It is all about the New Engineering Contract. The form is 10 years old, and is becoming increasingly popular. For many years it was seen as something of a curiosity, used for airport contracts but not a lot else. Now it seems to be popping up everywhere – the NHS, for one, will be using it for £1.4bn of contracts.
One of its objectives is to reduce the confrontational atmosphere that seems to pervade many construction contracts. So the vocabulary of disputes that we are all used to has been avoided. There is no such thing as loss and expense, extension of time or variation. Even the word "claim" has been banished.
This does not mean that designs are not changed, work delayed or extra cost incurred. The contractor still needs to be given extra time and money for all sorts of problems, just as it does under any contract. In the NEC, however, all these matters are wrapped up under a clause dealing with "compensation events".
The machinery for sorting out how much time and money is to be awarded for a compensation event starts with notification by the project manager to the contractor, or vice versa. Without notification, the evaluation exercise cannot start. The project manager can notify the contractor that there is a compensation event – for example, when instructing a change. If the contractor thinks that there is a compensation event that the project manager has not told it about – it might be anything from weather to a failure to provide information – it can notify the project manager. The problem is that the contract says that the contractor has to do the notifying within two weeks of becoming aware of the event.
That rather suggests that if the project manager has not said anything about it, and the contractor does not get round to saying anything for more than a couple of weeks, the right to any additional time and money is lost.
The culture of the NEC contract is very definitely not ‘get on with the job and sort out the problems at the end’
Any contractor who is told that it is too late shouts "Not fair!" and goes to see a lawyer. The lawyer looks up what is said in the (not very many) textbooks dealing with the NEC. Some say that being late really does not matter.
The contract cannot possibly mean that an entitlement to what may be a substantial sum of money is lost just because of a couple of days' delay in notification. Others say that that is exactly what it means.
In fact there are very good reasons to think that claims are effectively lost if the time limit is not met. The NEC is all about management. The parties are encouraged to think ahead, anticipate problems and find solutions before they happen. The culture is very definitely not "get on with the job and sort out the problems at the end" – it is "get on with the job and sort out the problems now before they generate more problems". So there is no mechanism for wrapping everything up at the end – there is not even a final account. The strict notify-it-now-or-forget-it approach fits perfectly with the rest of the contract.
That is not to say that the project manager always wants to deal with matters quite so efficiently. It is not unusual for everyone to agree that the compensation event procedure is just too difficult, so that calculation of the costs will be left to the end. That seems less demanding on everyone, but if you are going to do that, much of the benefit of using the NEC is lost.
John Redmond is head of construction at solicitor Osborne Clarke in Bristol.