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Success or failure of an NEC contract is all in the mindset

Debates on NEC have found their way repeatedly onto NCE’s pages and website. While staunch fans insist the NEC is the way forward, many others feel distinctly let down by it. Perhaps the best solution is for those unable to make NEC work to simply stop trying.

This form of contract clearly can work very well in the right circumstances – on a project where both parties are trained and willing to use it, and where sufficient financial and human resources have been dedicated to its management.

If the NEC is approached with an ICE or FIDIC mindset, the results will disappoint, says Trett Consulting director Paul Blackburn.

But those factors simply don’t apply in many instances. At the heart of the NEC contract is the ability to prevent disputes but it certainly seems to have failed in that purpose on the Cambridgeshire Guided Busway, which is still in the throes of a long-running quarrel after the County Council accused Bam Nuttall of overlooking six construction “defects”.

The council has said it will seek a public review of NEC once the project is completed. 

The NEC was created to be different to previous contract forms, so it demands a different, more collaborative approach that enables the parties to nip disputes in the bud.

If the NEC is approached with an ICE or FIDIC mindset, the results will disappoint, says Trett Consulting director Paul Blackburn.

Three success factors

NEC requires three basic factors to be used successfully. The first is time and human resources to keep up with the documentation. The second is a thorough understanding of what is required and why. The third is a well defined programme of works.

“There needs to be an acknowledgement from the start from the whole team [of] what it is they need to provide under the contract,” says Trett Consulting managing director Alastair Farr.

“We find the programme lets one of the parties down almost every time [there is a dispute].”

Paul Blackburn, Trett Consulting

“You have to have a robust programme that will take you through the course of the contract,” agrees Blackburn. “We find it lets one of the parties down almost every time [there is a dispute].”

Poorly produced programmes often arise when the document’s importance is underestimated, or when a very short tender period forces a contractor to rush the first accepted programme, he says.

A mutual, detailed understanding of NEC is best provided by a joint seminar, which ensures that both parties are on the same page and allows each to feel confident about the other’s expectations, says Blackburn.

Some clients make these seminars a requirement, but for others it may be wishful thinking in a recession. Still, anyone using NEC should receive some form of training, especially in the processes needed and the balance of risk.

“You can’t have too much training,” says Farr. “[NEC] is widely used now, so you would think people would have more understanding.”

Cambridgeshire relations

It is not clear how relations broke down on the guided busway project. Bam is unable to comment as discussions are still ongoing.

A spokesman for Cambridgeshire County Council said it routinely uses NEC, but will be more wary of using NEC following the dispute.

Whatever the origins of the dispute, it seems the council’s public inquiry is not likely to unearth any inherent flaws on NEC’s part.

“They should really sit down and think ‘how am I going to operate this contract? Should I be using NEC or ICE or IChemE or even FIDIC?’”

Paul Blackburn, Trett Consulting

The bottom line is that if a client – or, indeed, a contractor – is unable or unwilling to satisfy the three basic needs of NEC, they bring upon themselves the risk of unexpected delays, disagreements or inadequate documentation.

Clients often plump for NEC because it is the government’s preferred contract form, or because it is perceived as the best, says Blackburn.

They would be better off making a proper assessment in a project’s infancy, and seriously considering whether sticking with an older form of contract would be better.

“They should really sit down and think ‘how am I going to operate this contract? Should I be using NEC or ICE or IChemE or even FIDIC?’” says Blackburn.

The success of an NEC contract is therefore not determined during a project, or when problems arise, or even at handover. The best chance at ensuring success or avoiding a debacle actually comes before NEC is even chosen.

Readers' comments (1)

  • NEC3 contracts should be used for the right reasons, that means it fits with how the parties actually want to do business together. To use the outdated forms of contract cited surely means there is people failure; that people do not feel able/competent to step up and do what the contract expects of them, that they are much more comfortable playing games, having a hands off, wait and see approach - all plays nicely into the hands of those who derive an income from disputes. It really is about time we actually stood back, looked at where we are and where we are going as an industry. I don't see a plan, does anybody else? A few basics - get the brief right (that means clients need to be sure of what they want); surround yourself with the right (mided) people; give those people a realistic budget. These are a pre-cursor to success with any form of contract.

    Use NEC3 contracts because they give you the right tools for the job - a contract that finally believes in a Contractor's programme; a proactive approach to risk management through the early warning system; a real time approach to change management; flexible approach to many financial risk aspects such as payment mechanism, various incentives, performance bond, KPIs and so on; written in a manner users can actually understand and so on. Most other forms of contract just don't believe in most of these processes.

    Of course there were be failures but where is the proof that 'many' (that sounds to me like a lot of people?) feel let down by it; is it really the form of contract that has gone wrong on the Cambridge job?

    It is the best from of contract I have used; we as an industry need to mature, improve our competencies and reap the benefits accordingly. We have to rid our industry of so many problems that using outdated forms of contract simply will not solve.

    Robert Gerrard
    NEC Users' Group Secretary

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