Thomas Telford, the knowledge business of the UK’s Institution of Civil Engineers and owner of NEC Contracts, is looking to support collaborative contracting in Australia through partnership, guidance and training. 

Australia’s major project sector is under pressure. With the project pipeline shrinking, the industry risks a swing back to immature risk transfer and adversarial contracting culture. Meanwhile, clients are looking to minimise cost overruns and increase certainty.

The shift in focus from a culture of growing spend to greater budget constraint and focus on value reinvites a discussion about risk – or specifically how risk is better managed and mitigated, rather than simply transferred to the weakest party through a burdensome contract.

Australia has a legacy of diverse contracts, from international and national standards, through to state and bespoke project contracts. The wide diversity of contracts means that familiarity with any one contract and its settings is relatively low. State and Australian standards, such as the NSW Procurement Standard GC21 or the Standards Australia suite, have widespread use, but are often heavily modified and therefore do not resemble the base contract.  

NEC – which originally stood for ‘new engineering contract’ – was established by the United Kingdom’s Institution of Civil Engineers in the 1980s as an antidote to an adversarial contracting environment. The NEC4 Suite of Contracts embodies sound project management practices and is designed to be used day-to-day as the basis for developing the schedule of activity on site, in addition to commercial activity.

The contract documents are clear, simple and written in plain English to enable ease of use. There is no need for a lawyer to stand between an engineer and a contract. This allows the focus to be on an informed discussion between parties and good relationship management. The contract structures a management philosophy founded on open and regular communication.

The contract suite is also commercial model agnostic. Whether a hard dollar contract or an alliance, the NEC suite can accommodate the payment mechanism, variety of work and a location anywhere around the world. 

In Australia the contract has been used for everything from the D&C construction of a road to an alliance water treatment, from the Gascoyne to Western Sydney and in advisory, training and construction.

Collaborative contracting unpacked

According to Peter Colacino, NEC’s Ambassador in Australia and New Zealand, the NEC contract suite is not about status quo project management. 

“The NEC suite incorporates collaborative principles as the foundational clause. The suite contains processes designed to support users in working collaboratively, increasing trust and improve long term relationships throughout the supply chain. Collaboration can help to support wider advances across the industry, with increased productivity, fewer disputes and overall improved project outcomes,” Peter says. 

“Delivering truly collaborative procurement means addressing the incumbent adversarial culture and aligning behaviours towards a ‘best for project’ and even a ‘best for industry’ mindset,” Peter adds. 

“Collaborative contracting builds on open and honest dialogue to jointly seek continuous improvement through the project lifecycle. This can extend beyond delivery to early advice or operations and maintenance. It involves helping each party to perform better and the joint management of project risks. Leadership and communication skills are necessary to forge cultures of trust and co-operation.” 

Partnership to combat cost pressures

Consult Australia and NEC have established a new partnership to build the industry’s capability to respond to cost pressures, more collaborative work practices and climate action.

“The purpose of this developing relationship is to raise awareness of the NEC4 suite of contracts and the alignment of the contract to the priorities of Consult Australia and the organisation’s membership. The NEC Contract suite is designed to enable better project management, mature risk allocation and a more collaborative industry.

“The recent addition of the X29 Climate Plan clause is also ahead of the curve on other contracts in Australia allowing carbon considerations to be embedded in the contract agreement. The contract positions the built environment sector to respond to the recent sectoral pathways released by the Climate Change Authority. 

“This partnership provides the opportunity for a repositioning of contracting away from being just a tool for the legal profession and towards supporting contractors and the project team to deliver better project outcomes.”

Consult Australia members are entitled to discounted access to NEC4 Contracts and training to build their skills and capabilities to support successful project delivery. 

To find out more, head over to the Consult Australia Centre for Contracting & Risk.