New Engineering Contract is a contracting system developed to effectively manage a project from the inception to the final phase of the construction project. These contracts are described and written in simple English and designed in a structure that is easily understandable.
NEC contracts were introduced in 1993 with the aim of mitigating disputes in construction projects. Conventional contracts had several setbacks that led to an upturn in conflicts of interest and dispute rates. Therefore, NEC was introduced by the UK Institute of Civil Engineers to replace conventional contracting methods.
It is commonly observed that most of the disputes in a construction project are born when quality, cost, and time constraints are compromised. NEC contracts would aid in producing a high-quality product at desired cost and within the given time frame. These contracts clearly define, in legal terms, the roles and responsibilities of the contractor and the client.
In 2005, a third edition of the contracts was published as NEC3.
NEC is a family of contracts with each having its own, specific set of traits. These traits make them an exceptional adaptation for the contracting system and make the project efficient in terms of management. The following are the characteristics of this contracting system:
- The success of a project can be affected by the working relationship between the client and contractor. If the relationship has reached a state of default, project objectives would be compromised and the project would be a failure in many terms. NEC adaptation for a project not only enhances relationships but also ensures effective management of the relationship between working parties.
- One of the biggest factors associated with the NEC contracts is their versatility. There are different types of works in construction and these contracts are applicable for all types of construction work.
- The contract documents are quite simple and easily interpretable. There is no need for expertise and legal knowledge for dealing with these types of contracts. All the rules and regulations are clearly explained and can be easily understood.
- NEC contracts identify all types of risks and hazards a project can inflict and instead of allocating risk to various stakeholders, it deals with these risks.
- NEC contracts allow great flexibility to parties adopting this type of contracting system.
Every contractual system has to go through several sets of documents before its practical implementation. Contract documents can be defined as a written basis for the contract that describes the work, stakeholders, and roles. Similarly, the following are the set of contract documents related to NEC:
- Form of agreement: This is the document that describes that both parties are willing to enter the contractual phase and bound to follow regulations described in the statement of work.
- Conditions of contract: This document establishes a relationship between client and contractor based on the allocation of risk, price, and codes for construction.
- Contract Data: This is accumulated information that is required to make a contract work and identifying all the reports and documents which would provide details about the work that is needed to be done.
- Bill of quantities: A detailed cost, quantity, and unit estimate of the material that will be used during the construction.
- Statement of Work: This would describe the scope of work to be performed and the requirements for the finished product.
- Site Information: This document includes the layout of the site and all the primary information about the site that can affect the construction process.
It has been usually observed that NEC3 contracts entail nine clauses, which are:
- General Terms of Agreement
- Responsibility of Contractor
- Defect and Testing
- Payment rules and regulations
- Scenario and terms of compensation
- Risks, hazards, and policies about insurance
Most of the ongoing work is related to the improvement of collaboration among the parties involved in the construction projects. This increase in collaboration can be achieved by introducing certain clauses that add more value to both client and contractor. These clauses and roles wouldn't be biased and would consider the interest of both contractors as well as clients.
In November 2015, it was announced that NEC would publish Early Contractor Involvement (ECI) clauses. These clauses would give the contractor the right to be involved in the conceptual design phase of the project. Most of the contractors are liable to loss because they are not part of the early design stage which leads to inconsistencies in the estimate. These clauses would make sure the contractor is provided with all the information they need and with lesser risk during the progress of work.
Most of the contract systems are biased towards the contractor. The terms of the agreement introduced by the client don't care for the contractor. Some of these terms ask for subservience. NEC contracts are there for the advantage of both parties and it doesn't allocate all the risk to one side.
Furthermore, this contracting system doesn't allow clients to treat the contract unfairly in matters of time, cost, and quality. The contractor doesn't suffer from a lack of rights and enjoys a healthy working relationship with the client. This ultimately leads to the success of the project and the achievement of all project objectives.
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