NEC4 was announced in March 2017 and has been available since June 2017. This new edition reflects procurement and project management developments and emerging best practice, with improvements in flexibility, clarity and the ease of administration. It also introduced two new contracts: the NEC4 Design, Build and Operate Contract (DBO) and the NEC4 Alliance Contract (ALC). [14] An NEC4 contract suite covering facilities management was released in 2021. [15] Theagreedcumulativecostisthendeductedfromtheamountpreviouslypaidunderthecontract. Thisamountisthenpaidtothecontractor.

The repair and indemnity provisions at clauses 82 and 82 have been replaced with a new recovery of costs clause 82. The waiver of subrogation has now been extended to cover both parties, following on from the SSE v Hochtief decision where it was held that insurers had the right to pursue a joint insured. Core Clause 9: termination In addition, contract data has been simplified and the schedule of cost components has been changed Insurance – practically speaking only reaffirms what the Contractor can not charge for insurable events and insurance premiums rather than stating nothing is claimable in this section. Excessive use of Z clauses has been criticised as "onerous" and "poorly drafted"; NEC guidance states that "additional conditions should be used only when absolutely necessary to accommodate special needs". [25] Guidance notes and further information [ edit ]Client termination for any reason now has its own secondary option clause, at X11. Clause 91.8 creates an additional right for client to terminate due to corruption. Option W: resolving and avoiding disputes

Thomas Telford Ltd., NEC3: April 2013 Edition complete family of contracts, accessed 6 September 2021Figure 1 represents everything a contractor needs to get paid under an NEC4 ECC. Clause 52.1 − a core clause and so in all the options – draws the line between defined cost and fee. Simply, if it is not in defined cost, the contractor will be deemed to have included for it in itstendered fee percentage. The fee is the fee percentage times defined cost.

Secondary Options Y(UK)1 – project bank account, Y(UK)2 – ref. the ‘Construction Act’, and Y(UK)3 – The Contract (Rights of Third Parties) Act 1999. SCC 3 states, ‘The following components of the cost of support people and office overhead... A charge for support people and office overhead costs calculated by applying the overhead percentage stated in the Contract Data to the total of people items 11, 12 and 13. The charge includes provision and use of people, accommodation, equipment, supplies and services required to provide the office and to support people providing the service.’ That sharing of risks under ECC Option C is based on the assumption that both parties are incentivised to work together for the benefit of the project and assist each other to increase any gains and avoid overspend. Disallowed costs sit outside this mechanism and are borne in full by the contractor, so the extent of disallowed costs will have a substantial impact on the underlying commercial bargain. Amendments to disallowed costs As with all NEC4 contracts, the parties to a PSC are required to act in a ‘spirit of mutual trust and co-operation’ and give early warnings of anything that could affect time, cost or usefulness of the service so it can be mitigated without delay. NEC, Additional public sector Z clauses required to comply with the requirements of The Public Contracts Regulations 2015, accessed 10 January 2023Finally, the contractor’s tendered fee percentage has to include for anything missing in the SCC or SSCC, such as: insurance premiums; people whose normal place of work is not within the working areas unless they happen to be working in the working areas (other than those doing manufacture and fabrication or design outside the working areas); disallowed cost (in options C, D and E); and profit. Summary

This arrangement forces both parties to work more collaboratively as the financial success is shared by both client and contractor. Similarly, the financial failure of a project is shared. This collaborative working can reduce disputes and accelerate innovation. for those estimates to be produced within very tight timescales so as to avoid disrupting the project itself A new clause 31.3 allows for deemed acceptance of the contractor's programme where the PM does not notify its acceptance or non-acceptance within the time allowed by the contract. The contractor must first notify the PM of its failure, but the failure will be treated as acceptance if it continues for a further week after the contractor's notification. Disallowed Cost” is defined by Clause 11.2(25) and are costs that the Project Manager has decided are either:

The NEC disallowed costs provisions have been drafted carefully as part of the overall allocation of risk and to achieve a commercial balance which motivates both parties and aligns their interests. If not used correctly or if amended, that commercial balance is disrupted and the incentives for better performance under ECC Options C, D and E contracts will be less effective. Each of the different contracts listed above comes with its own set of guidance notes and flowcharts which should aid understanding of the intent of the drafted clauses. The guidance notes expand on each clause to give extra substance and intent of the original drafters as to how a clause should be understood and interpreted. The flowcharts then map out each of the main processes within each contract and demonstrate how it should operate and what to do next if a party has or has not carried out the next contractual action. If done well and promptly, it enables the Contractor and the Employer to properly manage both cost and value. About the Author Before deciding to go along with NEC4 PSC ideas for cost in options C and E, the client must first make sure it understands them and the implication on the resource requirement to verify and audit the costs properly. Helpfully, 13.4 makes it clear that if the project manager (PM) rejects something in the contractor's programme, the PM must provide reasons "in sufficient detail to enable the contractor to correct the matter".