The New Engineering Contract 4 (NEC4) suite of contracts was published in June 2017 and the latest amendments to the NEC4 suite have recently been issued. This follows amendments published in January 2019 and October 2020, and reflects industry feedback as to how the contracts could be further enhanced.
Full details of the changes to each of the contracts are set out in the NEC's full schedule of amendments. We summarise some of the key changes in this article. The NEC will also be hosting a webinar discussing these amendments on 19 April 2023.
Secondary Option X29
In July 2022, NEC published a new Secondary Option clause (Option X29) for inclusion in the NEC4 suite of contracts. It was initially issued as a standalone secondary Option in July 2022 but in the 2023 amendments, X29 has now been incorporated into each of the main contracts. As mentioned in our recent insight, Option X29 is borne out of the growing view that standard contract conditions can be used to support the reduction in the climate change impact of built assets. It introduces the possibility of setting specific climate change targets in a new "Performance Table" and to include both positive and negative incentives for suppliers to reduce whole-life cost.
Adjudication (all contracts including the Y(UK)2 option)
Option W2 is the dispute resolution option that is used when adjudication is the selected dispute resolution method and in circumstances where the Housing Grants, Construction and Regeneration Act 1996 (the HGCRA) applies.
Clause W2.3 has been revised to bring it in line with the requirements of the HGCRA, stipulating that the adjudicator decides the procedure and timetable to be followed in the adjudication. The final part of clause W2.3(2) has also been deleted: this previously required any further information from a party to be considered by the adjudicator to be provided within 14 days of the referral, unless this period was extended by agreement.
Working from home and other locations (included in the ALC, DBOC, ECC, ESC, FMC, FMS, TSC and TSS)
Amendments have been made to the Schedule of Cost Components (SCC) and the Short Schedule of Cost Components (SSCC) across a number of contracts to address the issue of remote working. Options have been added to the SCC and SSCC to allow parties to identify in the Contract Data the people whose costs will be recoverable as part of Defined Cost:
- even if they are not normally based within the Working Areas / Service Areas and are working outside of the Working Areas / Service Areas, e.g. people working from home; and
- if they are normally based in the Working Areas / Service Areas but are not working within the Working Areas / Service Areas, as long as they are working on the contract.
Secondary Option X22 – Early Contractor involvement (ECC)
The amendments to Secondary Option X22 are aimed at providing greater flexibility over the development of a project in Stage One, and greater certainty in circumstances where works do not proceed to Stage Two. Amongst other things, the revised clauses provide that:
- During Stage One the Project Manager and Contractor may agree to change the Site Information.
- If the works do proceed to Stage Two:
- compensation events originally judged against the Contract Date are instead judged against the date of the notice to proceed to Stage Two; and
- any compensation events that occurred before the issue of the notice to proceed to Stage Two are deemed to be included in the changes made to the Prices, Completion Date and Key Dates in the notice to proceed to Stage Two – as such, all outstanding compensation events will be addressed as part of the notice to proceed to Stage Two, instead of needing to be dealt with individually.
- If the works do not proceed to Stage Two:
- the Project Manager issues a notice to this effect and an instruction that the work in Stage Two is removed from scope;
- the Completion Date is changed to the date of Completion of Stage One; and
- the Prices are changed to match the Price for Work Done to Date at the end of Stage One – this confirms that delay damages and an assessment of the Contractor's share should not apply to Stage One.
Contactor's liability for design limited to reasonable skill and care (ECSC and ECSS)
In the Engineering and Construction Short Contract (ECSC) and Engineering and Construction Short Subcontract (ECSS), there is now the possibility of including an Option into the Contract Data – equivalent to Option X15 – which states that the Contractor's obligation for design is to use the skill and care normally used by professionals designing works similar to the works. This will be welcomed by contractors and subcontractors under these forms of contract who – constrained by standard PI insurance limits – are often unable / unwilling to accept higher fitness for purpose obligations.
As yet the NEC has not published any amendments in respect of the Building Safety Act 2022 (BSA). This is unsurprising given that much of the secondary legislation implementing the changes brought about by the BSA is still awaited and there is not yet an established market practice with regard to, e.g. the extended limitation periods for claims under the Defective Premises Act 1972 and section 38 of the Building Act 1984 (as yet not in force). The new Joint Contracts Tribunal (JCT) suite, which is expected in late 2023 / early 2024, is widely expected to address the BSA – further amendments to the NEC4 suite may therefore follow in due course.
In the meantime, users of the NEC4 suite should make sure their contracts reflect the relevant version of the NEC4, including any bespoke Contract Data and Z clauses, and template Scope documents.
If you have any questions about this article, please get in touch with Ashley Pigott or Ruth Griffin.