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.