4
Collaborative working with NEC4
Professional services
Relationship to the building contract
To benefit significantly from the integrated project management principles of NEC4, it will be necessary to bring the NEC4 family together and work as a collaborative team. The first step in this direction is the NEC4 Orange Book Professional Service Contract (PSC). There is parity between the PSC Orange Book and the NEC4 Black Book, such that the contracts operate in a back-to-back manner, with differences only in the conventions applicable to consultants’ and contractors’ respective roles. The Orange Book shares the Black Book philosophy, and most of the lessons learned in the context of an NEC4 building contract will be equally applicable to the PSC, including the all-important structure.
This section details the key points which should be considered with the PSC.
Figure 21:
PSC Core Clauses
Application of the PSC for any discipline of Consultant
All types of professional services can be successfully performed by Consultants appointed under the PSC and on projects requiring a number of different Consultants, having everyone signed up on the same basis can be of enormous benefit.
Cultural and procedural change
There is a need for a cultural shift in perspective to operate the PSC successfully and to reap the rewards. If people cling to old habits and are suspicious of new ideas, then many of the benefits of the PSC will never be realised. However, rapid change and new technologies are now a part of life and learning a new system which is truly new, rather than just new to the user, has the advantage that there has been little time for any bad habits to develop. The objectivity of the PSC also makes it unlikely to be open to many varying interpretations.
The PSC encourages, even demands, better documentation and more efficient management skills. It is often said that there is nowhere left to hide; nevertheless, if the procedures are ignored or incorrectly applied, the error is virtually immediate and can therefore be rectified for the future, rather than potentially handicapping the Project. If a party persistently applies the procedures incorrectly, or even fails to apply them at all, at least a clear breach becomes apparent, instead of arguing over semantics. It clearly takes both parties to ‘act in a spirit of mutual trust and co-operation’!
Responsibility, authority and people organisation
The PSC necessitates a clear line of both delegated responsibility and authority. The consequences of failing to provide this are that decisions would be unlikely to be reached within the required timescales. Some consultancy organisations have trained staff on trial projects under the PSC for measurement against projects which have been carried out under conventional discipline-specific appointment documents.
Using NEC4 may be easier if there is a clear understanding of people’s functions during pre-contract, post-contract and post-completion stages, which may overlap.
Multidisciplinary and project-specific nature of the Scope
The Scope in the Orange Book has the same status as in the Black Book. The Contract definition is as follows:141
The Scope is information which either
- specifies and describes the service or
- states any constraints on how the Consultant provides the Service.
The Scope should be arrived at based on building up an appropriate range of services relative to a particular Consultant’s discipline and required input on a particular project. While any formulaic tendencies based on ticking ‘standard services’ should ideally be avoided, there is no difficulty in using discipline-specific conventions as a framework for the Scope.
For example, the RIBA Plan of Work can be used as the framework for defining the range of services required from an architect on a particular project; however, the actual tasks to be performed under each work stage should be carefully considered and documented in the Scope.
If this approach is taken in arriving at the Scope for each Consultant, it should ensure that there are no gaps or overlaps in the total range of Consultants’ services performed on a project, providing a back-to-back seamless range of professional services for a project.
Consultant designers in particular have conventionally worked to standard services schedules, which do not always assist clients in understanding the complexity of work being undertaken. One of the benefits of the PSC is that it encourages a distinction between tasks being performed and deliverables resulting from such activities, which can be seen as equally helpful to consultants and their clients.
The documentation of the services to be provided under a PSC takes an appropriate form relative to the discipline and the Project, irrespective of whether the Client of the Consultant has conventional client, contractor, or ‘lead’ consultant status. The PSC, the Professional Service Short Contract (PSSC) or the Professional Service Subcontract (PSS) can be chosen accordingly.
No conventional percentage fee basis
While conventional standard form professional services contracts have been largely based on a percentage fee calculation, and resource-based fee calculations can still be seen as rare in some sectors, the PSC offers considerably more flexibility and accuracy in fee calculation with its main options. Many building clients will no longer tolerate a fee basis predicated on the principle of fees increasing with construction costs; i.e. almost a disincentive for consultants to proactively keep projects within a set budget.
Architects will be interested in the fee bases offered under the PSC payment mechanisms.
Figure 22:
PSC Main Option Clauses
Fine-tuning a PSC Consultant’s role
In addition to the complementary main option payment mechanisms, there is also parity in the secondary options as between the PSC Orange Book and the NEC4 Black Book, with adjustments made to recognise the PSC Consultants’ role.
