12 Tips to Stay Sane with NEC Contracts: Because Contracts Shouldn't Feel Like Learning a New Language!

Mastering the Essentials of NEC Contracts Without the Headache

Navigating construction contracts is never easy, and the NEC (New Engineering Contract) introduces its own set of complexities. Unlike traditional contracts, it’s more straightforward but still comes with unique provisions that can trip up even seasoned professionals. Here are 12 essential tips to help you stay on track when dealing with an NEC contract.

1. Learn the Language

? ?NEC contracts come with their own jargon. Terms like "Compensation Events" (akin to variations or extensions of time), "Contract Data," and "Risk Register" are vital to understand. Misinterpreting them could lead to costly mistakes.

2. Know Your Options

? ?There are six main options for structuring NEC contracts. From the more traditional lump-sum contracts (Options A and B) to cost-reimbursable ones (Option E), understanding the risks in each option is crucial. Options A and C are the most commonly used.

3. Stick to Written Communications

? ?All communications under NEC must be written and recorded—so no verbal agreements! Emails are allowed but ensure everything is documented clearly.

4. Notices, Notices, Notices

? ?The contract separates notices from general communications. You’ll need to issue a formal notice for anything like a delay or cost increase—burying this info in a report won’t cut it.

5. Key Dates Matter

? ?Sectional completion isn’t the only deadline to watch. NEC also has key dates for specific milestones and missing them could result in hefty damages.

6. Compensation Events Require Timely Action

? ?If a compensation event occurs, you have just 8 weeks to issue a formal notice. Miss the deadline, and you could forfeit your right to claim additional costs or time extensions.

7. Program, Program, Program

? ?NEC contracts are heavily program focused. Contractors are required to submit detailed schedules, including float and time risk allowances. Missing these deadlines can mean penalties.

8. Material Payments

? ?Under Option A, payment for materials only occurs once activities are complete. To get reimbursed for off-site materials, ensure they’re listed in the Activity Schedule.

9. Design Liability

? ?The NEC doesn’t have a specific design and build option. If the contractor is responsible for design, it must be clearly outlined in the Works Information.

10. Early Warnings Save Money

? ?Both the contractor and project manager must issue early warnings about potential delays or cost increases. Failure to do so could reduce your claim later.

11. Beware the Z-Clauses

? ?Employers often insert additional conditions, called Z-clauses, to shift more risk onto contractors. These clauses may reduce payment periods or shorten the time to notify compensation events.

12. Secondary Options Aren't Optional

? ?NEC allows employers to pick from various secondary options that influence contract terms, such as sectional completion (X5) or limiting design liability (X15). Make sure you understand which ones apply.

Conclusion:

NEC contracts may seem more accessible, but they come with their own challenges. From understanding the language to staying on top of notices, the stakes are high. Mismanaging an NEC contract could significantly impact your company’s bottom line, so be sure to assess risks and responsibilities before signing on the dotted line!?