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

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If there is any error of measurement in the BoQ, then both parties will know how much extra is to be paid and received. The new NEC4 user guides provide step-by-step support to help users choose the most appropriate NEC4 contract, prepare the chosen contract, select a supplier and then manage the contract to deliver the client's objectives. For the contractor, continuous monitoring should take place on the difference between the value and cost. This is slightly less important under cost contracts like option C,D &E. However, under option C it’s imperative the contractor keeps on top of their outgoings. For example, monitoring of, subcontract management, task efficiency and good Quality Management Systems (QMS) to keep defects to a minimum.

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. In a recent joint webinar Causeway held with Barry Trebes, NEC Tutor & Director at Trebes Consultancy Ltd, he highlights that NEC contracts go beyond being just legal documents and can be used as practical tools for project management, noting that ‘NEC contracts provide greater certainty of outcome,” and are “useful management tools." The new Core Clause 4 replaces the 'testing and defects' clause in NEC3. It introduces a new obligation for the contractor to produce a quality management system, set out in a quality policy statement, and a quality plan. These must be submitted for acceptance by the PM and comply with the scope.Although this contract is often referred to as “Cost Plus,” contractors should not get complacent and think Option E means a blank chequebook for works. The terms within the contract should set out clearly what is and isn’t to be reimbursed to the contractor.

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. Performance Management: NEC contracts place a strong emphasis on performance management, with clear mechanisms for monitoring and incentivising performance. The contracts include provisions for performance measurement, regular reporting, and incentivisation based on achieving project objectives. This focus on performance encourages accountability, quality delivery, and continuous improvement throughout the project duration. Project Manager: Employed by the Client, this role is similar to the Architect/ Contract Administrator under other contracts. Firstly, subcontractors will no longer be appointed until they are accepted by the client and, if required, the subcontract documents are also accepted. NEC3 did not require approval of subcontract forms if NEC contracts were used. NEC4 adds that NEC contracts "must not [be] amended other than in accordance with the additional conditions of contract". This means the client can set limits on acceptable amendments.Mostly used upon appointment of a contractor to carry out; infrastructure, highways, buildings & process plants. Can be used regardless of the level of design responsibility.

NEC is famed for its use of short, plain English, and the new contracts incorporate changes in terminology. They are now gender neutral with some considered changes in emphasis. For example, the 'employer' is now the 'client', and 'works information' is now the 'scope'. This creates consistency across the suite. By providing clear, straightforward language in contracts, and encouraging a collaborative and non-adversarial approach, they’ve played a big role in improving contract standards and project management in construction projects. NEC4 introduces a new dispute resolution procedure involving discussions between parties' senior representatives over a three-week period, based on submissions and producing a list of issues. This process is compulsory if option W1 is selected, or can be used by agreement if option W2 is selected. Note that the form states that submissions can be up to 10 sides of A4 with supporting documents, but hopefully parties will use these provisions sensibly. The new NEC4 user guides provide step-by-step support to help users choose the most appropriate NEC4 contract, prepare the chosen contract, select a supplier and then manage the contract to deliver the client’s objectives.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. The contract preparation user guide helps clients prepare the particular NEC4 contract they have chosen to use to achieve their project objectives ready for supplier selection tocommence. For each NEC4 contract, the relevant user guide includes NEC contracts focus on effective management processes, leading to more predictable project outcomes. We will now look at the changes to the core clauses, options and dispute resolution mechanisms in NEC4 in more detail. Core Clause 1: general Core Clause 5 also makes some more radical changes around defined cost for options C, D, E and F (new clause 50.9), and introduces a new final account process (clause 53).