The Value Of The NEC Contract 

No other contract suite has had such a transformative effect on the built environment industry.

by Joseph Keogh
20th June 2023

New Engineering Contracts (NEC) are used successfully in both public and private sector projects all over the world with the aim of improving project management. The benefits to the construction sector can be enormous.

NEC contracts are the only set of standard contracts designed to support and encourage good project management. Prior to the innovations of the NEC, ordinary contracts were primarily created as legal agreements best placed in the desk drawer until expensive and delaying difficulties emerged, accompanied by costly litigation and discussions about who was to blame. 

The language used in NEC contracts is straightforward and uncomplicated so that they are easily understood, and the methods outlined are intended to promote excellent project management. The goal is to achieve collaboration among all project contributors, which will result in effective risk appraisal, mitigation, and management. The contracts specify how the interfaces between all the organisations engaged in a project will be managed, from the client to the general contractors to the numerous subcontractors and suppliers.

The NEC was first published in 1993 as a fresh and unique method of handling construction contracts. "Constructing the team - The Latham Report," a significant UK government/industry examination of procurement and contractual arrangements in the construction industry, approved the NEC method for contract management.

Register for the NEC Forum
Register for the NEC Forum

The NEC has played an important role in assisting the sector in delivering better projects. It has accomplished this by including good project management techniques into the contract itself. These necessitate proactive risk and project management. The variety of pricing alternatives has provided clients with flexibility in risk allocation as well as the capacity to share and manage risk collectively.

The NEC contract encourages teamwork, collaboration, trust and proper project management. The contracts look after the client’s interests while still protecting the contractor’s profit. They help clients achieve more certainty about the outcome of a project, while making sure contractors are paid fairly and promptly.

Over three decades, the NEC suite has evolved, incorporating user feedback and reflecting industry change, including new procurement processes and management strategies such as alliances, information management (BIM), and supply chain interaction. This input, as well as the new procurement methodologies, fuelled the development of the next-generation contract - NEC4.

No other contract suite has had such a transformative effect on the built environment industry as the NEC. It has centred modern procurement on the joint sharing of risk and reward. It is also unique in that it offers a complete, end-to-end procurement solution for all works, services, and supplies in any industry and country.

Photo: Contract signing (© Maksim Prochan | Dreamstime)

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