Are you curious how these contracts compare and what are the practical issues to consider?
JCT and NEC each provide a suite of standard form contracts. The NEC contracts are intended to be more ‘proactive’, compared with other forms, such as JCT which is perceived as having a more ‘adversarial’ approach. However, JCT contracts are widely used and are better understood, traditionally being regarded as the UK’s standard construction contract.
That said, the use of the NEC contract is becoming increasingly popular with construction clients, not least for its ‘proactive’ approach.
As most construction folk have a reasonable working knowledge of JCT contracts, we asked the Edge Consult team to highlight some important considerations when considering, or working with, NEC forms. The key points raised are listed below:
- Do not approach a NEC contract like a JCT contract as the principles are very different. Ignoring these differences could be very costly. So study and understand the contractual procedures to be followed. If necessary, Edge Consult can assist you in this.
- Whilst JCT leaves it to the parties to decide the pace at which they wish to progress the final account and any extensions of time, NEC is designed to address such matters as the works progress. Therefore, ensure you have sufficient administrative resources to deal with programme and costs issues as the works progress. As a rule of thumb, consider doubling your normal allowance for management to deal with such issues as it can become very time intensive.
- Under NEC, variations and the like (known as Compensation Events) are intended to be priced, together with any programme impacts, either before or soon after instruction. Therefore, a single Compensation Event should include the programme implications, building costs related with any variation, disruption costs and prolongation costs. Only quoting one aspect may result in the loss of the right to claim for other aspects of a Compensation Event.
- If the price and time cannot be agreed, then under NEC a fair assessment may be made – this can be challenged but it requires a formal process. As noted above, read and understand the Compensation Event process to both protect and enhance your position. Failing to comply with the contractual timescales could be costly.
- NEC ideally requires mutual trust and cooperation, which sounds great, but for many this is a big cultural change. Both parties need to embrace this philosophy. Do not underestimate this requirement, ensure you provide sufficient management resources to make this happen.
- Whilst JCT may only require a programme to be updated following an extension of time, NEC is far more proactive. The programme should be updated every month. Changes to the programme should be identified, explained and hopefully approved regularly during the duration of the project. There should be no last minute surprises. Again, Edge Consult can provide you with the programme support you may need to protect your position.
- It can be difficult to retrospectively present alternative delay assessments. So ensure these are dealt with promptly, as intended by the NEC contract.
Whilst the NEC contracts are more proactive than JCT contracts, with all the benefits this brings, these benefits can only be achieved if all parties to the contract, e.g. sub-contractors, contractors and Employer’s Consultants follow the procedures detailed in the contract. This can work well and as intended. Unfortunately, in our experience many contract administrators, regardless of the party who employs them struggle to comply with NEC contracts. A badly administered NEC contract can quickly become unduly complicated as matters are increasingly dealt with retrospectively.
Whether your contract is JCT, NEC or bespoke, Edge Consult will provide you with the strategic contractual advice necessary to protect and enhance your position. Our strategic advice will cover not just an understanding of the legal aspects, but how the building contract interacts with the key issues of time and money.
The sooner Edge Consult are engaged, the greater the benefit to you. Early strategic advice will typically provide you with far better outcomes. A stitch in time can often save you much more than nine.
You can contact Edge Consult on 01473 834570 or via our website.