Figure 23:
PSC Secondary Option Clauses
Subcontracting
The next step in the direction of integrated project management principles of NEC4 is the NEC4 Purple Book subcontract. Again, there is parity between the NEC4 Purple Book and the NEC4 Black Book, such that the contracts operate in a back-to-back manner, with the difference in the ‘step down’ so that the Client becomes the Contractor and the Contractor the Subcontractor. Under the NEC4 subcontract conditions, the Contractor manages the time, cost and quality subcontract administration and, in the context of quality matters, there is recognition of both the Client’s and the Supervisor’s status under the NEC4 Black Book.142
The now familiar NEC4 structure is maintained.
The NEC4 Purple Book subcontract main option clauses mirror those of the NEC4 Black Book, with the exception of the management contract option (Black Book Option F).
A critical point for architects who have attempted to manage subcontract risk to clients under older style standard form contracts or subcontracts is the clarity with which such risk is placed on the Contractor under the NEC4 Black Book:
If the Contractor subcontracts work, he is responsible for Providing the Works as if he had not subcontracted. This contract applies as if a Subcontractor’s employees and equipment were the Contractor’s.143
Subcontracting under NEC4 will sensibly be carried out under either the Purple Book subcontract or, in instances where the subcontracted works are of low complexity, the Mauve Book Short Subcontract. Indeed, the NEC4 Black Book building contract foresees an NEC contract as the default for all subcontracts unless agreed otherwise.144
The Contractor submits the proposed subcontract documents, except any pricing information, for each subcontract to the Project Manager for acceptance unless
- the proposed subcontract is an NEC contract which has not been amended other than in accordance with the additional conditions of contract or
- the Project Manager has agreed that no submission is required.
The NEC4 Purple Book subcontract secondary option clauses mirror those of the NEC4 Black Book entirely.
Project profiles
It is extremely important in using NEC4 to its best advantage to properly analyse the profile of individual projects. Such analysis needs to extend beyond the essential procurement strategy and encompass an assessment of participating organisations and the staff employed within them. It would be naive to expect truly collaborative working between organisations to succeed without considering the people who can collectively make it happen – personalities matter!
Architects are often in a pivotal position with regard to fostering collaboration. This position results partly from the leading role architects may take at the outset of projects, including advising clients on the need for other consultants, and partly from an expectation that most architects can offer excellent communication skills.
Truly collaborative working requires a partnering style contract such as NEC4 as a prerequisite for success; however, it would be a fallacy to assume that merely choosing NEC4 as a contractual basis offers any guarantee of success. The people involved in a particular project have to buy into the contractual ethos for a project to be run successfully on a collaborative basis. While highly motivated project teams can achieve some degree of collaboration in spite of adversarial contract conditions, it follows that unwilling team members can fall out and jeopardise a project even with cooperative contract conditions.
Partnering
Partnering as a concept has been recognised in the building industry for a long time, essentially putting the success of the Project at the forefront of all parties’ goals. Partnering has historically had more than one guise. In its simplest form, partnering was an intuitive process between project team members (with cooperative personalities). As a more conscious decision, project teams volunteered to partner by adding a non-binding partnering charter to their (often still adversarial) contract conditions.145 In its most powerful form, partnering has become mandatory, based on cooperative obligations in a binding contract. It is this latter model to which NEC4 belongs.
The history of Secondary Option X12
In the year 2000, the CIC146 published the findings of their multidisciplinary Task Force research into partnering and provided a possible methodology for contractual partnering.147 This included model heads of terms for guidance to the construction industry.148 The NEC panel then carried out a review of NEC compliance with the CIC Guide and decided to retain the family structure of bi-party NEC contracts, including the core clauses, main option and secondary option clauses, as it was considered that the NEC family already incorporated most of the objectives of the CIC Guide. In addition, it was decided that a more formal layer of partnering rights and obligations should be added to NEC at secondary option level. The White Book consultative version of the NEC Partnering Option X12 was published as a supplementary NEC document in September 2000, followed by the first edition in June 2001. Secondary Option X12 was incorporated into the main secondary option documentation in NEC3 (2005). Secondary Option X12 was updated and renamed ‘Multiparty collaboration’ on publication of NEC4 in 2017.
