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Confrontation to cooperation

ICE news - The New Engineering Contract has come a long way since it was first published in 1993. The latest edition, NEC3 is launched today.

CONSTRUCTION HAS parallel worlds. It is often characterised as an industry of blame, bitter conflct and legal suits. But there also exists an industry where consultants, contractors, clients and project managers work in harmony, where project teams mitigate problems before they become serious, and where schemes are completed on time and to budget. That world, say some legal experts, is where the principles of the New Engineering Contract (NEC) reign.

The third edition of the contract was launched last month by publisher Thomas Telford, 20 years after the ICE's legal affairs committee first sowed the seeds for the groundbreaking document.

'The general approach back then was that contractors priced work on zero profit to win jobs and then made money on claims, ' says Thomas Telford publishing director Graham James. Disputes became part and parcel of engineering projects, with huge manpower and fiancial resources squandered on litigation. The importance of providing sound engineering, let alone innovation, was gradually demoted and the reputation of the construction industry slid rapidly downhill.

Yet there were parts of the construction industry, such as the nascent offshore oil and gas sector, where the story was very different. In 1985 the ICE commissioned Dr Martin Barnes to draft a contract which drew on examples good project management practices and encouraged partnering. The ideology was trialled six years later by BAA and Yorkshire Water, leading to publication of the NEC in 1993. It claimed to be the first construction contract written in clear, simple English rather than legal jargon, and it encouraged good management and flexibile working relationships.

But many greeted the NEC with suspicion, considering it too far ahead of its time to be practical. Could parties really sign up to working in the 'spirit of mutual trust and cooperation', and how would this stand up in court, asked the legal profession.

In 1994 the whole construction procurement strategy came under scrutiny from Michael Latham's government-funded review, Constructing the team.

Latham said that the NEC met all the requirements of a good, fair contract and recommended that it should be taken up by the construction industry 'It is basically a document for promoting the best delivery of a project, rather than [one] which tries to apportion responsibility for things which have already gone wrong. I believed that in 1994 and I believe it still, ' said Latham last month.

The second edition of the NEC was published in 1995 to include further recommendations from Latham. But the contract continued to attract criticism, partly because it had not been widely used, but mainly because the legal profession saw it as undermining the lucrative seam they were working, says NEC3 user group chairman Robert Gerrard.

The biggest negative response came from lawyers - they earn an income from disputes and the aim of this contract is to avoid them.' Despite this, after 12 years the National Health Service, Yorkshire Water, Highways Agency, British Airports Authority and Channel Tunnel Rail Link are all now using the NEC. Gerrard worked for Yorkshire Water in 1996 when the NEC was being piloted.

'We quickly realised that it provided the tools to get the best out of people. The NEC was made for the users to use it, rather than the lawyers, ' he recalls. 'We started out with 10% of projects run under the NEC, and now all Yorkshire water contracts use the NEC. It has proven to give clients more certainty over cost, quality and completion times.' A key aspect of the NEC is the 'early warning meeting' where parties own up to issues which could affect the delivery of the project and work to rectify the potential problem. The theory being that rectifying a problem before it happens is much cheaper than trying to sort it out when faced with it on site.

The third edition of the contract is the culmination of eight years of scrutiny by the user group to ensure that it is as useful and relevant as possible.

It is now a set of 23 documents including two new contracts for 'term service' and 'frameworks', which are published as hard copy documents and available online for registered users.

Gerrard explains that the term service contract will be for situations where a number of operations come under one category. 'For example, you might need a contractor to maintain a stretch of road over five years.

You would pre-agree a price list for each of those services and set a performance standard.

This could be the percentage of street lights that must be working at any time or related to the condition of the road surface, ' he says.

'You wouldn't need to use different contracts for each job and even include unplanned work can be included. Over five years, the relationship can build up and rewards can be built in.' he framework contract reflects the growing trend of contractual arrangements between large clients like BAA and Network Rail. This will be where more than one consultant or contractor is signed up to the framework and all, or a selection, are asked to bid for work.

The aim is to develop good relationships in order to win further work, says Gerrard.

The main engineering and construction contract has also been updated (see boxes).

So far the track record for the NEC is promising. It has never been disputed in court and all first time clients continue to use it. Eleven years after Latham first recommended the NEC to be used by the whole industry, the UK Office of Government Commerce has formally endorsed the latest edition for use on all public sector construction projects.

INFOPLUS To fi nd out more about the NEC visit www. neccontract.com

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