{"id":112185,"date":"2022-06-24T13:32:04","date_gmt":"2022-06-24T12:32:04","guid":{"rendered":"https:\/\/www.pbctoday.co.uk\/news\/?p=112185"},"modified":"2022-06-24T13:32:04","modified_gmt":"2022-06-24T12:32:04","slug":"importance-following-nec-contract-from-start","status":"publish","type":"post","link":"https:\/\/www.pbctoday.co.uk\/news\/planning-construction-news\/importance-following-nec-contract-from-start\/112185\/","title":{"rendered":"The importance of following an NEC contract from the start"},"content":{"rendered":"

John Elven, senior consultant at Arbicon<\/a>, discusses the importance of acting in accordance with the requirements of an NEC contract as a means of promoting dispute avoidance\u00a0<\/strong><\/h2>\n

NEC contract disputes<\/a> often arise where there has been a failure to follow the requirements of the contract. In view of this, it is essential to read and understand your NEC contract<\/a>, and then do exactly what it says. By doing this, those involved with NEC projects are in a far better position to get things right from the start and to prevent disputes from arising in the first place.<\/p>\n

If you start reading NEC from the beginning, the first core clause that you will read is clause 10.1, which in NEC 3 makes mention of the often quoted NEC requirement to \u2018act in a spirit of mutual trust and co-operation<\/em>.\u2019 Whilst this is important if one is to understand the intention of the NEC contract, NEC 4 has redrafted clause 10 so that it now has two sub-clauses which place greater emphasis on doing what the contract requires, rather than how the parties are expected to behave.<\/p>\n

In NEC 4, clause 10.1 simply states:<\/h3>\n

\u201cThe Parties, the Project Manager<\/em> and the Supervisor<\/em> shall act as stated in the contract.\u201d <\/strong><\/p>\n

With this simple statement, NEC 4 leaves no doubt as to the importance of doing what the contract requires. The inclusion of the word \u2018shall\u2019 means that compliance with this contract\u2019s requirements is not an option, it is mandatory.<\/p>\n

The requirement to act as stated in the contract is very clear, yet unfortunately I have spent countless hours dealing with NEC disputes which have only arisen where one or both of the parties (or Project Manager) has not done what the contract requires it to do.<\/p>\n

NEC 4 continues with clause 10.2, which states:<\/h3>\n

\u201cThe Parties, the Project Manager<\/em> and the Supervisor<\/em> act in a spirit of mutual trust and co-operation.\u201d <\/strong><\/p>\n

Notably, clause 10.2 excludes the word \u2018shall,\u2019 which seems to emphasise the NEC\u2019s focus on the requirement of the preceding clause 10.1.<\/p>\n

The NEC Guidance Notes indicate that the requirement to act in a \u2018spirit of mutual trust and co-operation\u2019 was added on the recommendation of the Latham Report but does not elaborate on what these words mean.<\/p>\n

However, as this article is promoting dispute avoidance, I thought it fitting to quote para 9.3 of Sir Michael Latham\u2019s report where he wrote (in Chapter 9 Dispute Resolution):<\/p>\n

\u201cThe best solution is to avoid disputes\u2026 If a contract document is adopted which places the emphasis on teamwork and partnership to solve problems, that is another major step\u2026\u201d\u00a0 <\/em><\/p>\n

Certainly, prevention is better than cure (as the saying goes) and the emphasis on working together to solve problems is in keeping with the NEC requirement that the parties firstly \u2018act as stated in the contract\u2019 and then work together to solve any problems.<\/p>\n

An example of this is the NEC 4 provision of early warning meetings whereby the Contractor<\/em> and Project Manager<\/em> can discuss solutions to \u2018any matter which could increase the total of the Prices, delay Completion, delay meeting a Key date or impair the performance of the works<\/em> in use.\u2019<\/p>\n

Hence, NEC 4 makes provision for the resolution of potential problems before they arise (clause 15 refers \u2013 like clause 16 in NEC 3).<\/p>\n

However, what happens if the parties do not<\/u> act as stated in the contract?<\/h3>\n
A practical Eexample<\/h5>\n

Let us consider a situation where the Contractor <\/em>failed to act in accordance with NEC 4 clause 32.1, where it states (in part):<\/p>\n

