That’ll do nicely

The New Engineering Contract is not exactly new. It was first published in a consultative edition in 1991 and promptly became popular in South Africa. The first edition proper was born in 1993 and a second edition came out in 1995, when it tried to change its name to the Engineering and Construction Contract. The rebranding did not make a huge difference to its popularity. Anyone who suggested using it was considered at best eccentric and at worst East Ham – one stop short of Barking.

In recent years, the NEC contract has become a respectable choice. It could be renamed as the PCC – Politically Correct Contract. The reason is that it is thought to be non-confrontational, with heavy emphasis on effective management to avoid claims and disputes, as opposed to the provision of ways of dealing with disputes at the end of the job. We are all partners now, not just parties to the contract, and this contract seems to suit that relationship. Government and quasi-governmental organisations are encouraged to adopt it, or something like it. The NHS expects all Procure21 projects to use a version of the NEC, although it is subtly tweaked in favour of the employer.

Encouraged by its new-found popularity, the Institution of Civil Engineers has produced a third edition. It was unveiled at the end of May.

There are a few innovations. The contract now has a couple of new family members – the framework contract and the term service contract – apparently introduced because there was a demand for them. A couple of provisions of the second edition that did not work quite as they had been intended have been put right. The adjudication clause now complies with the Construction Act, whereas the old version did not, which was a source of embarrassment to all concerned. There is also an option of a non-compliant adjudication clause, which parties might choose if they are working outside the UK or on a project that is outside the scope of the act.

The delay damages clause (the NEC equivalent of liquidated damages) has been changed to provide for reduction of the damages figure on partial possession – another rather embarrassing and potentially serious omission from the earlier editions.

There is now the possibility of introducing a maximum liability for the contractor. It will be interesting to see how often that is adopted; this author will personally give a prize to the first person who spots it in a UK contract.

In the past, anyone who suggested using the NEC was considered East Ham – one stop short of Barking

The most interesting change is in the compensation event provision. “Compensation events” is NEC-speak for claims for loss and expense and extension of time. If the employer’s team accepts that there has been a compensation event, there is no problem. If the team does not notify the contractor that there has been one, the contractor can start the process of assessment by notifying the project manager. The old edition says the contractor can only do that within 14 days of becoming aware of the event.

This has given rise to a debate. What happens if the contractor notifies (that is, starts the claim process) after the magic 14 days have passed? Some say there is no problem; others say the contractor has lost the chance to make a claim. The wording of the contract suggests the latter, but that seems a little unfair. The 14 days was tight, particularly if there is a string of subcontracts, with obligations on the poor subbie at the end of the chain to notify within one or two days so the claim gets up the line in time for the contractor to meet the deadline.

The new edition sorts it out. The 14 days has become eight weeks, which gives the contractor a fighting chance of putting in his notice. If the event is an instruction or a change of a decision by the project manager, the deadline is not really a deadline at all. If the event is anything else (such as weather, denied access or a host of others) the contractor loses the right to claim after eight weeks.

It is always a pity to see a favourite lawyer’s argument being killed off, but this makes the NEC much more attractive to potential users.

John Redmond is head of construction at solicitor Osborne Clarke in Bristol