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The first ‘New Engineering Contract' (NEC) was published in 1993. Updated to the NEC3 version in 2013, this suite of contracts has transformed the industry by placing collaboration and collective risk sharing as the foundation for modern procurement.

NEC4 Alliance Contract published for consultationThe new NEC4 Alliance Contract has now been published as a consultation draft for feedback from the construction and infrastructure sectors. This is intended to ensure that the contract framework meets the needs of these sectors.

“Traditional EPC (engineering, procurement construction) contracts generally do not deliver optimal outcomes, in part because they do not promote the necessary collaboration and risk sharing between the client and players in the supply chain,” says Ricardo Pillay, partner at Dentons South Africa.

“Alliance contracting was developed to meet the demands for better integration of project teams. It is used to generate better outcomes for large, highly complex infrastructure projects, where clients, in specialised sectors, have particular capabilities to contribute its skills and expertise to deliver the project.”

The NEC4 Alliance Contract seeks to provide a framework for a true multiparty contract in which everybody is engaged on a single set of terms and conditions. It is performance-based, and ensures that all members of the alliance share in both the risk and reward for the achievement of the project objectives.

NEC4 contracts reflect procurement and project management developments and emerging best practice, with improvements in flexibility, clarity and the ease of administration. Two new contracts have been added to the suite – NEC4 Design, Build and Operate Contract (DBO) and NEC4 Alliance Contract (ALC). NEC4 is suitable for procuring a full array of Works, Services and Supply, ranging from a major framework to small-scale projects.

“We are going to see massive infrastructure projects going ahead in Africa and we need to identify creative means of collaborative contracting to ensure that projects are on time, on budget and in accordance with specification. International best practice would dictate that these risks are best managed through alliance contracting. A ‘best-for-project philosophy’ is required and performance needs to be measured and monitored at an alliance rather than individual party level. We simply cannot afford the project delays and cost overruns that historically plague infrastructure projects,” says Pillay.

He adds that the Alliance Contracting model has already delivered good results in both the UK and Australia. “The devil is always in the detail, and while the experience gained in Australia and elsewhere is an invaluable starting point, it is critical that the consultative draft form of the NEC4 Alliance Contract allows potential South African users to identify matters they would prefer to be dealt with differently. So, when local users start to adopt this standard form for complex infrastructure projects, by that stage, we can safely conclude that the contractual terms are familiar and we have engaged drafters to refine key clauses.”

The consultation draft of the NEC4 Alliance Contract can be accessed at www.neccontract.com/About-NEC/NEC4-suite-of-contracts.

Image credit: https://www.dentons.com/en/ricardo-pillay

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