Extent of partnering
Secondary Option X12: Multiparty collaboration maintains the flexibility of bi-party contracts but allows specific aspects of partnering to become a contractual obligation if and when required. Contractual partnering arrangements can be tailored to suit both project and ‘people’ requirements:
- Bi-party partnering – requires an NEC contract.
- Multiparty partnering – requires NEC contracts, including Secondary Option X12.
- Multi-project partnering – requires an NEC contract or series of NEC contracts and can include Secondary Option X12 where multiparty partnering relationships are desired.
Structure and status
Secondary Option X12: Multiparty collaboration sits at secondary option level within the NEC ‘pick-and-mix’ framework and is incorporated in exactly the same way as other secondary options. It will be incorporated into as many bi-party contracts as required, which in practice will be the NEC4 contracts between all the key participants in a project. In comparing Secondary Option X12: Multiparty collaboration with other standard form contract approaches to partnering, architects should note the following:
- Secondary Option X12 is not a stand-alone contract; it is predicated on an NEC4 family base contract – NEC4 Black Book, Subcontract, PSC etc.
- Secondary Option X12 does not create a multiparty contract; all Partners share common bi-party rights and obligations.
- Secondary Option X12 does not create a legal partnership across bi-party contracts.
Secondary Option X12: People definitions and scope of application
There are some additional definitions in Secondary Option X12 to become familiar with:
- Promoter: project sponsor and Client under some bi-party contracts
- Partner: any team member with Secondary Option X12 in their bi-party NEC contract
- Core Group: group of key partners.
Secondary Option X12: Multiparty collaboration can be incorporated at any level in the supply chain; the contribution of a Partner is more important than their size.
The contractual partnering relationship commences with the first bi-party NEC family contract which includes the Secondary Option X12: Multiparty collaboration.
There is provision for Partners to join and leave at appropriate stages of a project or series of projects.
Implementation of Secondary Option X12 documents
The Schedule of Partners is maintained by the Core Group.
The Secondary Option X12 Contract Data identifies the Client and their objective.
The Partnering Information should contain only information which is relevant to all bi-party contracts, i.e. it must be common and not vary across the Partners’ contracts. In practice, this means that in compiling the Scope for a building contract and for a professional services contract where Secondary Option X12 is to be incorporated in the contract conditions, architects should ensure that the drafting is done on a side-by-side basis to ensure the required commonality.
Partners’ management responsibilities
Secondary Option X12: Multiparty collaboration creates additional rights and obligations to assist in managing the relationship between Partners. The intended live nature of the Partnering Information necessitates continuous review relative to both the Promoter’s objective and the other Partners’ objectives.
There is an important role for the Core Group in both preventive dispute avoidance and as the first tier of a problem-solving hierarchy. Formal dispute resolution and legal remedies are consciously left within the discrete bi-party contracts. This is based on the principle that the potential embarrassment of having to pass a dispute up the supply chain and back down again, with the certain knowledge of the ultimate Promoter, acts as an active incentive to most bi-party contract parties to resolve their differences amicably. The ultimate sanction for failing to act cooperatively remains, of course, the absence of future partnering projects.
Secondary Option X12: Multiparty collaboration clauses
X12.1 – Identified and defined terms
Partners are named in the Schedule of Partners and include the Promoter.
‘Own Contract’ means the bi-party contract between two Partners incorporating Secondary Option X12.
The Core Group is the listed group of Partners who will steer the partnering relationships on the Project.
Partnering Information specifies how the Partners work together.
Key Performance Indicator targets are stated in the Schedule of Partners.
X12.2 – Actions
The intention is to achieve the Promoter’s objective as stated in the Secondary Option X12 Contract Data and the other Partners’ objectives as stated in the Schedule of Partners.
The Partners select the Core Group and each nominates a representative.
The Core Group’s decision-making remit is stated in the Partnering Information. It works democratically and will normally be led by the Promoter’s representative.
The Core Group maintains the Schedule of Partners and Schedule of Core Group Members throughout the Project.
X12.3 – Collaboration
Collaborative team working is required as stated in the Partnering information, in a ‘spirit of mutual trust and co-operation’.
Allowance is made for reciprocal provision of Partners’ Information.
There is provision for each Partner to give early warning of matters affecting other Partners’ objectives.
The Partners’ contributions are coordinated by the Core Group in the form of a timetable, which is incorporated into each Partner’s Own Contract programme.
X12.4 – Incentives
Performance of the partnering team, a group of Partners or an individual Partner can be rewarded where a target stated for a Key Performance Indicator is achieved or improved upon.
