The NEC4 suite of contracts was published in 2017, bringing forward a series of changes based on common feedback and amendments to the previous iteration of contracts. Since its introduction, this continuous improvement approach has continued and the NEC4 suite has seen a series of further amendments, again to fall in line with user and industry expert feedback.
Early 2023 has seen the publication of the latest round of amendments, with two of these serving to enhance the application of contracts to suit an ever-evolving working landscape.
Location, location, location – Working Areas amendments
Three years on from the initial outbreak of the COVID-19 pandemic, the way we work looks very different for a lot of people. This still rings true for those industries described as more ‘traditional’ like construction, which are typically seen as more location based.
There have definitely been changes in the way work is delivered physically on site within the construction industry, and the sector plays host to all manner of roles not reliant on site attendance too.
The ‘new normal’ is now normal, with hybrid arrangements creating more staff transiency and remote working a part of everyday work life. But this posed challenges for those delivering projects under NEC contracts where people are operating outside of the defined ‘Working Areas’ or ‘Service Areas’, which has a knock-on impact on Defined Cost and what costs can be recovered as part of it.
To address these specific challenges, amendments have been made to the Schedule of Cost Components (SCC) and the Short Schedule of Cost Components (SSCC).
The SCC allows the functionality for users to identify people within the Contract Data whose costs can be recovered as part of the Defined Costs even when they are not normally based within the Working or Service Areas and are working outside of them. Meanwhile, changes to the SSCC allow the cost of people who normally operate within the defined areas to be recovered as part of the Defined Cost when they are working outside of them, provided there is work being carried out on the specific project.
This creates a standardised approach to recovery under the Defined Cost for clarity and ease of contract use, streamlining the ability for people to work flexibly. It also means that people are not forced onto site or into the Working or Service Areas to prompt Defined Cost recovery, which has added sustainability benefits through less unnecessary travel to said sites.
Climate-centric Contract Clauses – X29 amendments
With the continued focus on achieving net zero, all organisations must take account of their activities and their climate impact – especially those that have applied tougher targets than the government’s overall 2050 aim.
Around 25% of the UK’s greenhouse gas emissions can be attributed to the built environment, so getting the approach to climate initiatives and decarbonisation right is critical to driving change. The construction industry is placing a huge focus on sustainability, but there is an inherent risk for greenwashing, which the NEC sought to tackle with the introduction of Secondary Option X29 in July 2022.
To reflect this focus particularly on construction, X29 was published as a standalone Option for the Engineering and Construction Contract (ECC) and Professional Services Contract (PSC). It supports, incentivises and demonstrates carbon reduction initiatives on future builds across the industry. In basic terms, the procurer is able to identify their carbon reduction requirements under the contract Scope, and the supplier must demonstrate how it plans to meet these through submitting a Climate Change Plan – learn more about the new climate change clause, X29.
However, further amendments in early 2023 have incorporated X29 into all contracts in the NEC suite. While there has been no operational change in principles or applications, it is now making it applicable throughout the whole suite, prompting further focus on climate initiatives for all manner of works.
This being said, X29 has so far not been utilised as much as it should given its potential to drive change and is an area that construction organisations utilising NEC4 must step up. Various elements of the Secondary Option are designed to keep incentives on track to really drive decarbonisation, such as X29.3, which requires an early warning to be served to the Project Manager and Contractor if any matter could adversely impact the achievements of the Climate Change Requirements.
As the climate emergency continues to heighten, and net zero targets creep ever closer, embedding climate initiatives within contracts prompts the true accountability for organisations to properly work towards – and achieve – the all-important aims for our planet.
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