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WHAT IS THE NEC?

Promoting best practice procurement

Achieving excellence in the procurement of

Works, Services and Supply

WHAT IS THE NEC?

NEC is a family of contracts that
facilitates the implementation of sound
project management principles and
practices as well as defining legal
relationships. It is suitable for procuring
a diverse range of works, serviceS and
supply, spanning major framework
projects through to minor works and
purchasing of supplies and goods.
The implementation of NEC3 contracts
has resulted in major benefits
for projects both nationally and
internationally in terms of time,
cost savings and improved quality.
Welcome to a better way of procurement
Since its inception in the early 1990s, the NEC family of contracts has
become the market leader in contracts for the procurement of works
and is now gaining recognition in the areas of services provision and
supply of goods. Now in its third incarnation, the NEC3 is a suite of
30 documents which are fundamentally different in approach to many
other procurement contracts on the market. Where traditional forms of
contract can promote an adversarial relationship between contractor
and client, the NEC promotes a partnering, collaborative approach
which has a consistent record of delivering projects on time and on
budget at its core.
NEC has been designed using the
following three key characteristics:
Its use stimulates good management of the relationship between
the two parties to the contract and, hence, of the work included
in the contract.
It can be used in a wide variety of commercial situations,
for a wide variety of types of work and in any location.
It is a clear and simple document using language and a structure
which are straightforward and easily understood.
Each contract comes supported by associated Guidance Notes and
Flow Charts detailing exactly what procedures should be followed and
by whom throughout the lifecycle of the project.

The NEC story

Originally launched in 1993, and then known as the New Engineering
Contract, the NEC was praised for its collaborative and integrated
working approach to procurement. The original box set of 10 documents
was strongly recommended by Sir Michael Latham in Constructing
the Team as the best example of a modern contract that embraced
partnering.
The second edition of the box set was launched in 1995, adding in
several new documents to the family including a professional services and
adjudicators contract. This led to 10 years of extensive and successful
usage with significant feedback from the industry on the contract in
practice. This feedback was integrated into the development process and
culminated in the launch of NEC3 in 2005.
NEC3 contained many improvements and a number of new documents,
including the Term Service and Framework Contracts designed to expand
the appeal and usage of the NEC. NEC3 comes with a full endorsement
from the UK Office of Government Commerce (OGC), through the
Construction Clients Board, which recommends the NEC3 for use on all
public sector construction projects.
Construction CLIENTS Board endorsement of NEC3

The Construction Clients Board (formerly Public Sector Construction

Clients Forum) recommends that public sector organisations use the
NEC3 contracts when procuring construction. Standardising use of this
comprehensive suite of contracts should help to deliver efficiencies across
the public sector and promote behaviours in line with the principles of
Achieving Excellence in Construction.

In addition to the OGC endorsement, NEC3 was praised in the recent UK

Parliamentary Construction Matters report, which calls for transparent
and non-adversarial forms of contract to support integrated supply
chains. The report states that NEC3 is setting the benchmark in this area.
2009 saw the launch of the NEC3 Term Service Short Contract (TSSC)
and this year we released the NEC3 Supply Contract (SC) and NEC3
Supply Short Contract (SSC). These new additions to the family enable
the NEC to fulfil its aim of becoming the number one choice of
contract for all aspects of the procurement process anywhere in the
world. Whether your business is purchasing and supplying construction
materials, building a major project on behalf of a client or servicing a
structure once it is completed the NEC suite of contracts provides a
complete procurement solution.

for more information on any aspect of the NEC family of contracts or our support services please contact
NEC, 40 Marsh Wall, London, E14 9TP

A global contract

NEC In Usage

CLIENT FEEDBACK

NEC is intended for global

application and is being adopted
for many multi-disciplinary projects
by clients in nearly 20 countries.
Further support for NEC usage
in international markets was
given by Sir. Humphrey Lloyd,
a renowned UK judge, in his
published paper in which he voiced
his support for the NEC form of
contract and concluded that there
were no real hindrances to its
usage abroad.

Some recent examples of

projects using the NEC for
procurement include:

The NEC Contract is a positive and

progressive form of contract which allows
all parties to collaborate and contribute
to the successful delivery of buildings,
facilities and best value solutions.

NEC is used by clients in

nearly 20 countries including the
following;

Australia Meridian Energy

British Antarctic Territory

Morrison Falkland Ltd for the
British Antarctic Survey

Al-Raha beach development

in Abu Dhabi value of 10.3bn
Crossrail the biggest
construction project in Europe
worth 16bn
Olympic Delivery Authority
Construction of the venues and
infrastructure for the London 2012
Olympic and Paralympic Games
with a total value of 9.3bn.
UK Department of Health
(ProCure21) framework
worth 3.4bn
UK High Speed 1 and the
associated St. Pancras station
redevelopment total of 5.8bn
Key Sectors
The NEC is flexible enough to be
used for procurement across both
the Public and Private Sectors,
including:
Civil

India Larson and Toubro

Building
Nuclear

UAE Aldar Properties

Utilities
Infrastructure
Facilities Management

New Zealand Meridian Energy

Oil and Gas

Purchasing and Supply

South Africa Eskom,

Sasol, Transnet

Cliff Jones,
Senior Policy and Performance Manager
ProCure21, Department of Health

The overall philosophy of the NEC family

of contracts facilitates the all important
management of risk and enables projects
to be delivered on time and to budget.
For a project to be successful, all parties
must be successful and the NEC contracts
have been developed to improve
performance and ensure a fair and
equitable outcome for all parties. The NEC
form of contract is now being considered
by clients, contractors and consultants as
the contract of choice for engineering,
construction and professional services at
the all important procurement stage as it
provides a transparent and collaborative
successful road map for all concerned.
John Rayner,
Director
RedRay Consulting Ltd

