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NEC4 Alliance Contract

4 September 2017

The NEC has released a draft of a new NEC4 Alliance Contract, for consultation, allowing users to shape the final contract. This consultation process is now open and is expected to close on 30th November 2017. Formal publication is expected in January 2018.
It will be a single standalone contract, one of the NEC suite, consistent with all other NEC4 documents. It is designed for use on major projects or programmes of work, where longer-term collaborative ways of working are to be created. Due to the time investment needed, pre-contract, to create an alliance, it is not envisaged for use on low risk or low complexity projects.

The NEC contracts have always encouraged collaboration (although some disagree with its effectiveness in this regard[1]), with the NEC3 offering an additional partnering option under Clause X12. This option has, however, been criticised for its failure to create a multi-party set of relationships, to provide a basis for early contractor involvement or to provide adequate enforcement mechanisms[2].

These are issues which have been addressed in the PPC (Project Partnering Contract) 2000, which is a suite of standard form contracts developed, in the United Kingdom, for use on construction projects. It is one of a number of tools recommended by Constructing Excellence (a construction industry membership organisation based in the United Kingdom) as a means of helping to implement collaborative working.

Under the PPC2000 Employers (referred to as Clients), their agents such as the Engineer/Project Manager/Principal Agent (referred to as Consultants) and Contractors (referred to as Constructors) all sign a single multi-party contract, which can also accommodate early contractor involvement. The PPC200 has been used to good effect on projects such as the Cookham Wood Young Offenders Institution and North Wales Prison Trial Project in the United Kingdom.

A similar alliance agreement has also been shown to be effective through its use by the Stronger Christchurch Infrastructure Rebuild Team, established to repair roads and underground services damaged by earthquake.

The NEC4 Option X12 is now titled multi-party collaboration, however, the substance of this clause remains similar to Option X12 in the NEC3. NEC contracts allow all members of the supply chain to be engaged on similar terms and conditions, however, these are still two party rather than multi-party contracts.

The NEC4 Alliance Contract, on the other hand, is a single contract form, with a single set of terms and conditions which make provision for shared risks and rewards, that all members of the supply chain sign. It also makes provision for early contractor involvement, which allows budget, time and performance targets to be agreed with more accuracy.

What is envisaged is a cost reimbursable contract (defined cost-plus fee) similar to Main Option E in the other NEC suite contracts.

The members of the alliance then work together as an integrated team, work being allocated on a ‘best for project basis’, with an alliance board managing the alliance on behalf of the members, for the achievement of the alliance objectives, as determined by the Employer. Integrated systems and processes such as an early warning register and information modelling are used to assist the alliance members in achieving their objectives.

Decisions of the alliance board must be unanimous and will bind all members of the alliance. All liabilities are shared and manged by the alliance, except wilful default by one of the partners and third-party claims, which are the client’s risk.

Disputes are resolved by senior representatives or the alliance board, with third party support, if required. There is no provision for traditional dispute resolution provisions such as adjudication or arbitration, and a failure to resolve a dispute brings the alliance, or a partner’s involvement, to an end. It must, however, be born in mind that recourse to adjudication at any time is a statutory right afforded to all those engaged in construction operations in the United Kingdom, per the Housing Grants, Construction Regeneration Act 1996.

  1. Although similar regulations have been published for comment in South Africa, there is no such automatic right in this country yet.
  2. “A perception has emerged that NEC is a partnering or collaborative style of contract. That is an error unless the express Partnering Option X12 is adopted” Phillip Capper, King’s College London and White and Case 
  3. David Mosey “Module C – Collaborative Contracting under Partnering Contracts” King’s College London 2017, page 22 

Author: Michelle Kerr, Senior Associate