Many see the new NEC as a contract for dreamers with milk in their mouths; others consider it an improvement on other forms. Here's one reason to think the latter
You either love it or hate it. And by and large the legal profession seems to hate it. We are talking of course about the new edition of the NEC. Let's examine one way in which this much maligned contract encourages collaborative working and transparent practices.
Why is it that a contractor rarely, if ever, produces a target programme with terminal float? The answer is not difficult to find. If it produces a "transparent" programme, it runs the risk that the client will use the float for its own purposes.
JCT05, like its predecessors, works in a curious way. If, at the outset of the contract, a variation eats up the contractor's terminal float, there will be no extension of time because the variation has not caused delay to the completion date. So if the contractor is delayed at a later stage by the insolvency of a subcontractor there is no float left to help it. He may overshoot the completion date and be found liable for liquidated damages. By contrast, if those events occur the other way round, he will get an extension because the variation will have caused delay to the completion date.
That seems a most unsatisfactory state of affairs, because the order in which these events occur is quite outside the contractor's control. If you require the contractor to produce an honest programme you must change the rules about extensions of time. That is what the NEC contract has always done.
A contractor working on NEC is obliged to disclose the float in its programme, but it is also entitled to preserve it when changes are made to the completion date. The delay to its planned completion caused by a compensation event is added on to the completion date. Furthermore, it gets an extension to the completion date when a compensation event occurs in a period of contractor default, so long as its accepted programme at the time shows a planned completion date as a date in the future, not the past.
Arguments about who owns float can only be resolved in the real world by understanding the contract in question. It is, therefore, disappointing when one turns to the SCL protocol for guidance to find it suggested that as a matter of principle the project should own the float, which means it belongs to whoever gets to it first. That seems more a recipe for anarchy than a principle to be embodied in our construction contracts.
The other side of this particular coin is the question of whether or not the contractor has a positive claim of his own for loss and expense if he is prevented from achieving his early completion date.
The SCL protocol suggests that as a matter of principle the project should own the float. This is a recipe for anarchy
Twenty years ago in the Glenlion case a judge had to decide if a contractor working to a short programme on a JCT contract could claim damages against the client when the architect prevented "early" completion by late information release.
The contractor argued that a term should be implied into the contract that the client should perform its obligations in such a way as to enable the contractor to meet its early completion date.
The judge decided this would rewrite the contract in Glenlion's favour and result in the balance of the contract being lost. Glenlion was not obliged to finish by the early date but was seeking to impose a one-sided obligation on the client.
The SCL protocol takes an interesting line on this, recommending adoption of the principle that if the client is aware at the time of contracting of the contractor's intention to complete early, and that intention is realistic, then the contractor should be paid his prolongation costs in the Glenlion scenario.
NEC achieves a similar result in a way that does not depend upon such imprecise and subjective guidelines. Under NEC if the client fails to provide information by the date identified for its release in the accepted programme a compensation event arises.
But since the client is encouraged to state in the works information any constraints that the contractor's programme must observe, including prohibiting early completion, there is no hardship to either party. Transparency prevails.
Tony Blackler is a partner at Beachcroft Wansbroughs and was on the panel that produced the NEC 3