NEC Engineering and Construction Contract
The NEC4 Engineering and Construction Contract (ECC) is a highly flexible and adaptable contract suitable for construction projects of all sizes and complexities. It’s part of the NEC contract suite, which provides contracts for most commercial projects.
Let’s explore what kind of projects it works best with and when it might be the right choice for your organisation.
What is the NEC Engineering and Construction Contract?
Because it has been designed to be extremely flexible, the NEC Engineering and Construction Contract is suitable for anything from minor refurbishments to major civil engineering works. It has a proven international track record for delivering building and infrastructure projects.
The way the contract is structured – with six main payment options and several secondary options – means it can be tailored to the specific needs of any project. So, it can be used for projects like:
- Small, straightforward problems like minor renovations or local infrastructure upgrade
- Medium size developments like schools, hospitals or commercial buildings
- Large, complex infrastructure projects like highways, rail, energy and major public works
Other major contract providers, including FIDIC and JCT offer contracts suitable for similar projects, so it’s worth exploring what is the best option for you.
Features of the NEC Engineering and Construction Contract
The NEC Engineering and Construction Contract takes a different approach to contracts from other providers. Here are a few key points to consider when deciding whether to choose it for your project.
Clear and simple
As with the rest of the NEC contract suite, the Engineering and Construction Contract is written in plain English, avoiding jargon, so it’s easily understood. It’s also structured to minimise ambiguity and reduce the risk of disputes.
Flexible payment and risk
The Engineering and Construction Contract provides six main payment options, each of which allocates the risk between client and contractor differently.
Option A: Priced contract with activity schedule
The contractor bears most of the risk for quantities and efficiency. They must deliver for the agreed payment lump sum.
Option B: Priced contract with bill of quantities
The contractor bears the risk for efficiency, the client bears the risk if quantities differ from the initial bill of quantities.
Option C: Target contract with activity schedule
The contractor and client share cost risk via agreed percentages. The contractor is responsible for quantity risk.
Option D: Target contract with bill of quantities
Similar to Option C above, but the client bears responsibility for quantity risk.
Option E: Cost-reimbursable contract
The client pays the actual project costs. The contractor bears little risk apart from disallowed costs.
Option F: Management contract
The client pays the actual costs plus a fee. The contractor manages the work, but bears minimal cost risk.
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Who administers the project?
The administration is carried out by two key roles, appointed by the client: the project manager and the supervisor.
The project manager is responsible for the day-to-day admin of the contract. They must act impartially, following the collaborative and proactive approach used by NEC contracts.
The supervisor’s main duty is to ensure that works are carried out in accordance with the contract. They conduct inspections and tests, and notify the project manager of any problems.
Who is responsible for design?
The Engineering and Construction Contract can be used for projects with any combination of design responsibility, from fully client-designed to design-and-build.
The design requirements are outlined in a scope document (previously referred to as works information in NEC3) to ensure clarity and adaptability.
How are project changes dealt with?
All changes, delays and other unforeseen events are managed through a fast and fair compensation event process which is built into the contract. It ensures that neither client nor contractor is unfairly disadvantaged by unforeseen events outside of the contractor’s control and is designed to resolve problems quickly, keeping the project moving and reducing disputes.
Compensation events are the only way to make changes to price or time. There is no other general right to claim for loss, expense or delay.
How are disputes dealt with?
The Engineering and Construction Contract provides several escalating options for dealing with disputes between parties.
Pre-adjudication
Two routes are offered before adjudication. Senior representatives from each side can be appointed to meet and attempt to resolve the dispute. Or, a dispute avoidance panel (DAP) can be appointed. The DAP is responsible for regular site visits to identify and resolve disputes before they arise. DAPs are best suited to larger projects.
Neither of the pre-adjudication routes are mandatory, as the Housing Grants, Construction and Regeneration Act states that a party can take a dispute to adjudication at any time.
Adjudication
Adjudication is the main dispute resolution method for all NEC4 contracts. The adjudicator is an independent, neutral party and can be appointed at several stages of the project, depending how the project is being administered. Either party can then apply to them for adjudication. Their decision is binding, unless and until it’s revised by arbitration or litigation.
Arbitration or litigation
If adjudication fails, either party can refer the dispute to arbitration or litigation, depending what is specified in the contract. NEC contracts are set up to avoid escalating conflict, so resolution in the earlier stages is encouraged.
Changes from NEC3 to NEC4
The NEC contract suite was revised in 2017 when NEC4 was introduced. The core principles of collaboration, flexibility and clear language remain, but the update included several enhancements and new options to address industry feedback and modern project needs. These are some of the key changes to the Engineering and Construction Contract.
Structure and language
The new version reorganises and streamlines several clauses for better clarity and usability. Some wording has been changed to enhance readability and gender neutral language is used throughout.
New and enhanced contract options
The NEC Engineering and Construction Contract introduces new forms including Design, Build and Operate (DBO) and the Alliance Contract, providing greater flexibility. It also introduces an option for Early Contractor Involvement (ECI) for contractor involvement during the design phase.
Risk management
The ‘risk register’ from NEC3 has been renamed to the ‘early warning register’, to clarify that it’s specifically for early warnings rather than for all project risks. The NEC4 version also puts a stronger emphasis on proactive risk management and identification.
Disputes
NEC4 Engineering and Construction Contract introduces the DAP (dispute avoidance board) as an additional pre-adjudication dispute resolution option.
Information management
Updated provision for Building Information Modelling (BIM) has been added, in line with current industry standards.
Contractor proposals
Contractors are now able to propose changes to the project scope that could reduce costs or improve outcomes. The project manager can accept or reject these proposals.
Cost savings
When using Option A or Option B for pricing, any cost savings made through value engineering can now be shared between parties. This was not possible under NEC3, and is intended to encourage cost
saving by contractors.
Programme management
In NEC3, if the project manager did not respond to a programme submission within a specified period,the programme was automatically accepted. This is no longer the case with NEC4.
Commercial simplification
Commercial provisions have been consolidated and simplified to reduce disputes and make the contract more user-friendly.
How can Sypro help?
Sypro was co-founded by one of the select few experts chosen to draft NEC4, so you know your NEC contract management is in safe hands. Our tools are built to save you time and money, and keep your projects compliant. If you want to know more about what we do and how we can help, drop us an email or give us a call on 01482 765601.
Why use Sypro?
Sypro has been helping some of the biggest construction, energy and public sector organisations around the globe keep their projects on track and their NEC contract management compliant for over 15 years.
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