NEC v JCT

Chris Holt. FRICS, Cert Ed, MCIOB

CONTRACT LAW ~ NEC v JCT

COMPARISON OF FORMS

The two most appropriate forms of contract to own and compare are

JCT Standard Building Contract 2005(2011) With Quantities

NEC Engineering and Construction Contract 2005

Option B: Priced Contract With Bill of Quantities


JCT vs NEC ~ Contracts

JCT ~ There are 18 individual, self contained JCT contracts between Employer and Principal Contractors

NEC ~ There are 6 'Main Option' contracts between the Employer and Principal Contractor


JCT vs NEC ~ Pages

JCT ~ There are 113 pages in the JCT Standard Building Contracts 2005 with Quantities

NEC ~ There are 63 pages in the NEC 3 Engineering and Construction Contract

2005

Option B: Priced contract with bill of quantities


CLARITY , SIMPLICTY, FLEXIBILITY


AIM : CLARITY, SIMPLICITY, FLEXIBILITYThree aims of NEC drafting committee was to achieve

higher levels of contract style and layout, through

clarity simplicity flexibility

The NEC provides nine core clauses dealing with most of the same matters

compared to

forty principles clause within the JCT SFBC 1998.


CLARITY, SIMPLICITY, FLEXIBILITY (continued)

• The JCT suite requires the procurement team to

• select the correct form of contract, from a broad range of prepared standard contracts.

• In the 2005 range of JCT contracts, there are approximately forty • Framework Agreements; • Appointment Agreement, • Main Contracts, • Specialist Package Contracts, • Trade Contracts, • Subcontracts• Home Owners Contracts


AIM : CLARITY, SIMPLICITY, FLEXIBILITY• The NEC start from the reverse position, the team has to

build a bespoke contract form from a

• single common form of main contract

• flexibility is obtained by selecting one of the main 'Pricing Options'• Option A ~ Activity Schedule Option B ~ Bill of Quantities

• selection from range of second stage selections are made from an extensive range of 'Secondary' clauses, such as– delay damages– sectional completion– key performance indicators

COLLABORATION AND PRO-ACTIVENESS


COLLABORATION AND PRO-ACTIVENESS• The NEC form encourages a more

• collaborative approach between the main participants

• It acts as a • stimulus to encourage good project management

• At the beginning of the NEC documentation it states– ' the key to the successful use of the NEC is the users adopting

the desired cultural change…

– moving away from a reactive and hindsight-based decision making and management approach to….

– one that is foresight based, encouraging a creative environment with pro-active and collaborative relationships'

CONTRACT LAW ~ NEC v JCTCOLLABORATION AND PRO-ACTIVENESS (continued)

Integral to this approach are the

number of provisions requiring early and decisive problem solving actions taken by all parties.

For example, when NEC 'Compensation Events' occur, which might cause delay and additional cost, there is a common duty to warn the other parties of the impending risk.

compile/amend the 'Risk Register'

hold a Risk Reduction Meeting to manage the consequences

NEC v JCT

NEC ~ COLLABORATION AND PRO-ACTIVENESS (cont)

There is a strict eight week cut-off period for the Contractor to notify of a compensation event.

If eight weeks are exceeded then the Contractor loses the right to compensation.

Even shorter timescales are fixed for the Contractor to submit quotations to deal with the event.

A failure by the Project Manager to respond to a notification or quotation, within a similar period of time,

will lead to a 'deemed acceptance', binding the employer

NEC v JCTCOLLABORATION AND PRO-ACTIVENESS (continued)

The JCT forms, pre 2005, allowed claims to 'fester'

by putting the claim to one side before completion.

Putting a claim on a 'back-burner' could lead to a souring of relationships between parties

The down side with the NEC pro-active approach

is that it requires a heavy resource commitment from all sides to administer the project

SPECIFIC KEY ISSUES

DESIGN RESPONSIBILITY


SPECIFIC KEY ISSUES ~ DESIGN RESPONSIBILITY

• The JCT provides for 'Partial Design' by the Contractor through the use of

– 'Design Portion Supplement'

– and the 'Employer's Requirements' performance specification and the ' Contractor's Proposal' technical design/cost response

• The JCT also provides for full design

• via a range of 'Design and Build' forms



• The NEC 3 approaches design responsibility more flexibly

• The amount of any design is set out as part of the 'works information',

– a schedule to the contract containing technical information relating to the scope of the works

CONTRACT LAW ~ NEC v JCTSPECIFIC KEY ISSUES ~ DESIGN RESPONSIBILITY

• Under the JCT design and build forms

• The standard design warranty expressly restricts the level of duty owed by the Contractor, to one of

– 'reasonable skill and care' which has to be proven by the Contractor



• In contrast:

• Under the NEC 3 the parties must expressly agree to a

– secondary option clause X15 'Limitations of the Contractor's liability for his design to reasonable skill and care'… to have the same effect as the JCT.

• Without such an agreement, a

– 'fitness for purpose' obligation would normally be implied by law as part of the design and build Contractor's responsibilities


SPECIFIC KEY ISSUES

INSURANCES

NEC v JCTSPECIFIC KEY ISSUES ~ INSURANCE ARRANGEMENTS

The JCT forms, the Contractor is required to insure the works

to be maintained until 'practical completion' has been certified.

Under the NEC 3, the Contractor's Obligation section, the Contractor is to

arrange insurances, and that they extend to the issue of the 'defects certificate'

CONTRACT LAW ~ NEC v JCTSPECIFIC KEY ISSUES ~ INSURANCE ARRANGEMENTS

With reference to the 2012 Olympic games,

there is a commitment to ensure that the appropriate insurances are maintained, using the NEC as a standard

Project insurance is one of the key commitments

Project insurance is a financial loss policy

not a liability policy

underwriting the entire delivery team


SPECIFIC KEY ISSUES

DISPUTE RESOLUTION

NEC v JCT

SPECIFIC KEY ISSUES ~ DISPUTE RESOLUTION

• All JCT and NEC 3 forms provide

• an automatic right to adjudication as provided for by the Construction Act.

• In the case of the NEC 3, this resolves a problem with earlier versions, which attempts to build a

• four week 'cooling-off' period into the process, before either part could go to adjudication.

– Under the Construction Act, a party has the right to adjudicate at 'any time'



• Also, under the NEC 3 , • to challenge the decision of an adjudicator / arbitrator

• or through the courts,

• the dissatisfied party must give notice to the other side within four weeks of the decision.

• After which, • the decision becomes final and binding on both parties

CONTRACT LAW ~ NEC v JCTREFERENCE

'Let the Games Commence: NEC v JCT

Reynolds Porter Chamberlain LLP

Construction Update Magazine

Documents

NEC v JCT