There has been significant discussion within the infrastructure sector about the need to improve project outcomes with better collaboration across contracted parties.
While the discussion and intention for collaboration is great, how do we actually get there?
Contract model selection is one component of achieving this, however the form of contract selected can also support the achievement of collaboration – contractually requiring all parties to collaborate rather than relying on best intentions and hoping it occurs.
Over the last decade, many of our Australian clients have predominantly favoured fixed-price contracts, with the intention of transferring the risks onto contractors (who in turn shift this risk to their supply chain) as they were considered better equipped to manage risks during project delivery. This practice often results in the perception that risk has been successfully transferred, although it is frequently held by the party least equipped to manage it effectively.
While the selection of fixed-price contracts may hold merit for some projects, it may not be the optimal choice for all. The use of more collaborative forms of contract, meaning those contracts that allow partial or full risk share between the client and the contractor, has again started to gain traction.
With the infrastructure landscape remaining highly active along the eastern seaboard, largely fuelled by the need to transition to clean energy, there is a growing imperative to explore alternative and collaborative contracting models.
One standard form contract suite that is increasingly used within the Australian market is the New Engineering and Construction (NEC4) contract, with particular emphasis on the Engineering Construction Contract (ECC) for main works. The NEC4 suite of contracts was published in June 2017 (with amendments in January 2019 and October 2020). The previous suite, NEC3, was first published in 2005 and revised in April 2013.
COLLABORATIVE CONTRACTING USING NEW ENGINEERING AND CONSTRUCTION (NEC) CONTRACTS
Australian Standard form contracts are often characterised as adversarial in nature and have not kept pace with modern practices. In contrast, the NEC4 suite of contracts are widely recognised for their collaborative approach and proactive management style.
Central to NEC contracts is their use of ‘plain English’, which ensures that all parties can easily comprehend the contract terms. NEC4 contracts actively foster engagement from both the Client and the Contractor, motivating each party to excel. They offer straightforward and proactive mechanisms that allow for constructive challenges and discussions, enabling timely decision-making and issue resolution throughout the project delivery process.
The NEC4 ECC contracts also establish a framework for collaborative project risk management through the use of Early Warning Notices, which provides for the development of cost and time-effective mitigation measures. This approach promotes fair dealing among project stakeholders when addressing risks and managing changes, enhancing the collaborative nature of these contracts.
Furthermore, having six main different payment options within the NEC4 ECC suite ensures consistency no matter the clients design level or risk appetite. Whether you are working with a priced contract with an activity schedule or a bill of quantities, a target contract with an activity schedule or a bill of quantities, a cost-reimbursable or management contract. This versatility allows for seamless transitions between different tried and tested contract types and promotes a more efficient and collaborative approach to construction contracting.
OUR EXPERIENCE
The ConnellGriffin team has utilised NEC contracts across multiple projects in the UK and Australia including, but not limited to:
- United Utilities - Asset Management Plans (UK)
- Sydney Water - Malabar System Investment Program (Aus)
- Sydney Water Partnering for Success Programme (P4S) (Aus)
- Silvertown Tunnel (UK), and
- Hammersmith Flyover (UK).
OUR KEY PEOPLE
If you would like to know more about our experience with NEC4 contract suite and how it may benefit your project, reach out to one of our key team members.
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