NEC4 - October 2020 Amendments

With thanks to Ian Heaphy and Peter Higgins

Introduction

The NEC4 suite of contracts was published in June 2017. Following publication there has been continuing discussion and feedback from users and industry experts on the new features, forms and changes which were introduced. This feedback has been extremely positive overall and has provided many constructive suggestions as to how the contracts could be further enhanced.

To build on the constructive feedback and further improve the contracts the NEC published a set of amendments in January 2019 and have now issued a second set of amendments in October 2020. The principal amendments are detailed below, in addition there are some minor corrections to the wording in some of the contracts.

A schedule of amendments is available for each contract on the NEC contract website. The schedules detail all amendments being made except minor typographical amends which do not affect the interpretation or application of the contracts. New contracts are printed with the amendments included. Updated versions of the User Guides have also been produced to reflect the amendments made to the contracts.

Delay damages (all contracts)

In all NEC4 contracts that contain an option for delay damages the relevant clauses have been amended to clarify that any delay damages cease at termination. After termination any further delay costs will be considered as part of the general costs / damages due as a result of the termination of the supplier’s obligation to provides the goods, works or services.

Contractor’s liabilities & use of equipment, Plant and Materials (TSC, TSS and DBOC)

In the TSC, TSS and DBOC clause 81.1 has been amended to confirm that the Contractor is liable for loss of or damage to any equipment provided by the Client to the Contractor. Those parts of clause 7 detailing the rights to use equipment, Plant and Materials and other materials provided by the Client has also been simplified.

Secondary Option X22 – Early Contractor involvement (ECC, ALC)

Secondary Option X22 has been amended to provide greater flexibility in the development of a project in Stage One and to provide a more structured process for the Contractor’s submissions and the notice to Proceed to Stage Two. As part of the changes the Project Manager and Contractor are required to agree any changes to the Access Dates, Key Dates and the Completion Date that may be necessary, in addition to agreeing any necessary changes to the total of the Prices.

Secondary Option Y(UK)1 – Project Bank Account (ECC, ECS, PSC, PSS, TSC, TSS, SC and ALC)

The Project Bank Account Option Y(UK)1 has been updated to reflect user feedback, electronic banking methods and best practice. The main changes are explained below (based upon ECC):

• Choice of account holder - The Client now decides whether the account is held by the Contractor or whether it is held jointly by the Contractor and the Client. This determines responsibility and involvement with setting up the Project Bank Account and approving payments. This option allows the Client to decide the level of its day-to-day involvement in administering the Project Bank Account.
• Electronic banking - The procedures have been updated to reflect electronic banking methods.
• Payment Schedule - A Payment Schedule has been included, which replaces the Authorisation document. The Payment Schedule is prepared by the Contractor and is a list of payments to be made to the Contractor and Named Suppliers from the Project Bank Account. The Contractor provides the information in the Payment Schedule to the project bank and provides a copy to the Project Manager.
• Project Bank Account Tracker - A Project Bank Account Tracker has been included, which is prepared by the Contractor and contains a register of all payments made to and from the Project Bank Account and the date each payment was made. It is updated and issued to the Project Manager when payments are made from the Project Bank Account.

Secondary Option Y(UK)2 – The Housing Grants, Construction and Regeneration Act 1996 (TSC, TSS, PSC, PSS and DBOC)

Secondary Option Y(UK2) has been amended in those NEC4 contracts that link the “final date for payment” with the submission of an invoice from the party to which payment is due to reflect recent developments in UK case law.

The amendment changes the “due date” to the later of the date of receipt of an invoice by the party which is making payment and fourteen days from the assessment date. The final date for payment is then be a fixed period of time from the due date.

The timescales for payment in all contracts are not changed as a result of the amendments.

Note to NEC3 users

The NEC4 updates make a number of changes to the contracts, but users should be aware that we do not provide updates to the NEC3 contracts. Some of the changes that have been made to the clauses in NEC3 in the initial publication of the contracts and in subsequent amendments were made to provide greater clarity on the operation of the contracts. Users of NEC3 do not get the benefit of those improvements. NEC4 has been around for more than three years, so NEC3 users should look to adopt the updated versions as soon as practicable.

Acronyms used in this article refer to NEC4 Contracts:

• ALC – Alliance Contract
• ECC – Engineering and Construction Contract
• ECS – Engineering and Construction Subcontract
• PSC – Professional Service Contract
• PSS – Professional Service Subcontract
• PSSC – Professional Service Short Contract
• SC – Supply Contract
• TSC – Term Service Contract
• TSS – Term Service Subcontract
• DBOC – Design Build Operate Contract