and enhance understanding. This reflects their emphasis on collaboration between parties and overall user-friendliness. It also makes them much easier to understand without a legal background. Using plain English makes NEC contracts clearer. This minimises ambiguity and can help limit disputes.

Client involvement and administration

The two contract types are administered substantially differently. This affects the relationship between the client and the contractor. In a JCT contract, the client appoints a Contracts Administrator to oversee the project. They manage contractual obligations on both sides, and act as a point of contact between client and contractor. The contract administrator role focuses on payment admin and advising on the procedures and processes in the contract. So, they must have a deep understanding of the contracts, and the language they use.

NEC contracts need more client involvement. They incorporate a Project Manager who ensures the project runs smoothly. It’s a more hands-on role than the contract administrator in a JCT contract. It also needs a good understanding of the technical side of the project to enable effective decision-making. By overseeing project processes, and assessing and managing risk, the project manager helps maintain the collaborative nature of an NEC contract. As they’re deeply embedded with both clients and contractors, project managers are better able to anticipate and mitigate risks, and help teams work more efficiently.

Programme of works

A programme of works is a schedule of project milestones and responsibilities. It’s a vital component of the NEC contract, and helps make sure timelines are adhered to and adjustments can be made. It evolves through the project and must be regularly updated and accepted by all parties. It also helps detect problems early. It can also be a very admin-intensive process. JCT contracts don’t involve a programme of works. Instead, they require key dates and milestones to be set in a plan at the beginning of the project. This plan isn’t usually reviewed or updated during the project unless a time extension is requested. It’s less admin-intensive, but much less flexible too.

Payment structures

JCT and NEC approach payment structures differently. JCT uses traditional fixed-price payment structures. Provisional payment sums and an estimate of the total cost of the works must be agreed before the project starts. They also have a rigid approach to cost management. This provides clients and contractors with cost certainty by specifying amounts upfront.

NEC contracts allow more flexible payment. There are several options to cover most types of payment. These include target-cost options, designed to allow cost adjustment throughout the project. This is useful for projects with many variables, where cost changes are likely. It allows for better cost control as the project evolves.

Treatment of time and cost

Time and cost are treated separately under JCT. This means timeline adjustments don’t directly impact financial terms. It can simplify delay management, as the two are addressed separately. NEC contracts integrate time and cost, into compensation events. This streamlines managing project adjustments so both parties can address changes quickly and efficiently. In turn, this helps NEC projects remain adaptable and encourages a holistic overview of project needs from clients and contractors.

Governance and certainty of outcome

There are key differences in how each contract type handles project changes. ‘Implemented’ (i.e. finalised) compensation events in NEC contracts can only be changed via a formal dispute process or by mutual agreement of the Parties. This gives clients and contractors greater confidence and certainty. Because JCT contracts separate cost and time and don’t have pre-defined deadlines, they can take much longer to resolve.

Complexity and administrative requirements

JCT contracts require detailed, in-depth administration. They emphasise formal procedures and thorough record-keeping. This makes for a high level of accountability and a detailed paper trail. It’s ideal for projects that need a structured and documented process. NEC contracts have more progressive administration requirements. They prioritise regular updates and ongoing communications over strict procedural requirements. This makes NEC contracts more dynamic. So they’re suited to constantly evolving projects that need real-time collaboration.

Which contract is right for my project? 

Neither contract type is better than the other. They do the same job in different ways. Choosing the right one depends on your organisation and the nature of your project. When deciding which to use, consider things like:

• The level of client involvement you want
• The kind of relationship you want between the client and the contractor
• Which approach to risk management will work best

JCT contracts take a traditional, well-structured approach. They offer fixed-price certainty and minimal client involvement once the contract is signed. They do this by creating a prescriptive, restrictive framework. They’re well suited to projects where predictability and clear risk allocation are key. NEC contracts are better suited to projects that need flexibility, close collaboration and adaptability. They’re more adaptable, with flexible payment options, integrated time/cost adjustments and a strong emphasis on collaboration. That makes NEC contracts particularly well suited to engineering and large-scale works where client involvement and ongoing, proactive risk management are essential.

Whatever contract type you decide, Sypro is here to help you effectively and compliantly manage it. Take a tour of our software today to see it for yourself or enquire about pricing