\u201cThe Contractor<\/em> shows on each revised programme\u2026 [how it] plans to deal with any delays and to correct notified Defects<\/u> \u2026\u201d<\/p>\n

In this case, the Contractor<\/em> consistently failed to include in its revised programmes when and how it was going to correct the numerous<\/u> \u2018notified Defects\u2019 \u2026<\/p>\n

As an initial consequence of this failure, the programmes were rejected by the Project Manager<\/em> on the basis that the Contractor\u2019s<\/em> plans were deemed neither practicable nor realistic (see NEC 4 clause 31.3) \u2013 i.e., the Contractor<\/em> had not demonstrated how he planned to correct the Defects.<\/p>\n

Without knowing when the Contractor<\/em> planned to correct the Defects, the Project Manager<\/em> did not know whether the Contractor\u2019s<\/em> planned Completion date was achievable or not.<\/p>\n

NEC 4 clause 31.2 (8th<\/sup> bullet) required that the Contractor<\/em> identify the resources he planned to use to carry out the works<\/em>, but as it did not do so, the Project Manager<\/em> was not able to determine whether the Contractor<\/em> had allocated sufficient resources to correct the Defects.<\/p>\n

As the Contractor<\/em> persisted in producing non-compliant revised programmes (that were also rightly rejected by the Project Manager<\/em>), this caused further problems when it came to assessing the effect of delays caused by compensation events (e.g., changes due to Project Manager<\/em> instructions \u2013 see NEC 4 clause 60.1).<\/p>\n

NEC 4 clause 62.2 requires that, \u2018If the programme for remaining work is altered by the compensation event, the Contractor<\/em> includes alterations to the Accepted Programme in the quotation.\u2019<\/p>\n

If the Contractor<\/em> had an up-to-date Accepted Programme, that should not have been too much of an issue. However, as the Contractor\u2019s<\/em> programmes were consistently being rejected for non-compliance with the contract, the assessment of compensation events became increasingly difficult (as the last Accepted Programme became increasingly \u2018remote\u2019 from the date subsequent compensation events occurred).<\/p>\n

By consistently failing to include for the correction of Defects in its programme, the Contractor<\/em> placed itself at risk because it was no longer able to show the impact of a compensation event in context with a current Accepted Programme. Further, the Contractor was unlikely to be awarded sufficient additional time and to under-recover its losses associated with compensation events.<\/p>\n

How easily this situation could have been avoided if the Contractor<\/em> had acted \u2018as stated in the contract\u2019 and provided compliant revised programmes in the first place.<\/p>\n

For me, the \u2018rules\u2019 are clearly set out in an NEC contract (subject to any inconsistencies that may arise due to copious amendments), that provides the perfect starting point for me to ascertain what has gone wrong, in the event of a dispute.<\/p>\n

I cannot emphasise strongly enough that all those involved with an NEC contract must get it right from the outset and familiarise themselves with the contract terms \u2013 especially the effect of any amendments \u2013 and please do not forget any additional contract requirements that may be stated in the Works Information or Scope! It is also essential that you manage the contract and work with mutual trust and co-operation!<\/p>\n

If you need any advice on an NEC Contract, require any clauses to be checked or would like a contract written, please use our\u00a0<\/strong>contact form<\/strong><\/a>\u00a0or call our offices below:<\/strong><\/p>\n

01733 233737<\/strong><\/a>\u00a0Peterborough<\/strong><\/p>\n

0207 406 1494<\/strong><\/a>\u00a0London<\/strong><\/p>\n

0121 262 4086<\/strong><\/a>\u00a0Birmingham<\/strong><\/p>\n

\n<\/div>","protected":false},"excerpt":{"rendered":"

John Elven, senior consultant at Arbicon, discusses the importance of acting in accordance with the requirements of an NEC contract as a means of promoting dispute avoidance.<\/p>\n","protected":false},"author":17,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[304],"tags":[853,122272,24813,88176,172727,728],"stakeholder_rel_tag":[],"contributor_rel_tag":[],"class_list":{"0":"post-112185","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-planning-construction-news","7":"tag-adjudication","8":"tag-ah-arbicon","9":"tag-building-contracts","10":"tag-construction-disputes","11":"tag-featured","12":"tag-quantity-surveyors"},"acf":[],"yoast_head":"\nThe importance of following an NEC 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