Most government organisations and State-owned enterprises have standardised on the use of the New Engineering Contract (NEC), an international construction-industry-specific contract format, to improve roll-out and execution of infrastructure projects, law firm Nupen Staude de Vries partner Cameron Staude says.
Construction and building contracts are designed to allocate risk effectively among the parties, which affords clarity on the various roles and helps projects to progress amid complex project environments and when multiple parties are involved.
NECs can change the risk allocation through the addition of optional clauses, also known as X-clauses, which can be included in the contract to further allocate, mitigate or deal with risks. Other important elements are the site information and works information, which set out the conditions of the site and the scope of work of the project respectively, he says.
“The NEC provides an understandable and robust contract that can be modified to meet project needs quickly and clearly, with risks and responsibilities clearly assigned. I expect that the use of NECs in government organisations will increase and become the main form of construction contract used,” says Staude.
NECs emphasise the importance of successful project execution through proactivity, collaboration and effective communication among the parties.
Consequently, a key role in NECs is that of the project manager. The project manager must proactively manage issues, disputes, delays and instructions between the parties and must typically be an experienced engineer or project manager, or at the very least have an experienced team that he or she can call on when needs be to provide advice.
However, a key challenge for government organisations is that project managers are often not sufficiently empowered to make decisions above a certain threshold to fulfil commitments and keep the project progressing, leading to delays.
The precise allocation of risks supports project flow and audit processes to resolve issues. This allows for the easy identification of and communication with the responsible party.
The works information is of central importance to the contract because it informs the contractor of what he has to provide, as well as any restrictions on how the works are to be provided.
“Disputes can be checked against whether a reasonable and experienced contractor would have anticipated and/or dealt with an issue. “Conversely . . . whether a reasonable contractor would have been expected to source or clarify specific information in the site and/or works information must be considered.”