Although Tony Bingham and others criticise the NEC3 for its administrative burden, in the global construction market it has a vital role to play in good project management
The NEC suite of contracts was always intended to be - and is - more than just a niche UK domestic form of contract. Its adoption into the international market place has been slow but inevitable as it offers new choices to solving problems.
The NEC3 will be valuable in the global construction market, whether that encompasses the whole international marketplace for construction or the increasingly global nature of construction work as driven by major multinational companies.
There are many issues facing the global construction market such as greater efficiency, achieving out-turn best value, more cost transparency and added value in a project. In addition, the global market faces challenges from the huge growth of markets in China and India, the financial instability over recent years and a construction skills shortage. Although these issues are not driven by a choice of contract, in all these areas NEC3 has value to add.
The information generated through NEC3 requirements is important to the management of any project
In key growth markets NEC3 is now a widely tested form of contract having been used on thousands of projects from the UK to Hong Kong to Australia. Further, using the UK as a model, its widespread use particularly in relation to infrastructure is now generating the benefits of a standardised form of procurement. As the use of NEC3 spreads across the global market no doubt this important additional benefit will follow.
The approach of NEC3, with its emphasis on communication and good management based on mutual trust and co-operation should, if embraced, reduce the impact of fluctuations in the market through early discussion on funding issues. The flexibility of NEC3 has made it reasonably common to see training and developments needs brought into the contract, the Olympics being a prime example of such an approach.
NEC3 maintains a position of importance as its approach continues to align with the changing needs of the market at the macro level but does it work for individual projects at the micro level?
The success of any firm, whether construction-based or otherwise, is communication. The bigger the company the harder effective communication becomes. Those difficulties increase again once you move into a global market where distance from the head office, cultural issues and a multitude of different contracting terms become prevalent.
NEC3 supports the business ideal of good communication from the ground up. It provides more detail and more requirements for good communication than any other form of contract. The requirement to issue early warnings, hold risk reduction meetings, update the programme, identify and assess the impact of change and maintain auditable costs records are all key business skills.
While NEC3 has been criticised for creating too heavy an administrative burden on the parties through the demands of communication, this is a somewhat unfair particularly in a global context. The information generated through the requirements of NEC3 is important, if not vital, to the proper management of any project. The contractual requirement to do what should be good practice in any event should not be criticised.
The core principles of NEC3 are that it is flexible, simple and acts as a stimulus to good management. One of the greatest challenges to the use of NEC3 in the global market is how it deals with cultural differences. NEC3 comes from a background, generated through Latham and Egan, of looking to establish best value and move away from lowest cost tendering. There are still many regions of the world where those ideals are not embraced and lowest cost tendering is still the norm. The importance of NEC3 in these regions will be as a viable alternative to traditional contracting and as a focus point for dissatisfaction with traditional forms of procurement.
There is no doubt that NEC3 has a role in global construction and that its importance on that stage should not be underestimated. NEC3 is a relatively young form of contract and the rate of growth it has achieved in the UK is unlikely to be matched internationally unless and until organisations such as the World Bank start to see the benefits of a form of contract that focuses directly on achieving best value through the core project team.