Delivering the 2023 Rankine Lecture, Mark Wild CEng – the former Chief Executive of CrossRail – recently outlined the “key strategic lessons” from the Project. In an otherwise excellent, and entertaining, talk he failed to make reference until asked to two aspects which clearly had a major bearing on the project finishing many years late and more than 25% above budget. One of these aspects was the form of contract adopted.
I’d like to make some observations on that contract, pointing out what I believe to be some difficulties associated with it and to providing a cautionary note to those engineers who are required to use it.
The contract used in CrossRail was the 3rd edition of the New Engineering Contract - “NEC3”. The NEC suite of contracts is published by Thomas Telford Limited on behalf of the Institution of Civil Engineers (“ICE”). These NEC contracts replaced the previous ICE contract forms and were met with some controversy, with many engineers seeing NEC as a “playground for the legal profession”. (At this point, as a chartered engineer and arbitrator, I should declare an interest and confess that I too have often benefited from what I consider to be the contractual chaos which the NEC sometimes produces.) It is now the “go to” contract form for UK and Scottish Government infra-structure contracts and is increasingly used by private companies in the engineering and construction industries. Interestingly, however, major international contracts are still executed on the basis of what is essentially the ICE Contract form (that is, the “FIDIC” contract forms) - so while the UK Government and others are supporters of NEC, the international engineering profession appears to have no doubts as to which contract is preferable.
This is not the place for me to rehearse what I consider to be the manifest failings of NEC and I will confine myself to one very obvious area of difficulty. In the mid 1990’s, in what was described as an attempt to reduce engineering disputes, the UK Government commissioned a major study . It concluded, in a wide-ranging survey of the construction and engineering industries that 40% of respondents wanted “simpler contracts” and 52% wanted “standardisation of contract documents”. The NEC was designed, and subsequently amended, to address these issues and others. It has failed. The Government contract for the re-furbishment of the Queen Elizabeth Tower (the “Big Ben” tower), for example, was an NEC 3 contact and contained 76 pages of closely-typed, legally tortious additions and amendments to the standard NEC provisions. That is neither “simple” nor “standard” but sadly, in my experience, it is not untypical . Generally these alterations and amendments are read and understood, not by the client, nor the design-team nor necessarily the contractor, but by their respective legal advisers and (sometimes) the adjudicators, arbitrators and judges who have to interpret them. So it is not remotely surprising to me that projects using NEC contacts are so often late and over budget – rhetorically, how does a team successfully deliver a project in accordance with a contract when they don’t understand what that contract says? . (During questions, Mark was asked how many such amendments the CrossRail contract contained but declined to provide an answer.)
So what is to be done? Well, many engineers will have no choice but to make use of NEC – decisions on contract will be made by their client, and their client’s legal advisers. But, as a minimum, an engineer should advise his client that NEC comes with potential problems and often with legal difficulties and associated costs. There are moreover options. The ICE contract form still exists and is maintained and updated by the Association of Consultancy and Engineering, jointly with the Civil Engineering Contractor’s Association. Additionally, the FIDIC forms (essentially the ICE forms) are readily usable in most circumstances which an engineer is likely to encounter. In some circumstances, even the JCT Forms might be preferable to the NEC ones. I readily concede that many will immediately discount these options – but a discussion on them is, I believe, warranted. In any event, as I have often argued elsewhere, an engineer must ensure he is aware of and understands the conditions of contract under which he is working and take reasonably appropriate steps to meet those conditions. In my experience, under NEC, that often does not happen.