NEC3 Suite of Contracts – Overview

The NEC contract is deliberately written to formalise the requirement to carry out good practice project management systems that should assist the project teams in understanding the status of both time and cost for the lifecycle of the project.

It is intended to provide mechanisms for contractors and project managers to work collaboratively, and are designed to contribute to the effectiveness of the management of the work and the understanding between the two parties.

They are founded on a number of key principles, which include:

  1. Foresight applied collaboratively mitigates problems and shrinks risk
  2. A regularly accepted programme allows the parties to understand where the parties are and assess future progress and change. It also avoids the inevitable arguments over disruption that would be brought about with retrospective assessments.
  3. Provides a prescriptive process for assessing change i.e. compensation events, of which there is a strict series of processes to follow. These result in a contractual conclusion, with the event being “implemented” and not liable for subsequent change from either party.
  4. The processes within the contract rely upon the fact that an up-to-date and realistic programme maintained by the contractor is used in joint decision-making between the two parties.

The NEC contracts form a suite of contracts, with NEC being the brand name for the “umbrella” of contracts. When it was first launched in 1993, it was simple the “New Engineering Contract”. This specific contract has been renamed the “Engineering and Construction Contract” which is the main contract used for any construction based project. It now sits along side a number of other contracts that together should mean that the NEC suite is suitable for what ever stage of a lifecycle the project is at and what ever party you are within a project. The contracts available within the suite are: 

Engineering and Construction Contract (ECC)

Suitable for any construction based contract between an Employer and a Contractor. It is intended to be suitable for any sector of the industry, including civil, building, nuclear, oil & gas, etc. Within the ECC contract there are six family level options of which the Employer will choose what he deems to be the most suitable and give him the best option/value for money on that project:

  • Option A: Priced contract with activity schedule
  • Option B: Priced contract with bill of quantities
  • Option C: Target contract with activity schedule
  • Option D: Target contract with bill of quantities
  • Option E: Cost-reimbursable contract
  • Option F: Management contract

These options offer a framework for tender and contract clauses that differ primarily in regard to the mechanisms by which the contractor is reimbursed and how risk is allocated/motivated to control costs. The clauses of these options can be adapted by tenders for subcontractors, and designers by choosing one of the contracts below.

The Engineering and Construction Subcontract Contract (ECS)

Very similar in detail and complexity of contractual requirements to the ECC contract above, but allows the contractor to sub-let the project to a subcontractor imposing most of the clauses that he has within his headline contract. There is very little difference between the ECC and the ECS, other than the names of the parties are changed (contractor and subcontractor) and some of the timescales for contractual responses are altered to take into account the timescales required in the ECC contract.

The Engineering and Construction Short Contract (ECSC) – This is an abbreviated version of the ECC contract and most suitable when there is considered “low risk” (not necessarily low value) on a project with little change expected. This contract is still between the employer and contractor but does not use all of the processes of the ECC making it simpler and easier to manage and administer.

The Engineering and Construction Short Subcontract (ECSS) – Allows the contractor to sub-let a contract down the line to a subcontractor on a low risk project when his contract with the employer is an ECSC.

The Professional Services Contract (PSC) – This contract is for anyone providing a service, rather than doing any physical construction works. Designers are the most obvious party that fit into this category. Whilst they are producing a design for an employer or contractor, they would sign up and follow the clauses within the PSC. Most of the clauses within this contract are the same as that in the main ECC contract, so that all contractors, designers and subcontractors have pretty much the same obligations and processes to follow as each other.

Framework Contract (FC) – Parties enter into a “framework” of which work packages will then be let during the life of that framework. Any individual projects will then be awarded using one of the other contracts within the suite, meaning that the parties follow the headline clauses within the framework contract (which is a fairly slim contract) and then the individual clauses within the chosen contract for that package. Different work packages can be let using different contracts during the life of the framework.

Term Service Contract (TSC) – For parties on a project that is operational or maintenance based, e.g. maintaining highway signage, where the contract is to ensure that a certain standard is maintained. This contract is not generally used for constructing new works, but can include some amount of betterment. There is also a “Term Service Short Contract” where the project is a relatively low risk project and is an abbreviated version of the main TSC.

Supply Contract/Short Supply Contract (SC/SSC) – The newest addition of contracts to the NEC family, being launched in 2010. This is for a supplier of supplies or goods to a project, and puts extra contractual requirements on them during their procurement/manufacture period. The Supply Contract is for big items of procurement, with the Short Supply Contract potentially being for more run of the mill procurement items on a project.

Adjudicator’s Contract (AC) – If there is a dispute between the parties on a project then the Adjudicator will follow the clauses within this contract in order to come to a decision.

Guidance Notes and Flowcharts – For each of the different contracts listed above each 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.