Louise Shiels explains some of the changes in the new suite of updated NEC3 contracts.
- New professional services short contract
- Project bank account provisions
- CIC BIM protocol references
- Amendments to the standard form wording
- ‘How to’ guides
There’s been a lot of interest in the new suite of NEC3 contracts. The contracts are not just reprints. NEC says they include “a host of new industry updates, new features and improvements”. But what’s new?
New professional services short contract
The new suite includes a new professional services short contract – this is a useful addition to the NEC3 suite as it aims, as the reference to ‘short’ suggests, to plug a gap offering a more straightforward services contract for appointments that don’t require as sophisticated management as the full professional services contract.
Project bank account provisions
From what we have seen so far, NEC’s proposed project bank accounts may give rise to some concerns (for main contractors in particular) as the NEC PBA seems to fall short of what other PBA mechanisms offer, eg JCT.
If there is disagreement as to the amounts to be paid into the PBA, or there is a delay in issuing the authorisation for release of money from the PBA, NEC3 does not provide comfort to main contractors.
Under NEC3 (unlike JCT), subcontractors to the PBA do not acknowledge that payment into that PBA discharges the main contractor’s obligation to make payment, under the subcontract, to the extent of that payment.
The NEC3 PBA therefore exposes the main contractor to risk where the main contractor’s payments are sitting in the PBA pending the employer’s authorisation of their release, but the main contractor still faces a valid claim for payment in full from subcontractors.
Main contractors are likely to seek amendments to protect themselves against this position.
CIC BIM protocol references
The new suite of contracts refers to the CIC Building Information Protocol which is suitable for use on level 2 BIM projects.
The obligation on parties to provide defined elements of their works/services using the model will need to be incorporated within the relevant form of contract. It is suggested that this takes place by reference in the Works Information, Scope or Z Clauses. Careful drafting will be required to ensure successful incorporation.
The contracts likely to be used with BIM are the Engineering and Construction Contract, the Engineering and Construction Sub-Contract and the PSC.
Amendments to the standard form wording
Amendments to the standard form wording include additions and updates arising out of the Local Democracy, Economic Development and Construction Act 2009.
These changes have been incorporated across the entire suite of contracts, ensuring the payment and other provisions are compliant with the requirements of the 2009 Act. There are also changes to notification and assessment of Compensation Events under the contract and termination for non-payment.
‘How to’ guides
The suite helpfully includes seven practical guides to aid practitioners in setting up and managing NEC3 Contracts.These are some useful additions aimed at creating collaborative working between the client and the supply chain.
Louise Shiels is a partner in the construction & engineering team at Dundas & Wilson CS