This webinar, led by Rob Gerrard and Richard Patterson, focused on key changes and updates in the NEC4 Engineering and Construction Contract, particularly regarding the project manager's role.
Major topics included new and revised secondary options, important language and terminology updates, and changes in core clauses affecting contract administration and dispute avoidance.
Practical implications for project managers, including quality management, payment, program acceptance, and final assessment processes, were discussed.
The session concluded with a Q&A addressing implementation details, training/accreditation changes, and next steps for broader NEC4 rollout.
Action Items
Publish slides and unanswered Q&A after presentation – Rob & Richard
Update training and teaching materials for September to reflect NEC4 – All trainers
Integrate new value engineering percentage and program acceptance protocol into project templates – Contract administrators
Include quality management system requirements in contract scopes – Project managers
Add process and deadlines for final defined cost closure into project workflows – Project managers
Coordinate with NEC Users’ Group for latest guidance on alliancing and information modeling – Interested parties
Prepare for annual NEC Users’ Group seminar on 22 June – Organizers
Ensure transition and top-up accreditation resources are available for NEC3-accredited project managers – Accreditation team
Changes to NEC4 Secondary Options
Introduction of the Dispute Avoidance Board as a standard option, bringing NEC in line with international best practices.
Addition of undertakings to the client (collateral warranties) and transfer of rights clauses (intellectual property), adapted from the Professional Services Contract.
Parent company guarantee updated to "ultimate holding company guarantee," with minor drafting changes.
X15 (contractor’s design) now covers skill, care, professional indemnity insurance, and clarifies intellectual property/licensing, now including a reversal of burden of proof.
X21 introduces a whole life cost clause, allowing operational expenditure improvements to be proposed by the contractor.
X22 formalizes Early Contractor Involvement (ECI), significantly altering procurement and the project manager’s role.
Information modeling now a formal requirement, intentionally broader than just BIM, with specified roles for project manager regarding information execution plans.
Language and Terminology Updates
Section 10.1 split for clarity; spirit of "mutual trust and cooperation" unchanged.
X12 rebranded as "multiparty collaboration" (was "partnering"); content itself not changed.
"Risk register" renamed "early warning register" for clarity and consistency.
"Works information" now called "scope"; "employer" is now "client"; "employer risk" now "client’s liability".
Minor tweaks across Section 8 to clarify meaning and consistency; overall intent unchanged.
Core Clause and Operational Changes
Explicit prompts for specifying required communication system and other key contract data.
Obligation for project manager to set up the early warning register and schedule regular early warning/risk reduction meetings.
Clear mechanism for contractors to submit proposals for changes to the client scope, with value engineering percentages now required even under Options A/B.
Subcontracting process largely unchanged but with adjusted definitions and requirements for pricing information.
Program submission and acceptance: if the project manager fails to respond within 2 weeks, a contractor prompt can trigger a "treated as accepted" program—heightening the importance of timely project manager action.
Program and compensation event meetings now expected as good practice (though not strictly enforced by remedy clauses).
Payment now requires contractor application; only one fee percentage will be used (removing subcontracted fee percentage).
Preparation of compensation events is now recoverable as defined cost (A/B), if it truly increases cost.
Defined cost closure mechanism: contractor can trigger finalization with a submission; PM has a set period to respond, after which costs are locked.
Quality Management and Final Assessment
Section 4 now called "Quality Management" rather than "Testing and Defects".
Contractor must operate a quality management system per requirements stated in scope, submit quality policy statement and plan for acceptance.
These quality requirements are now managed by the project manager, not the supervisor.
Final assessment clause: within 4 weeks of defect certificate, PM must conduct final assessment; if not, contractor can do so.
New procedures for dispute of final assessment, with clear timelines for referrals to senior representatives/dispute boards/adjudicator.
Options A, B, C, D, and E – Commercial Provisions
Only one short schedule of cost components now for A/B; tendered rates for compensation events.
Subcontractor costs included as invoice amounts, aligning with other options and simplifying practice.
Removal of separate overhead percentages in all options; these costs now treated as part of direct cost/equipment.
Clarified processes for compensation event quotation and dividing date for forecasting costs.
Decisions
Dispute Avoidance Board adopted as standard secondary option — Aligns NEC with international norms and promotes proactive dispute resolution.
Scope, terminology, and core process changes standardized — Reduces confusion between NEC contract types.
"Treated as accepted" program provision introduced — Ensures contract progress when project manager is nonresponsive but increases need for diligence.
Fee percentages and defined cost rules simplified — Reduces complexity in payment and compensation event assessment.
Open Questions / Follow-Ups
How will updated value engineering percentages be set in practice, and what guidance will be provided on selecting appropriate percentages?
Details of transition and top-up paths for NEC3-accredited project managers to NEC4 certification to be clarified by accreditation bodies.
Further implementation guidance on information modeling and the differences between X12 and the forthcoming alliancing contract is pending.
Additional detail and market feedback on practical issues of managing new cost components (e.g., equipment vs. overhead) in long-term contracts.
Some unanswered questions from the Q&A are to be addressed and published with the slides post-webinar.