Contract Competition

With a Qatar 2022 World Cup on the horizon and Dubai’s successful bid for Expo 2020, the scale of infrastructure investment in both countries is unlikely to be anything short of exceptional over the course of the next few years.

In both the UAE and Qatar (and indeed in many other Gulf countries), procurers of major infrastructure have generally opted for the FIDIC Standard Form Contracts to deliver their projects. There is, however, an emerging competitor on the international projects scene in the form of the Third Edition of the New Engineering Contract (NEC3).

So what are the differences between the two standard forms of contract in terms of what the new competitor brings to the table which the current incumbent might not?

The structure of the two sets of documents is markedly different. FIDIC has produced a range of contract forms whose terms change in order to reflect the different risk profiles of construction projects – eg. design and build (Yellow Book), turnkey (Silver Book), build-only (Red Book) and so on.

In contrast, the NEC suite is generally arranged according to alternative pricing options – lump sum (Option A), re-measurable (Option B), target cost (Options C & D) and cost reimbursable (Option E).

The core clauses of each “option” do not materially differ, focussing on collaboration methods and on the use of the contract as a “project management tool”.

NEC’s focus on these aspects is viewed by many as its unique selling point and is often contrasted to the strict allocation of risks in FIDIC (and other standard contract forms), with the latter perceived to be more ‘adversarial’ and as such more likely to give rise to disputes.

Whether this is true is difficult to say given that NEC3 is relatively young and that disputes under both forms of contract are commonly resolved privately by arbitration.

However, the NEC is more detailed and prescriptive in terms of promoting good project management when compared to FIDIC and the other standard forms.

Take the construction programme. Over the course of some 21 bullet points, NEC lists in detail what the programme must include. It requires the programme to deal with the order and timing of the contractor’s operations together with a statement of how the contractor plans to work for each operation by reference to equipment and resources. It also needs the programme to show provision for float and time risk allowances, as well as the timing of the work of the employer (or other subcontractors) and the dates by which information or access is required from them.

The detailed programming requirements under NEC dovetail with other bespoke project management tools in the core clauses. Both the contractor and project manager are required to give early warnings of matters which could affect cost, time or performance. These are then entered into a risk register and become the subject of risk reduction meetings to assess how these are mitigated.

Principles of proactive project management, collaborative working, good faith, mutual trust and cooperation go to the very core of the NEC’s terms.

It is the prominence of these concepts which perhaps set NEC apart from FIDIC and other standard forms of contract – and which have contributed to its success on major infrastructure projects, such as London’s 2012 Olympics.

The question, therefore, is not so much as to whether NEC is a suitable contender for projects but whether procurers of major projects in the region are willing to give the NEC a go and if so, whether the various stakeholders are able to affect the shift in mindset required to realise its full potential.


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