A final point which architects and their clients will note when comparing partnering methodologies and standard form collaborative contracts is that Secondary Option X12 does not envisage the necessity for an externally appointed partnering advisor. The key reason for this is that individual contracting partners maintain their autonomy with Secondary Option X12, rather than effectively joining an overarching entity as would be the case where a multiparty contract is created.
Framework agreements
Project-specific emphasis
The flexibility of the NEC family allows emphasis to be placed on project-specific solutions. Particularly in the context of long-term relationships and partnering, the NEC family is ideally suited to being used as the basis for an umbrella framework agreement, with subsidiary ‘call-off’ orders. The precise way in which this is done will depend on the nature of project requirements and the consequential choices of NEC4 family contracts.
Many architects have gained experience of framework agreements in the context of European Union-derived procurement legislation concerning publicly funded – in whole or in part – construction projects. Such framework agreements may have been contractually complex and may have involved bespoke drafting. One of the fallacies which seemed to pervade framework agreements using NEC contracts in the early years of NEC was the apparent presumption that the NEC contracts were invoked at secondary level, underneath a bespoke umbrella contract. This seems to have had no compelling legal or management basis, but rather to have been a hangover from the manner in which older style standard form contracts might be linked together to form a more collaborative framework agreement. A more successful model in the context of NEC would seem to be to capitalise on the back-to-back drafting and introduce an NEC4 contract as the head framework agreement, with further NEC4 contracts nested into it to deal with individual contractual requirements, whether they be on a task-by-task or project-by-project basis.
There are several relatively high-profile project programmes which were developed during the currency of the NEC second edition and were procured on the basis of framework agreements predicated on NEC contracts. A public sector example of these would be one of the NHS procurement programmes for new hospital buildings.149 A private sector example would be a nationwide expansion of a mobile phone network through additional mast construction.150
The NEC Framework Contract
The NEC Framework Contract was introduced into the NEC family with the third edition (2005) and it forms part of the NEC4 publication in 2017. It achieves clarity in providing a specific head contract into which various NEC4 contracts can be nested in order to realise projects.
Term Services
The NEC4 Term Service Contract (TSC) and the Term Service Short Contract (TSSC) are of particular interest in the context of whole life and maintenance contracts. Where appropriate, suppliers can be appointed under the TSC, nested into the NEC4 Framework Contract.
Management systems
Paperless methods
The corollary to logical and efficient communications under NEC4 contracts is that they lend themselves to being managed under a smart IT system. It is entirely feasible to monitor periods of reply for a variety of communications on a project by means of computerised management systems, which will alert users to periods that are about to expire and enable them to meet imminent contractual deadlines. While such management systems would be complete overkill on smaller or more straightforward projects, there is a plausible argument in their favour on larger or more complex projects. This is particularly the case where a number of NEC4 contracts are interrelated, or nested, with consequentially cascading communication timescales. Generic and NEC-specific software has been developed which assists in managing NEC4 projects, especially in relation to contractual communications, such as notifications.
Many NEC projects have adopted an electronic information-sharing portal for the project team members to exchange information, including contractual communications. The new Secondary Option X10: Information modelling introduced on publication of NEC4 in 2017 sets out a clear basis for managing projects using BIM (Building Information Modelling) and should be helpful to architects.
Support
Architects will probably only want to progress to sophisticated electronic management systems when they have mastered the basics of NEC4 and have honed their communication management skills. There is quite a lot of support available either directly or indirectly from the NEC publishing body, Thomas Telford Ltd. There is also a well-established group to promote the exchange of information about the NEC in use – the NEC Users’ Group, which provides a very useful and transparent forum. Finally, there is a website dedicated to NEC and its wider application,151 which is an obvious starting point for architects, allied professionals and their clients who might be new to NEC4.
Notes
141 Core Clause 11.2 (16).
142 NEC4 Subcontract Core Clause 40.
143 NEC4 Black Book Core Clause 26.1.
144 NEC4 Black Book Core Clause 26.3.
145 E.g. JCT 98 Practice Note 4 (2001, RIBA Publications).
146 Construction Industry Council.
147 CIC (2000) A Guide to Project Team Partnering, London.
148 Upon which the partnering contract PPC2000 was subsequently based.
149 ProCure 21 – based on an NEC Main Option C contract strategy.
150 Based on an NEC Short Contract strategy.