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RM-NEC Guide Summary
RM-NEC Guide Summary
NEC3 is now used for many major construction and engineering projects in the UK and overseas. It is
endorsed by the Institute of Civil Engineers, the Olympic Delivery Authority and the Office of Government
Commerce which recommends NEC3 for use on all public sector construction projects.
Underlying principles of NEC3
NEC3 adopts a fundamentally different philosophy and practice to most other standard form construction
or engineering contracts. Its three core underlying principles are:
clarity and simplicity: the contract is well-supported with additional materials, including detailed
flow-charts and guidance notes. NEC3 is intended to be clear, simple and easy to use, and is written in the
present tense in plain English. However this can lead to problems as its brevity can, in some cases, create
ambiguity and much of its terminology is untested in the courts;
stimulus to good management: overall, NEC3 focuses on 'real time' management of the project rather
than looking back on what the parties should have done. However it is very heavy on administration, and
requires good understanding of its procedures and sufficient resources from both the employer and the
contractor to make it a success;
flexibility: NEC3 can be constructed from nine sections of core clauses, six main options, two dispute
resolution options and seventeen secondary options. This flexible approach is intended to avoid the need
for lots of bespoke amendments, reduce the need for lengthy negotiation and also reduce the potential for
disputes. However, in practice most of NEC3 contracts include considerable bespoke amendments –
known as the 'Z' clauses as they form part of Option Z under the contract.
The structure
NEC3 contracts are constructed as follows:
core clauses: these nine sections are the same in every form, and cover the basics which are applicable
in every contract:
1 - general - includes defined terms, interpretation, communications, ambiguities;
3 – time – starting, completion dates, key dates, programme, access, takeover, acceleration;
4 – testing and defects – tests and inspections, notifying defects, correcting defects, accepting defects,
uncorrected defects;
5 – payment – assessing amounts due, payment provisions, pain share/gain share where appropriate;
6 – compensation events – events which will give rise to time and money and procedures for dealing with
these;
main options: these relate to contract structure and pricing. One option, from A to F, must be selected:
A: Priced Contract with Activity Schedule;
F: Management Contract
there are some potentially surprising approaches taken to recoverable costs, and these need to be worked
through in detail - particularly if the same mechanism is stepped down to subcontracts;
NEC operates what is in effect a maintenance period after the project is completed, instead of the
traditional defects liability period;
the events which can give rise to an extension of time or additional payment are comparatively extensive.