Most contracts are designed for lawyers or, occasionally, financiers. But NEC contracts are designed for the engineering profession. As part of a new partnership Consult Australia and NEC Contracts will explore how the NEC suite can tackle persistent issues faced by members.

This month, Consult Australia and NEC Contracts® formalised a partnership to progress global best practice. With Australia’s construction industry mired in adversarial contracting and problematic procurement, Consult Australia and NEC Contracts are determined to drive change through a collaborative approach.

“As we look to drive productivity, decarbonise through procurement and support innovation and digitalisation, we can learn from global best practice like NEC,” says Consult Australia’s Chief Executive Officer, Jonathan Cartledge.

Plain English contracting in a complex industry

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. 

“NEC was designed as the consulting engineers and project manager’s contract – a Plain English solution that everyone from the onsite team to the people in the office could understand, and that didn’t need lawyers to interpret,” says NEC Contract Ambassador Peter Colacino.

At the time, the UK’s construction industry was plagued by the same issues Australia has today: “high costs, high failure rates and high barriers to entry, low productivity, low diversity and low social impact,” Peter says.

The latest generation of the suite, NEC4, was released in 2017 and is widely used in the UK, and many other countries including Hong Kong, Singapore the Netherlands and South Africa. In Australia, the NEC contract was first applied in 2012 at the Meridian Wind Farm in Ballarat. It has been adopted by as diverse organisations as Sydney Water and Main Roads Western Australia, but is yet to gain the widespread traction it has elsewhere.

Contracts bound by transparency and trust

Most state and territory governments in Australia continue to use their own bespoke contracts for infrastructure projects and capital works. The Northern Territory’s standard contract was written in 1981 and “has been amended so many times the original would need to be held together with sticky tape, and the needs of the industry have moved on” Peter says. “Victoria has 38 so-called standards, with so many variations where there is no longer a clear standard.” 

One of the foundation clauses of every NEC4 contract states that the parties are to act “in a spirit of mutual trust and co-operation”. This differentiates NEC4 contracts from traditional contracts, which tend to follow a more adversarial, ‘us and them’ approach, Peter says. 

The “heart of collaboration” of NEC4 contracts is the ‘early warning’ process. If either party becomes aware of any matter which could affect time, cost or quality, they are required to notify the other party immediately. This is promptly discussed at an early warning meeting to determine how best to mitigate risks, resolve issues and avoid disputes.

Standard contracts, global benefits

Some lawyers are “leaning in” and recognise the need for change. Others argue that each infrastructure project is unique and therefore requires a bespoke contract, this overlooks the fact that, as Peter puts it, “good process is still good process.” 

“Rather than lawyer-led, ‘pistols at fifty paces’ contracting, NEC contract negotiations are led by a commercial discussion and the lawyers check that legal documents reflect those negotiations.” Importantly, NEC outlines a “set of behaviours and principles” that can change the industry culture. “You have to buy into those principles before you unlock the full benefits of NEC.”

In a highly internationalised sector with a globally mobile workforce, there are other benefits of standardisation, especially as Australian businesses look to export their skills to the world.

The partnership with Consult Australia is an “important milestone” for the industry, Peter adds. “There are better ways for our industry to operate to drive value for the economy and for Australian communities. Consulting engineers can be change agents that move the industry towards better way of operating.”

Check out Consult Australia’s Centre for Contracting and Risk to learn more about the NEC contract suite.