Good form for resolution

by Joe Colgan

For a market whose construction projects are almost beyond imagination in terms of scale and design, the UAE’s contracting policy, when compared to the UK’s, is languishing in the past.

Whilst the UK has introduced novel forms of procurement and contract, such as PFI, PPP and the NEC, virtually all contracts in the UAE are executed using the FIDIC conditions of contract.

Both the 1987 and 1999 forms are used to varying degrees, with bespoke project requirements generally picked up in the Particular Conditions of Contract (PCCs).

This ‘one size fits all’ approach has its limitations: FIDIC does not, to any real degree, facilitate either whole or partial contractor design, nor does it in the manner of the NEC suite of contract documents, promote collaborative working, or in the words of the contract: ‘a spirit of mutual trust and cooperation.

FIDIC still requires the engineer to act in a quasi-arbitral role, determining without bias, claims for additional cost and time while acting clearly as the employer’s representative in numerous other instances. It was this ‘duality’ of role, among other things, that engendered the ICE to look, in the early 1990s, at creating a more flexible and multifaceted form of contract with the NEC, or Engineering and Construction Contract, to give it its correct title, emerging from this nascence.

To date, the form has found favour with many of the UK’s major procurers. Among them are the British Airports Authority, Network Rail and the privatised entities that have taken over the London Underground network.

The NEC suite (as it is still known) is now in its third edition and the form caters for all manner of procurement: full or partial contractor design, target cost with BOQ, target cost with activity schedule, management contracting, fixed cost or re-measurable, etc.

The whole is created by a combination of one main option and a variety of secondary options.

There are other basic forms, a professional services’ form and latterly a form of sub-contract allowing all parties to be procured on a common and mutually compatible basis.

With the basic tenets of the first edition still intact; namely, adjudication as dispute resolution (which has changed the face of construction litigation in the UK), flexibility by use of main and secondary options, the project manager as the all-powerful and central figure in the contract, a direct imperative to do or forsake some act (‘the contractor/project manager shall’ is a much-used phrase with sanction for any failure to perform said act) much of the contract is unchanged from the original edition.

The contract also recognises the potential unfairness of linking remuneration for post-contract variations with tendered prices. By use of the schedule of cost components the contractor is able to formulate the cost of claims using contemporaneous costs rather than historic ones. But there are certain restrictions; obviously the costs must arise as a consequence of the claim and be justifiable and proportional to it and not compounded by the contractor’s failure to do anything it is contractually bound to do.

The entire premise of the contract is based upon several key traits: fairness, pro-activeness and hands-on use of the contract. It is not, as has often been said of forms of contract, one that is only brought out of the drawer when a dispute arises.

The NEC seeks to proactively resolve problems by a collaborative approach using all parties to the contract; the key ones being the contractor, the project manager and the supervisor, with the latter being effectively clerk of works, resident engineer/inspector.

This is undertaken by use of the ‘early warning’ clauses; these oblige any party to issue notification, as soon as is practically possible, of potential problems that have or may arise and the party may call a meeting, at which others are obliged to attend, to seek to agree a resolution to the problem.

Having used the form over a period of seven years and having been the project manager that gave it its first serious trial on a multi-disciplinary construction, finishes and services project for the modernisation of Bank Station for London Underground between 1994 and 1998, I can say that I personally prefer it to other forms and find it brings benefits that others do not. It requires several key relationships to be maintained and nurtured – the respective QS’s one is absolutely key given most of the costs for variance are forecast. The planners too should have a harmonious relationship.

The contract requires cost and time to be recast when events render the baseline programme or budget no longer valid; followed with discipline, this can result in multi- million dollar contracts being kept under a very tight rein, with variations raised and concluded every single month and final account capable of being rendered very soon after completion.

All of the actions required by the parties are set out as process diagrams and it therefore readily lends itself to the use of the collaboration tools talked about by an EC Harris associate in the 3 November issue of Construction Week. Notwithstanding that, the process nature of the contract makes administration that much simpler.

It is also (a first for a set of conditions of contract) written in plain English and not ‘legalese’, which has arguable benefits and is not to my personal preference.

I find there is a different approach and philosophy about an NEC project when both client and contractor are educated users and I can say from experience, erstwhile serious disputes have been amicably resolved under this form when a different contract approach would have seen the parties in court.

No doubt given the innovativeness and forward thinking prevalent here, it won’t be long before it catches on.


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