Ding ding ding …. JCT 2016 vs NEC4 forms of Contract
Our Project Management Associate, Brendan Hills offers a personal perspective on the forms of contract used at Lee Wakemans, and where he sees the industry trends heading.
Over the last 15 years the forms of contract have been progressing faster and changing more frequently than ever before.
Just 10 years ago, we were still finishing off a couple of contracts using the JCT 1980 form of contract. We now have a plethora of options released in the last 2 years, many of which are untested in the courts and unfamiliar to the industry.
Earlier this year, the release of NEC4 marks the further refinement of the ‘simple man’s contract’,when many of us are still getting to grips with NEC3. The revision introduces two new forms, the Design, Build and Operate (DBO) Contract and the Alliance Contract (ALC). NEC4 contains various changes to the programme, payment and compensation event clauses and some common sense changes to terminology, which have caused much confusion in the past.
In 2016 we saw some (relatively minor) revisions to the JCT family of contracts after they were completely re-written in 2005. The changes include redrafting of the payment regime and greater provisions for securities such as bonds and PCG’s. In my opinion, the most important changes are those relating to insurance provisions , which will simplify insurance arrangements considerably for refurbishment work in particular.
NEC, NEC, NEC
Following the Latham and Egan reports, the construction industry pendulum swung towards NEC contracts due to their strong partnering emphasis, when the JCT contracts at the time were considered adversarial. However since the release of the NEC3 suite and the widespread adopting of its principals, we are seeing this partnering ethos spill over into most contracting relationships.
JCT contracts have adopted some of the NEC principals and have released a partnering specific contract – the Constructing Excellence contract.The contract has in fact existed since 2006, and I have to say that I have never actually seen it used in anger.
What’s the flavour of the month in 2017?
At Lee Wakemans, we are increasingly finding that our clients and contractors have an inclination towards the old faithful JCT contracts, as the complexities of the NEC suite are causing frustrating levels of administration.
The problems that the NEC set out to solve have been by and large addressed by a shift in mindset within the construction industry as a whole. Long term relationships are valued, risk allocation is agreed fairly, negotiation of contracts is commonplace and the public sector is leaning heavily on frameworks.
Even within our office we have a great divide of opinions as to which suite of contracts is ‘the best’. We have some evangelical NEC supporters and a few JCT enthusiasts, all with interesting and varying viewpoints, which is probably a good indicator of the industry on the whole. Which side of the fence do you sit on?
This is my personal insight,based largely on our experiences here at Lee Wakemans as opposed to it being scientifically based. In 2015 90% of the contracts being run by Lee Wakemans were NEC3, however in 2017 this has reduced to approximately 30%.
We are yet to run a new NEC4 contract, although the pendulum may swing back that way after it gains some traction and some of the amendments have been tested by the courts. If I stare deeply into my crystal ball I think we may even see a resurgence in client prepared Bills of Quantities!
We’d love to hear your thoughts.
Lee Wakemans is a development consultancy that helps organisations create, develop and deliver built projects on time and in budget.
They provide four core development service offerings; Development Management, Project Management, Cost Management and Health and Safety Management.
Please contact Brendan Hills on 02920 442900.