NEC Contracts

For British Water, ‘Procurement Explained’

Richard Patterson
NEC and Procurement Specialist
Mott MacDonald
27 April 2022
Richard Patterson
BA MBA CEng FICE
Mott MacDonald NEC
Advisory Services

33 Years with
Mott MacDonald

26 Years with
NEC….and FIDIC

1 Year with NEC as

NEC Consultant

(c) Mott McDonald : NEC for British Water

• What are the most
dangerous words
in the English
language?

• We always do it
this way.

(c) Mott McDonald : NEC for British Water

 UK Water National/International Accounts Mott MacDonald
companies
Account: AOI1
Non- UK Governments and
water Accounts
Municipalities
using NEC Mark Dives Account: SCO1
Scottish Water
Doug Luke
Account: IET1
Internal Mott MacDonald
Mark Dives Account: AON1
North
Tony Smithson
Account: RID1
Regulators, IFIs & Developers
Mark Dives

Account: EVA1
Environment Agency
Account: AOC1
Martha Taylor
Central
Matt Fox

Account: CON1
Contractors
Charlie Bell

Account: AOW1 Account: TWL1

West Thames Water
Nick Bessent Keith MacPherson

Account: AOS1
South
Dan Rouse
To start ‘NEC’ is now a ‘brand’

•New • > 25 years’ of use

•Engineering • any project or service
•Contract • a management tool AND a contract

(c) Mott McDonald : NEC for British Water

Real basic intro:

Mott MacDonald's 'Little

Book' of NEC

APM website

(c) Mott McDonald : NEC for British Water

Plan

• NEC basics
• NEC collaboration
• NEC4 for process contracts
• NEC climate change
• NEC3 to 4 – use it!

(c) Mott McDonald : NEC for British Water

Plan

• NEC basics
• NEC collaboration
• NEC4 for process contracts
• NEC climate change
• NEC3 to 4 – use it!

(c) Mott McDonald : NEC for British Water

NEC’s core principles

Stimulus to good management

Flexibility

Clarity and simplicity

(c) Mott McDonald : NEC for British Water

NEC’s core principles

Clarity and simplicity

(c) Mott McDonald : NEC for British Water

NEC Clarity – You can read it

• plain, readable English

• excellent structure
• free from references to specific laws
• minor secondary options to suit specific
local law - eg Y(UK)2, Y(NZ)2
• so easy to translate, if required

(c) Mott McDonald : NEC for British Water

Language. NEC
Present tense and in English!

(c) Mott McDonald : NEC for British Water

NEC’s core principles

Flexibility

(c) Mott McDonald : NEC for British Water

What How Where
• any aspects of • any Anywhere in the
any project, any procurement world
service strategy
• and supply • any level of
• ‘complex’ or ‘Contractor’
‘simple’ design
• any sector • range of
payment
options
• clear and
flexible risk
allocation

(c) Mott McDonald : NEC for British Water

 SC & SSC
Supply Supply Contract & Supply Short Contract

Prof’l Services
High ECC TSC

Contract

PSC
Engineering and Construction Contract Term Service Contract
Complexity ECS
Project Engineering and Construction
Subcontract

ECSC
Prof’l Services
Short Contract

PSSC TSSC
Engineering and Construction
Short Contract
Term Service Short Contract
ECSS
Engineering and Construction
Low Short Subcontract

Framework Contract
Adjudicator’s Contract
business design construction operation
case
NEC3 family
 Prof’l Services
TSSC

Management
Alliance Contract

Subcontract

(Feb 2021)
High

PSSC

Facilities
FMC
Contract
Term Service
Subcontract
DBOC
Complexity
Design Build and Operate Contract
Project

Short Contract
Management
(Feb 2021)

FMSC
Facilities
Low

Dispute Resolution Services Contract

business design construction operation
case
NEC4 new members
NEC Family
• Engineering and Construction Contract (ECC)
• Engineering and Construction Subcontract (ECS)
• Engineering and Construction Short Contract (ECSC)
• Engineering and Construction Short Subcontract (ECSS)
• Professional Services Contract (PSC)
• Professional Service Short Contract (PSSC) (April 2013)
• Term Service Contract (TSC)
• Term Service Short Contract (TSSC)
• Framework Contract
• Supply Contract
• Supply Short Contract
• The Adjudicators Contract
NEC4
• Dispute Resolution Services Contract
• Professional Services Subcontract (PSC)
• Term Service Subcontract
• Design Build Operate Contract (DBOC)
• Alliance Contract
• Facilities Management Contract

(c) Mott McDonald : NEC for British Water

 Z additional conditions
Y(UK)1 Y(UK)2 Y(UK)3 jurisdiction-specific options

X10
X11
X12
X13
X14
X15
X16
X17
X18
X20
X21
X22
X8
X9
X1
X2
X3
X4
X5
X6
X7
secondary options

W1 W2 W3 dispute resolution option

A B C D E F Main (payment) option

1-9 core clauses

Flexibility – The ECC4

(c) Mott McDonald : NEC for British Water
Who takes the risk?
Quantity Efficiency
risk risk

