NEC4 And FIDIC Compared

The year 2017 will see the introduction of new editions of the FIDIC and NEC forms of contract. Having been trialled last year in a pre-release version, FIDIC are launching the second edition of their Rainbow suite of contracts in December, whilst, on 22 June 2017, the NEC4 form was revealed. Jeremy Glover explains some of the changes to both contracts and at the same time highlights some of the differences between the NEC and FIDIC forms.1

Use of the FIDIC and NEC forms

The first edition of the Conditions of Contract (International) for Works of Civil Engineering Construction was published in August 1957, whilst the New Engineering Contract ("NEC") was first published in March 1993. In the UK, NEC3 was the contract of choice of the Olympic Delivery Authority who were responsible for the planning, designing and building of the venues, facilities and accommodation, and developing the infrastructure to support these, for the 2012 Olympic Games. NEC3 is also widely used in the decommissioning of nuclear power stations and is currently being used on Europe's largest construction project, the Crossrail project in London. FIDIC is not used so much in the UK.

Since April 2015 all Hong Kong Government works departments have been required to tender new projects using the full suite of NEC3 contracts. The NEC3 has also been widely used on major projects in South Africa; the South African Construction Industry Development Board currently recommends NEC3 contracts for public sector use in South Africa. In South Africa the NEC3 form, along with FIDIC, is one of four contracts authorised for use under the Construction Industry Development Board (CIDB) Act. Against it, it has been said that more contracts are let under the FIDIC Red Book, annually by number, than any other single international form of contract and that the FIDIC Red Book has been and is being used in more countries around the world (160) than any other form of contract.2

When the NEC announced at the beginning of March 2017 that they were releasing the new NEC4, they said that the three core drafting principles were as follows:

stimulus to good management; support the changing requirements of users; and improve clarity and simplicity. The underlying philosophy behind the FIDIC 2016/2017 update is quite similar, including: to enhance project management tools and mechanisms; to achieve a balanced risk allocation. This is being achieved through more reciprocity between the Parties; to achieve clarity, transparency and certainty; and to reflect current international best practice. At the June 2017 conference, where the new form was released, the NEC made clear that their approach was "improvement through collaboration" or "evolution not revolution". That does not appear to be the case, with the pre-release version of the FIDIC Yellow Book being 50% longer than the 1999 version. So the NEC4 is very much an update, the key features are the same and the contract unsurprisingly still adopts the same plain English style. As well as updating the existing NEC3, a new Design Build Operate contract has been introduced and the NEC are also planning to introduce an NEC4 Alliance Contract. The NEC form has also adopted gender neutral drafting, something FIDIC is expected to follow.

As with FIDIC, the NEC4 makes use of deeming provisions. A contractor's programme will be deemed to be accepted if the project manager does not respond within the contract timescales. Again, as with FIDIC, the NEC4 introduces a requirement for the contractor to prepare a quality management plan.

Structure and Format

There has been little change here. The FIDIC forms reflect different risk profiles: design and build (Yellow Book), turnkey (Silver) and build-only (Red). With the NEC, the contracts are arranged according to alternative pricing options: lump sum (option A), re-measurable (option B), target cost (options C and D) and cost reimbursable (option E).

Both FIDIC and the NEC aim for standardisation. The 1999 Rainbow Suite contracts all have 20 clauses. This will increase to 21 and there is a high degree of similarity across the suite. The 1999 FIDIC form works by having standard clauses known as general conditions and then the parties have the option to...