If you are working in construction or engineering, you are likely familiar with the NEC (New Engineering Contract) contracts. These contracts are commonly used in the United Kingdom, but are also gaining popularity in other parts of the world. As of 2017, NEC4 contracts were introduced to replace the previous NEC3 contracts. But what exactly is the difference between NEC3 and NEC4 contracts?
NEC3 Contracts
NEC3 contracts were first introduced in 1993 and have been revised multiple times since then. NEC3 contracts are known for their collaborative approach and clear allocation of risk. They are also designed to be flexible and adaptable to different types of projects. One of the key features of NEC3 contracts is the use of “Option A” (priced contract with activity schedule), which is the most commonly used option.
Some of the other features of NEC3 contracts include:
– A provision for early warning of potential issues
– The use of payment milestones instead of traditional progress payment schedules
– Joint compensation events, which allow both parties to share the consequences of any event that causes a delay or extra cost
– A dispute resolution procedure that encourages parties to resolve disputes through negotiation and mediation before resorting to legal action
NEC4 Contracts
NEC4 contracts were introduced in 2017 as an improvement on NEC3 contracts. The main goal of NEC4 contracts is to simplify the language and layout of the contract, make it more user-friendly, and to provide more guidance on how to use the contract. NEC4 contracts were also designed to be more collaborative, flexible, and adaptable.
Some of the key improvements in NEC4 contracts include:
– The introduction of “Option X” (a provision for an early contractor involvement), which allows the contractor to be involved in the pre-construction phase
– The provision for a secondary option clause, which allows for tailor-made clauses and is intended to reduce the need for contract amendments
– The inclusion of a “mutual trust and cooperation” clause, which reinforces the collaborative approach of NEC contracts
– The inclusion of guidance notes for both the employer and the contractor to help clarify key provisions
Conclusion
The main difference between NEC3 and NEC4 contracts is that NEC4 contracts are designed to be more user-friendly and include more guidance notes. NEC4 contracts also introduce new options and clauses that were not present in NEC3 contracts. However, both contracts share the same collaborative and flexible approach, with a focus on clear risk allocation. Regardless of which contract you use, it is important to ensure that you understand all of its provisions and how they may impact your project.
