In 2016, JCT introduced its latest suite of contracts to the industry. In 2017, NEC and FIDIC followed suit, with NEC publishing its NEC4 suite of contracts and FIDIC publishing its 2017 editions of the Yellow, Red and Silver Books. In this feature, we take a look at the key changes that users of these international forms need to be aware of.
NEC4 - KEY CHANGES
On the 22 June 2017, the UK Institute of Civil Engineers released its NEC4 suite of contracts - the most substantial update since NEC3 was published in 2013. The new suite of contracts was released to "build on the success of NEC3", with the objective of "evolution not revolution". The NEC4 suite involved an update to all of the existing NEC3 contracts, as well as the release of the following additional contracts:
a Design, Build and Operate Contract; an Alliance Contract (in consultation form only); and new forms of subcontract. The rationale behind the changes introduced by NEC4 included NEC's desire to minimise differences between the forms, to reduce users' over-reliance on z-clauses, to increase clarity within the forms, to bring the forms more in line with public sector principles and to take on board industry feedback. Many of the changes in the NEC4 suite are minor, but some are significant, presenting new risks and opportunities for users. Below, we outline some of the key chances to the Engineering and Construction Contract (ECC) that users need to be alive to.
The term Works Information is no longer used, now replaced with the term Scope throughout the suite. A new core clause allows the Contractor to propose Scope changes to the Project Manager for acceptance, with a value engineering percentage used (under Options A & B) to split the benefit between the parties. A new secondary option also makes provision for the Contractor to propose Scope changes to reduce the whole of life cost of the asset, though the form is silent on liability issues if the proposed results are not achieved. Time:
The term Risk Register is no longer used, now replaced with the term Early Warning Register, to distinguish it from the project risk register used for wider project management purposes. Amendments have been made to the early warning regime requiring the Project Manager to prepare the first Early Warning Register within 1 week of commencement and set a date for the first Early Warning meeting within 2 weeks. The forms were previously silent on how this process was kick-started. Employers should be aware that there are new deeming provisions in relation to any Contractor's programme submitted for acceptance. The programme will be deemed to be accepted by the Project Manager if he / she does not notify acceptance or non-acceptance within two weeks of it being submitted and such failure continues for a further week upon the Contractor giving notice. The rationale is to resolve the stalemate that otherwise arose under NEC3 and therefore reduce the scope for uncertainty as to the status of the Contractor's programme. Payment:
Significant changes have been made to the payment provisions. Contractors should be aware that there is a new obligation to submit a payment application to the Project Manager before each assessment date. If the Contractor fails to do so, the amount due is deemed to be the lesser of the Project Manager's assessment or his previous assessment. Accordingly, in the...