Contractors are set to benefit from a raft of changes expected in the impending NEC4 suite of contracts, including greater clarity when it comes to insurance.
The latest versions of the NEC documents – NEC4 – are due to come into force later in June. It’s 12 years since NEC3 contracts were first published and the latest iterations are already being seen by industry experts as evolution rather than revolution.
Notwithstanding, the revised paperwork will please contractors as it remains ‘plain speaking’ and supports the ongoing drive for collaborative working.
Important anticipated changes include possible compensation for contractors preparing quotations and allowing contractors to reach the definition of defined and progressive costs as work proceeds rather than waiting to the end of a project. There are also changes in there that are designed to give greater clarity on insurance requirements.
Key Insurance clarifications in NEC4
Previously, in the NEC3 suite, it was Section 8 that focussed on the management of risks and insurance. Insurance industry experts had raised concerns that loose terms and definitions – designed to reflect the overall ‘plain speak’ mantra – might give rise to disputes. Section 8 has been significantly revised to clarify its intent and address concerns raised by insurance experts.
Most notably, the term ‘risks’ in section 8 of NEC3 led to particular confusion as ‘risk’ has a different meaning elsewhere in the suite. In NEC4 it has been changed to ‘liabilities’. The NEC3 word ‘indemnity’ has also been removed, partly because it is not well understood outside the UK.
The contractor’s liabilities have been set out in detail in NEC4, rather than being defined by exception as in NEC3. The interaction between the client’s liabilities in section 8 and the compensation event regime in section 6 has also been clarified.
Finally, clause 84.2 in certain NEC4 contracts now requires insurance policies to include a waiver of subrogation rights against the parties, so that insurers can no longer take action that would undermine the agreed allocation of liabilities under the contract.
Growing use of NEC suite of contracts globally
Rekha Thawrani, NEC Contracts General Manager, said: “The uptake of NEC products and services has grown exponentially across the globe over the last 20 years and we pride ourselves on the fact that our innovative portfolio will always react to and be shaped by the needs, experiences and feedback of our users.
“As part of our commitment to all our customers, we continue to constantly review ways to enhance and update our products. We believe NEC4’s diverse range of definitive end-to-end project management contracts will empower users to deliver projects on time, on budget and to the highest standards now and in the future to the benefit of both industry and society.”