Why should we use JCT contracts as opposed to NEC, ICE or other formats?
You shouldn't. There are projects which suit the JCT style of contracting and projects which suit other styles of contracting.
NEC is a form of partnering contract where the parties are more on an equal footing in terms of risk and reward than under a JCT. The idea behind NEC contracting is that every project member works as a team to minimise delay and disruption and produce a project that avoids lengthy disputes and excessive costs.
The key differences between JCT and NEC are:
The JCT Contract is a fixed price lump sum contract. NEC Option B offers a fixed price lump sum contract but Options C and D are target cost contracts.
2. Provisional sums
The JCT Contract contains provisional sums, whilst the NEC Contract does not.
3. Cost scrutiny
In a JCT contract there may be some cost scrutiny via the contract sum analysis and tender negotiations but the NEC contract has an open book procedure with the key concepts of defined cost and disallowed cost.
4. Ground Risk
In the JCT contract ground risk is with the contractor. However, the NEC contract uses the ICE foreseeability test in relation to ground conditions.
5. The programme
The JCT contract does not have a programme as a contractual document. The programme is at the heart of the NEC ethos. It is a contractual document and to be regularly updated. The NEC contract also has key concepts such as float, completion float and time risk allowances.
In relation to payment, the JCT contract payment section is clear, is all in one section (clause 4) and easy to follow. However, in relation to the NEC contract it is located in three different locations – clause 5, Y(UK)2 and Contract Data Part 1.
7. Extension of time/loss and expense
In relation to extensions of time and loss and expense, the JCT contract has relevant matters and relevant events and time and money are dealt with as separate concepts. The NEC contract has the compensation event and it deals with both time and money. The ethos of compensations events is that they are dealt with in real time as much as possible and this is very much process driven. The compensation events also have a condition precedent nature, and failure to notify the compensation event within the 8 week period can have dire consequences.
The JCT contract contains comprehensive detail in relation to insurances at clause 6 and Schedule 3. In relation to the NEC contract, the insurance detail is very brief and contained at clause 84 of the contract. The NEC contract is silent on some insurances. The missing insurances relate to existing buildings insurance and adjacent property insurance, and need to be included in the additional insurances section of the Contract Data Part 1.
9. Design risk
The JCT contract has a clear interaction between the Employer’s Requirements and Contractor’s Proposals and there is extensive drafting in the JCT. The NEC contract however simply states a contractor is to design the parts of the works which the Works Information states he is to design. The Works Information contains far more than Employer’s Requirements. There is guidance as to what the Works Information should contain and it is dangerous and bad practice to simply re-badge a JCT Employer’s Requirements document as an NEC Works Information document.
10. Employers Requirements/Works Information
The Works Information contains far more information than a JCT Employers Requirements as it is a shorter contract and leaves some of the detail to the Works Information. Simply re- badging a JCT Employers Requirements as an NEC Works Information is dangerous as the terminology and level of detail required is different.
In terms of using the ICE Conditions of Contract (CoC), in 2009 the ICE Council formally endorsed the NEC Contract, and ICE transferred its part in the ownership of CoC to ACE and CECA. In August 2011, ACE and CECA relaunched CoC as the Infrastructure Conditions of Contract (ICC) a standard suite of forms of contract largely based on CoC.
The ICC is intended for use on infrastructure projects, not building projects. The ICC suite of contracts includes a number of different versions:
• Design and construction.
• Target cost.
• Ground investigation.
• Archaeological investigation.
• With quantities.
• Minor works.
• Partnering addendum.
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