What is an NEC Contract? NEC Contracts Explained

If you're in the construction industry in South Africa, you've likely heard of NEC contracts. These contracts are becoming increasingly popular in the country, thanks to their flexible and collaborative approach. In this article, we will discuss everything you need to know about NEC contracts in South Africa, including what they are, who uses them, and how they can benefit your business.

What does NEC Stand For?

NEC is an acronym for “New Engineering Contract”

What is an NEC Contract?

NEC contracts are legal agreements used in the construction industry to regulate the relationship between the employer and the contractor. NEC is a suite of contracts for the construction and engineering industry and which contracts are aimed facilitating the implementation of sound project management principles and practices and can be grouped into contracts that make provision for:

• works;

• services; and

• supply.

Works encompasses purchases such as the construction, refurbishment and decommissioning of buildings, structures, process plants and infrastructure – including everything from houses, schools, hospitals and leisure facilities to infrastructure for water, energy, transport, industry and waste.

Services includes purchases of professional services such as engineering, architectural, project management and consultancy works. It also covers composite services such as facilities management, cleaning, catering, security, maintenance and data processing.

Supply includes supply of high-value goods and associated services such as transformers, generators, rolling stock, cranes, gantries and complex plant. It also includes lower-risk items such as building materials and products, stationery, personal protective equipment and parts.

These contracts were first introduced in the UK in the 1990s and have since been adopted worldwide. NEC contracts are designed to be flexible, transparent, and collaborative, making them ideal for complex and high-value projects.

Who uses NEC Contracts in South Africa?

NEC contracts are commonly used in South Africa by both private and public sector clients. They are often used in infrastructure projects such as road and bridge construction, water and sanitation, and building construction. These contracts are also used in the engineering industry for projects such as design, supervision and consultancy services.

What are the Benefits of NEC Contracts?

NEC contracts offer several benefits for both the employer and the contractor. Firstly, they provide a collaborative framework for managing the project, which promotes teamwork and open communication between the parties. Secondly, they ensure that the project is completed on time and within budget, as the contract outlines the timeline and the cost of the project. Finally, NEC contracts provide a legal basis for resolving disputes, as they outline the dispute resolution procedures to be followed.

How do NEC Contracts Work?

NEC contracts are structured differently from traditional construction contracts. They consist of several parts, including the core clauses, the secondary clauses, and the optional clauses. The core clauses outline the fundamental terms and conditions of the contract, while the secondary clauses provide more specific details about the project. The optional clauses are tailored to the specific needs of the project and can be added or removed as necessary.

NEC contracts also include several key features, such as the compensation event system, which allows for changes to the project scope or timeline, and the early warning system, which encourages parties to identify potential issues early and work collaboratively to resolve them.

NEC Contract Review

Our construction lawyers have extensive experience in putting together, reviewing and negotiating NEC Contracts. We assist clients throughout a project life cycle of complex infrastructure and construction projects (which includes all stages of development and delivery and extends to financing and disputes under all forms of construction contracts). If you need any legal assistance in this regard, do not hesitate to contact our offices.

In conclusion, NEC contracts are an excellent option for construction projects in South Africa that require flexibility, collaboration, and transparency. By understanding the basics of these contracts, you can ensure that your construction project runs smoothly and is completed on time and within budget. If you have any questions about NEC contracts or need help drafting a contract, consult with a legal professional who specializes in construction contracts.