NEC4: Engineering and Construction Contract Option A: Priced Contract with Activity Schedule

Product Information

Although designed with simpler language compared to other contracts, and with the first changes since the NEC3's introduction in 2005, the NEC4 contains these terms that you must familiarise yourself with. Works that require immediate attention and cannot be defined at the project outset may benefit from a fast contract agreement.

By having multiple types of NEC contracts available, project stakeholders can select the most appropriate contract that aligns with their specific project scope, procurement strategy, and desired contractual arrangements. This flexibility ensures that projects of all sizes and complexities can benefit from the advantages that NEC contracts bring, including clarity, transparency, and a collaborative approach. The NEC4 Engineering and Construction Contract (ECC) is the main works contract in the NEC4 suite of collaborative, flexible and clearly written contracts for built environment procurement. Ultimately, the variations in NEC contracts provide a framework that can be tailored to meet the unique demands of each construction project. Whether it's a large-scale infrastructure endeavour or a smaller-scale development, NEC contracts offer a standardised yet adaptable solution to streamline project management and foster successful outcomes. These disadvantages, however, are often outweighed by the benefits they provide in terms of clarity, collaboration, flexibility, and effective project management.The works are constructed by multiple subcontractors who are directly employed by a management contractor. The management contractor will be responsible for the procurement, coordination, and implementation of works in exchange for a fee. This means the client often takes on the financial risk. This option includes a target contract linked to an activity schedule. The target contract contains a price commonly referred to as a target cost. The repair and indemnity provisions at clauses 82 and 82 have been replaced with a new recovery of costs clause 82. The waiver of subrogation has now been extended to cover both parties, following on from the SSE v Hochtief decision where it was held that insurers had the right to pursue a joint insured. Core Clause 9: termination

NEC contracts focus on effective management processes, leading to more predictable project outcomes. NEC4 has been updated in various ways to reflect modern construction practices (including greater reliance on technology) and to accommodate requests from users. Whether you have no previous experience with NEC contracts, or have worked on projects with NEC3, it’s helpful to understand some of the changes in the latest updates. NEC contracts have been used on a number of major projects, including on London 2012 venues. The 6000-seat Velodrome was the first major venue to be completed at the Olympic Park was procured under an NEC3 Engineering and Construction Contract option C (target contract with activity schedule) - read all about the project here. If the contractor encounters an event which they deem couldhave an impact on the price of works. They should issue an Early Warning Notification as soon as they become aware of that event.The timely issuing of notifications is essential to the NEC’s collaborative way of working. Continuous communication between all parties will ensure disputes are kept to a minimum. NEC contracts have revolutionised the way projects are executed, offering a practical approach that goes beyond legalities to provide effective management tools. They have been used on a number of major projects across the world. A new clause 31.3 allows for deemed acceptance of the contractor's programme where the PM does not notify its acceptance or non-acceptance within the time allowed by the contract. The contractor must first notify the PM of its failure, but the failure will be treated as acceptance if it continues for a further week after the contractor's notification. This arrangement forces both parties to work more collaboratively as the financial success is shared by both client and contractor. Similarly, the financial failure of a project is shared. This collaborative working can reduce disputes and accelerate innovation.

This option is a cost reimbursable option. Unlike Option E, this option is tailored towards the management contractor procurement route. This option contains a priced lump sum contract. The lump sum contract is then linked to a contract programme with an activity schedule. Each activity on the schedule is then allocated a price.Fee Percentages: There are several fee percentages that need to be tendered in respect of assessing cost, and a knowledge of their application is crucial when formalising an NEC4 contract. Short Schedule of Costs: Vital to the assessment of Compensation Events. The short schedule of costs covers option A and B and is devised to capture more cost than NEC3. Several add-on percentages have been removed to eliminate unnecessary complications. The alliancing contract was published for consultation on 28 June, with final release anticipated in January 2018. It is NEC based on option E but multi-party contract performance based, so driven by client needs. It is a 'pure' alliance contract under which all parties to the alliance carry all risks except wilful default, and there is no dispute resolution mechanism. The idea is that, if there is a dispute, the alliance effectively comes to an end.

In a previous articlewe explored the different NEC Main Options. We gave a brief overview of each option, aiming to provide basic knowledge of what each option means. This article will dig deeper into one of these options. NEC Option A: Priced Contract with Activity Schedule. The user guide on procurement and contract strategies helps clients to identify the best way of achieving their project objectives, taking into account constraints, funding, risk and asset ownership. It provides guidance on selecting the most appropriate procurement route and choice of available NEC4 contracts and available options to meet their specific needs. a new value engineering reduction percentage clause 63.12, allowing the contractor to share in cost reductions obtained as a result of a contractor proposal;

Core Clauses

The nature of the FC and DRSC mean that the contract preparation and management parts of the guidance are contained in the same user guide. For those unfamiliar what NEC contracts are, there may be a learning curve involved in understanding the specific terminology, processes, and procedures outlined in the contract. This can require additional time and effort to become acquainted with the nuances of NEC contracts. Collaboration and Cooperation: A distinctive feature of NEC contracts is the emphasis on collaboration and a non-adversarial approach. The contracts promote early involvement of all parties, encouraging cooperation and open communication throughout the project lifecycle. This collaborative environment fosters a proactive problem-solving mindset, leading to more efficient decision-making and improved project outcomes.