Engineers and construction lawyers launched new criticisms of the NEC form of contract this week, saying that its use requires too much project management expertise and generates too much paperwork.
“Inflexible” and “process-orientated”
They also said that the contract form, originally drawn up to promote effective dispute resolution, was often the focus of legal action.
Debate about the effectiveness of the NEC has grown following Cambridgeshire County Council’s calls for a government-funded public review of the NEC after its guided busway project suffered disputes (NCE 7 October).
Law firm Burges Salmon partner Will Gard said NEC based projects “regularly” end in litigation and that NEC is “not necessarily” an improvement on older forms of contract.
“We certainly wouldn’t recommend it to clients who were not sophisticated procurers of construction work,” he said.
“You have to define what you want up front and then manage it very carefully. In practice that requires an additional resource that some contractors don’t have.”
Law firm Hogan Lovells partner John Gerszt said the NEC is too inflexible and process-orientated. “It’s a process-driven regime and the process is producing the documents. It’s very rigid,” he said.
Gard said more training and understanding of how to use the NEC is needed, and that engineers often fail to keep up with the paperwork when problems arise. “They sort the job out on site and worry about who will pay for that later,” he said.
“They sort the job out on site and worry about who will pay for that later”
Consultant RJM Ground Solutions director Chris Milne said he was unsurprised to hear of more perceived problems with the NEC. “Those of us who regularly use NEC know how often misinterpretations of it can lead to difficulties,” he said. “Doubtless the NEC has its merits but it is a shame that the ICE does not accept the need to keep a range of contracts available.”
The ICE announced it would no longer maintain and develop the ICE Conditions of Contract in July in favour of endorsing NEC3. Last month the Association for Consultancy and Engineering (ACE) and the Civil Engineering Contractors Association jointly agreed to maintain ICE Conditions of Contract as contracts of choice.
ICE Contract “imperative”
ACE chief executive Nelson Ogunshakin said it was “imperative” to maintain the ICE Conditions of Contract “so that the best interests of the industry are served”.
Former Office of Government Commerce (OGC) assistant director for contract innovation Roger Hankey agreed that the NEC required extra project management expertise.“Maybe the NEC just exposes the contract management weaknesses a bit more obviously,” he said.
Hankey led an OGC review of the NEC in 2003 and said he came away with a feeling that a different approach to the NEC was needed. “I had reservations then about whether most clients, contractors or their respective professional advisors would put in the effort.”
If people regard [NECs] as merely paperwork they are severely missing the point”
However, NEC Users’ Group secretary Robert Gerrard refuted the criticisms. “It works when people know what they’re doing and do it properly,” he said.
“It’s a problem getting people to actually read the contract.” He rebutted claims that the contract generated excessive paperwork. The early warning, risk register and programmes processes are vital, he said. “The industry should always have done these things and never did. When the industry gets its head around these we will upskill as an industry. If people regard those as merely paperwork they are severely missing the point.”
Gerrard also said the so-called strict deadlines imposed by the NEC are flexible and can be postponed to some extent. “There are deadlines. That’s to create certainty. But there are lots of get-outs in the clauses.”
Claims that the NEC requires too much project management for some companies are unreasonable, he said. “If you’ve got a complex project then, no apologies, you do need sophisticated project management.”
Litigation claims “not true”
Gerrard said that although NEC project disputes are regularly resolved through adjudication, private settlement, arbitration or mediation, it is “simply not true” that they often end in litigation. Since inception of the NEC only “five or six” projects have gone to court, he said.
The NEC promotes a collaborative non-confrontational approach to construction projects, and aims to resolve problems as they arise.
A key difference between the NEC and the traditional ICE Conditions is that the role of the programme of works under ICE Conditions the contractor must submit a programme of works and then has an obligation to complete it within the time stated. Under NEC the contractor must submit revised programmes at each stage showing actual progress achieved and any implications for remaining stages.