A Priced contract with activity schedule

Contractor

B Priced contract with bill of quantities

Client Contractor

C Target contract with activity schedule

Shared Shared

D Target contract with bill of quantities

Client Shared

E Cost reimbursable contract

Client Client

F Management contract
Depends on subcontracts used

(c) Mott McDonald : NEC for British Water 19

21.1 The Contractor designs the parts of
the works which the Scope states the
Contractor is to design.

(c) Mott McDonald : NEC for British Water

NEC’s core principles

Stimulus to good management

(c) Mott McDonald : NEC for British Water

Stimulus to good management

Accepted
communications
Programme

compensation
early warning
events

(c) Mott McDonald : NEC for British Water

 The most important word in the NEC!
Compensation events

(Almost) all in Assess time and

one place cost for all Clear
timebound
process for
Assess forecast assessment
Based on ‘real’
now – not ‘wait
effect of event
and see’

(c) Mott McDonald : NEC for British Water

Timescales for compensation events
Contractor aware of event PM notifies and

< 8 wks
Contractor notifies
PM instructs quote
1wk

ECC3: 3wk
or
PM silent?
C notifies; PM says no Contractor quotes
PM has further
2 wks; 2wk
otherwise
‘treated as PM replies
accepted’

PM assesses accept Not agree and

(c) Mott McDonald : NEC for British Water 24

Plan

• NEC basics
• NEC collaboration
• NEC4 for process contracts
• NEC climate change
• NEC3 to 4 – use it!

(c) Mott McDonald : NEC for British Water

NEC’s core principles – in 2020 it might add

Collaboration

(c) Mott McDonald : NEC for British Water

 Increasing
NEC Options for collaboration collaboration
• Core clauses: programme, early warning,
compensation events
• Option X20 - Key performance incentives
• Option C - target contracts
• Option X22 (NEC4) early contractor involvement
• Option X12 – multi-party collaboration
• NEC Alliance Contract

(c) Mott McDonald : NEC for British Water

Plan

• NEC basics
• NEC collaboration
• NEC4 for process contracts
• NEC climate change
• NEC3 to 4 – use it!

(c) Mott McDonald : NEC for British Water

NEC can do process
contracts!
X17 performance damages

See second chapter in ‘NEC

Compared’ – NEC compared with
IChemE contracts
(c) Mott McDonald : NEC for British Water
Plan

• NEC basics
• NEC collaboration
• NEC4 for process contracts
• NEC climate change
• NEC3 to 4 – use it!

(c) Mott McDonald : NEC for British Water

Can we save the
world with
NEC?
(c) Mott McDonald : NEC for British Water
NEC option X29
Reducing the impact of the
works on climate change
Draft for comment – consultation now
Climate change requirements
Performance Table
(c) Mott McDonald : NEC for British Water
Plan

• NEC basics
• NEC collaboration
• NEC4 for process contracts
• NEC climate change
• NEC3 to 4 – use it!

(c) Mott McDonald : NEC for British Water

NEC4 – released 2017

Gender neutral

Evolution, not revolution

New contracts, new options

Some ‘fixes’

Some (good) new ideas

Lots of ‘tidying’ improvements

Mott MacDonald 7 December 2020

(c) Mott McDonald : NEC for British Water
Thank you
richard.Patterson@mottmac.com
07903 359 699
Back up slides
Main (payment) Options

Activity schedule Bill of quantities Reimbursable

Priced
Contract A B
Target
Contract C D
Cost
Reimbursable E
Management
Options also in
Contract
Professional Services F
Contract (PSC)

(c) Mott McDonald : NEC for British Water 37

Main Options – Estimating and efficiency risks

(c) Mott McDonald : NEC for British Water 38

(c) Mott McDonald : NEC for British Water

The target contract

Contractor
share share
- the ‘Contractor’s share’ percentage ranges

Warning: share first assessed at Completion 100 %

– many Clients use a Z for this! ECC4 54.3 120 %

50
tendered % ‘pain’
total of the Prices – the moving target! 100 %
the
Prices 35 ‘gain’
%
80 %
amount 0

Employer
compensation %
events

Price for Work Done to

Date (PWDD) = Defined Contractor’s share
Cost + Fee
time Completion
ECC Contract Documents
From Employer/Client From bidder
Contract Data Letter
part one part two of
Acceptance

Works or
Works
Information /
Information/
Scope form of
Scope for
Contractor's agreement CDM PCI
Site design
Information constraints
activity
conditions of
schedule
contract
(Options factual info
Core A and C)
Options
Option Z (boq
(Options
incorporates by ref.
Schedule(s) B and D)
of Cost
Components optional
Accepted
Programme
(c) Mott McDonald : NEC for British Water requires info.to be stated in 40
What we have on NEC
• Richard Patterson
• worked for Thomas Telford (TT) in 2007 on global business
development and training
• part of NEC4 drafting team
• Gives NEC Training’s 4 day ECC PM accreditation course
• helped develop MM business in NEC in Hong Kong
• Extensive publications on all things NEC
• has trained on NEC in UK, Australia, NZ, Germany, France,
Ethiopia, USA

• Alec Kowalski
• 10 years experience as ECC Project Manager
• Gives NEC Training’s 4 day ECC PM accreditation
course
• Petter Siljehag
• Extensive NEC experience as ECC PM and Supervisor

(c) Mott McDonald : NEC for British Water