It is time for clients to adopt the NEC4 Alliance Contract

In July last year the UK government published its Construction Sector Deal under its Industrial Strategy banner (HM Government, 2018). The ‘deal’ is ambitious in its vision, which is to transform construction delivery through: greater deployment of digital technologies, especially at the design stage; greater use of offsite manufacturing; and greater focus on whole life asset performance.

Those of us who have been around the industry a long time will now begin to yawn and wonder why – in spite of numerous previous initiatives – the industry remains transfixed in a previous century. Quality issues abound and the majority of projects do not come in on time or within budget.

However, there is a recognition in the Construction Sector Deal that things must now change. It says, ‘The current business model of the construction sector is not sustainable. Construction customers and businesses across the supply chain are focused on the cost and risks of individual projects, and do not collaborate effectively.’

Transforming procurement

The deal acknowledges that maximising the potential of digital and manufacturing technologies to transform the industry is dependent upon the way we procure and deliver. This is where the new NEC4 Alliance Contract (ALC) comes in.

The ALC was launched last summer at the NEC Users’ Group conference in London (Issue 92). It represents a fundamental shift in procurement, from hierarchical and sequential appointments to engaging a single team committed to integrating processes, working collaboratively and sharing risks and rewards.

The key to the success of alliancing is that the team should include all participants who are essential to ensuring the outcomes for the project are achieved, which means including all relevant specialist professions and trades.

The ALC is a multi-party contract and all members of the alliance ‘buy in’ to a governance structure that comprises an alliance board. The members of the alliance make up the board, which is responsible for ensuring the outcomes required by the client are achieved – the client sets the tone by setting out the necessary performance targets.

Making delivery more efficient

All participants have a shared interest in achieving what is best for the project. In this way process waste associated with more traditional delivery processes is much reduced. For example, the huge costs often incurred by the supply chain having to make designs work is often a significant factor in cost overruns and failure to complete on time.

Equally important is that the ALC is devised to avoid or minimise disputes. Any murmurings of a dispute can be referred to the board for resolution and, if this proves difficult, independent expert determination can be resorted to.

I hope that government clients – and even private-sector clients – will soon follow Hinkley Point C’s lead in using the ALC. The Infrastructure Clients’ Group should promote it too. In time, it will be interesting to capture experience of using this contract and gauge the extent to which marks a new dawn for construction procurement and delivery.

NEC has published guidance to accompany the Alliance Contract: NEC4: Preparing an Alliance Contract, NEC4: Managing an Alliance Contract and NEC4: Alliance Contract Flow Charts (NEC, 2018).

References

HM Government (2018) Industrial Strategy: Construction Sector Deal, available at: https://www.gov.uk/government/publications/construction-sector-deal (accessed 22 November 2018).
NEC (2018) NEC4 Alliance Contract: Guidance and Flow Charts, available at: https://www.neccontract.com/NEC4-Products/NEC4-Contracts/NEC4-Alliance-Contract-ALC/NEC4-Guidance-Notes-Flow-Charts (accessed 22 November 2018).