United Kingdom
BAA, CTRL, NHS ProCure 21

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The NEC family

NEC3 is suitable for procuring a
diverse range of - Works, Services
and Supply spanning major
framework deals through to minor
works and purchasing of supplies
and goods.
Works
encompasses purchases such as
the construction of buildings,
highways, major process plant and
equipment.
Services
includes purchases of both
professional services such as
engineering, architectural and
consultancy works along with
more composite maintenance
or management services such as
soft/hard facilities management,
cleaning, catering, security
services, maintenance of a specific
plant/building, data processing
and more complex services such as
ambulance services.
Supply
includes supply of high value
goods and associated services such
as transformers, turbine rotors,
rolling stock, loading bridges
transmission plant and cable,
process plant together with lower
risk goods and associated services
such as building materials, simple
plant and equipment, stationary,
PPE, manufacturing parts,
components and store items.
The Information on these pages
provides a brief summary of
each of the contracts and their
respective areas of application.

Works

ServiceS

Supply

NEC3 Engineering and

Construction Contract (ECC)

NEC3 Term Service

Contract (TSC)

NEC3 Supply Contract (SC)

This contract should be used for

the appointment of a contractor
for engineering and construction
work, including any level of design
responsibility.

This contract should be used for

the appointment of a supplier
to maintain a service or manage
and provide a service. These
services may include elements
of design and relate to physical
works or soft services such as
facilities management. They may
have discrete packages of project
works; although where the bulk
of the scope is about delivering
a physical end product it may be
appropriate to use the ECC/ECSC
as an alternative. The TSC contains
a call off facility.

NEC3 Engineering and

Construction Short Contract
(ECSC)
This contract is an alternative to
ECC and is for use with contracts
which do not require sophisticated
management techniques, comprise
straightforward work and impose
only low risks on both client and a
contractor.
NEC3 Engineering and
Construction Subcontract (ECS)
This contract should be used
for the appointment of a
subcontractor for engineering
and construction work where the
contractor has been appointed
under the ECC and is written as
a back to back set of terms and
conditions.
NEC3 Engineering and
Construction Short
Subcontract (ECSS)
This contract can be used as a
subcontract to ECC or ECSC. It
should be used with contracts
that do not require sophisticated
management techniques, comprise
straightforward work and impose
only low risks on both the
contractor and subcontractor.

NEC3 Term Service Short

Contract (TSSC)
This contract is an alternative to
TSC and is for use with contracts
which do not require sophisticated
management techniques, comprise
straightforward services and
impose only low risks on both
client and a contractor.
NEC3 Professional Services
Contract (PSC)
This contract should be used for
the appointment of a supplier
to provide professional services,
such as engineering, design or
consultancy advice. Unlike the
TSC, which is about maintaining
an asset, this contract is about
providing professional advice. This
contract, like the TSC, contains a
call off facility.

This contract should be used

for local and international
procurement of high-value goods
and related services including
design.
NEC3 Supply Short Contract
(SSC)
This contract should be used
for local and international
procurement of goods under a
single order or on a batch order
basis, and is for use with contracts
which do not require sophisticated
management techniques and
impose only low risks on both the
Purchaser and the Supplier.
Other
NEC3 Adjudicators
Contract (AC)
This contract should be used for
the appointment of an Adjudicator
to decide disputes under the NEC3
family of contracts. It may also be
used for the appointment of an
Adjudicator under other forms of
contract.
NEC3 Framework Contract (FC)
This contract should be used for
the appointment of one or more
suppliers to carry out construction
work or to provide design or
advisory services on an as
instructed basis over a set term.
This umbrella contract must be
used in conjunction with one or
more of the other NEC3 contracts
and provides a sophisticated call
off mechanism.

for more information on any aspect of the NEC family of contracts or our support services please contact
NEC, 40 Marsh Wall, London, E14 9TP

OPTION STRUCTURE
The ECC, ECS, PSC and TSC offer up a range of Options to select from
that builds up the contract terms to suit the works or services. At the
heart of the contract conditions are the core clauses, which contain the
essential common terms. To this must be added a main Option, which
will determine the particular payment mechanism. Finally, the selected
secondary Options are combined with the core and main Option clauses
to provide a complete contract.
This approach gives even greater choice to contracting parties to
assemble the appropriate contract conditions to suit. The ECC, ECS, PSC
and TSC offer different basic allocations of mainly financial risk between
the parties through the main Options.

The ECC main Options and a brief description

of each is as follows.
 ptions A and B: these are priced contracts with the risk
O
of carrying out the work at the agreed prices being largely borne
by the Contractor.
 ptions C and D: these are target cost contracts in which
O
the out-turn financial risks are shared between the Client
and the Contractor in an agreed proportion.
 ptions E and F: these are cost reimbursable types
O
of contract with the financial risk being largely taken
by the Client.

The comparative availability on the main Options

in ECC, ECS, PSC and TSC is shown in this table.
Option Title

ECC ECS PSC TSC

A. Priced contract with activity schedule

with Price List

B. Priced contract with bill of quantities

C. Target contract with activity schedule

D. Target contract with bill of quantities

E. Cost reimbursable contract

F. Management contract
G. Term contract

with Price List

time based

The SC does not have main Options; the pricing mechanism is the Price Schedule which may include both lump sum and measured items.
With the exception of the Adjudicators Contract, all other NEC contracts are drafted for use in a multi-party partnering arrangement utilising the
provisions of Option X12 Partnering.

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