NEC Contracts: The secret to proactive project management

Project managers are the glue that holds a team together to ensure proper delivery of work on behalf of a client. Furthermore, the use of the New Engineering Contract (NEC) is the best ‘secret weapon’ in their arsenal – that is according to the experts at one of the UK’s leading multi-disciplinary property consultancy firms, EDGE. Associate director Ben King, who is based at the firm’s office in Birmingham and has a wealth of experience in project management, discusses.

From the outset, the NEC suite of contracts has been designed to follow three key principles. This can be simply put down to a collaborative approach between parties – reliant on good working relationships – followed by the flexibility to work in a range of commercial situations that best suit the client, and lastly, the use of clear and easily understood language and structure. Since its earliest development in 1991, through its various revisions over the years, these three pillars have undoubtedly redefined project management for the industry.

By instilling these ideologies, clear boundaries are set that enable parties to work with trust – something that was incorporated in the NEC’s second edition as recommended by Sir Michael Latham, and has remained in place since. The aim is that with such a contract in place, and parties able to fully understand the process, the adherence to principles will mean disputes are limited.

The margin for error in the industry continues to shrink and keeping projects on track has never been more critical. Following the latest release of NEC4, the experience and expertise of delivering through NEC contracts is growing, spearheading the way for proactivity in project management.

It also continues to stay fully updated, adding new clauses to address modern challenges, such as the addition of clause X29, which addresses carbon reduction. Reflecting the importance of full understanding of these contracts to provide clients with the necessary expertise, here at EDGE, we are in the process of having every single member of our project management team become NEC accredited, ensuring we can deliver across the board.

Benefits for all

With collaboration, flexibility and clarity set in stone from the beginning, this filters down into a range of benefits for clients, which is a key desired outcome from best practice guidance within the government’s Construction Playbook.

Perhaps most notable is the ‘early warning’ process – parties are expected to work together on managing risk in a proactive manner. If an issue arises that could potentially impact time, cost, or quality, it is a requirement to notify the other party immediately.

The common saying goes ‘a problem shared…’, and in this respect, the aim is for an early warning meeting to take place that will discuss ways to resolve the problem. Not only does this reinforce collaboration, but it also halts the issue from growing to something potentially unmanageable, reducing time or cost concerns for all parties and ultimately protecting the project from potential failure.

At a time when the industry is under immense pressure to recover from the pandemic, transparency and communication is key, mirroring the principles of good project management.

NEC contracts are also able to adapt, with clearly defined processes to handle change in costs and time known as ‘compensation events.’ This helps evaluate cost and time implications so changes can be made quickly and efficiently. By consistent monitoring and overseeing of the contract, budgets can move around as required and there are no hidden surprises on completion – this also helps to keep costs to a minimum.

A key revision from NEC3 to NEC4 was the introduction of triggered payments to help answer the call to end payments arriving late, which has a knock-on effect through suppliers and can prove especially difficult for SMEs.

Overall, the NEC has a strong focus on proactive risk management rather than dealing with problems as they happen. This puts all parties on a better starting note, building stronger foundations and is more likely to save time and money.

Agile delivery

It is becoming increasingly clearer how well NEC contracts work across a broad spectrum of areas.

NEC4 built on the success of its predecessors and its use of past tense celebrates the triumph it has had on contracts across the world. Some notable examples include the use of NEC3 for the London 2012 Olympics including the London Stadium and London Velodrome, as well as Crossrail and Heathrow Airport’s Terminal 2.

While many NEC contracts are from the public sector, there is evidence of expansion across the private sector too.

At EDGE, we have utilised NEC contracts across residential, retail, aviation and health sectors and are proud to apply these to new joint contracts tribunal (JCT) moving forward. The high level of scrutiny, full insight into delays, and a strict and formal early warning process all aid in highly effective risk management that we aim to bring as project managers.

A recent infrastructure example was the £10m enabling works at the Milton Keynes East development. We were appointed the NEC project manager for a six-month programme delivering a package consisting of three temporary bridge installations, utility diversions, temporary haul road construction, and archaeology investigation to facilitate development of 5,000 homes across 1,000 acres.

During our appointment we managed the contract via software tool Sypro Contract Manager, setting up weekly early warning meetings, commercial meetings, and monthly progress meetings. We managed changes via an agreed process with the client, combining client approval of the Project Manager’s Instruction (PMI) prior to formal instruction under the contract. Compensation events were strictly controlled via thorough NEC knowledge and, crucially, the contract and corresponding use of software was able to comprehensively detail key project information for clarity of all parties.

Final thoughts

While there are still other forms of contracts being negotiated and utilised successfully, no obligations found in NEC contracts are present and it is only a matter of time before the issues raised by this become too damaging. Providing data throughout the project, to assess and effectively meet requirements or tackle difficulties, is an integral part of best practice in project management.

The NEC contracts ensure at every turn, parties know the full picture, to respond and progress with minimal disruption – and encourage best practice in line with the Construction Playbook’s principles too. This is why we feel it is so important to have an accreditation scheme in place for all project management specialists at EDGE.

And we know that with the introduction of clause X29, which will essentially incentivise carbon reduction, the NEC suite of contracts is committed to developing as the industry faces bigger and bolder challenges in the future.

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