Chapter 4: The NEC Suite of Contracts

The Engineering Construction Contract (ECC) should be used for the appointment of a contractor for
engineering and construction work, including any level of design responsibility. The writers of the
ECC strive to apportion a balanced amount of risk to each party to the contract; that is, to he who is
most able to bear this risk. The ECC is often colloquially known as the NEC3 contract, as it is the
main contract of the NEC suite of contracts.

The ECC seeks to achieve this objective through several clauses established in the self-styled core
clauses of the contract. The main strategy for choosing the form of contract starts with a decision
between the six main options, one of which must be chosen. Secondary options may then be
considered to enhance these main options, although this is a non-compulsory item.

One of the promoted benefits of the ECC is the fact that is has been drafted in plain English and uses
simple language. The clauses are kept deliberately short with bullet points used to make it easier to
read, the idea being that this will make it easier to understand and operate. The contract does not
contain any legal terminology; however it also does not contain commonly used construction
terminology (Heaphy, 2012).

In reading this contract, one notices the emphasis on communication and interaction between all
parties. Clause 16 introduces the Early Warning system, whereby the contractor and the Project
Manager give an early warning by notifying the other as soon as either becomes aware of any matter
which could... adversely or otherwise impact upon the project. This clause also introduces the
concept of the Risk Reduction meeting. We see the writers of this contract address the need to
minimise the impact of risk from the outset, and Prevention Methods are outlined in Clause 19 of the
contract. From this it is evident that this contract addresses the need for realistic and methodical risk
identification and analysis, and sets out responsibility for the mitigation or burden of these risks in a
clear fashion.

In Clause 25 of the ECC contract, the Contractors main responsibilities are set out. Again we see the
emphasis on collaboration and communication. Clause 25.1 addresses the need for transparency in the
realisation of successful projects.

The Contractor cooperates with others in obtaining and providing information which they need in
connection with the works.

Clause 80 and 81 allocates the burden of risks between Employer and Contractor. Clause 80 deems
the Employer responsible for faults in his own design; loss or damage to plant and materials supplied
to the Contractor until the Contractor has accepted them; negligence or breach of statutory duty; and
several risks that can be seen as Acts of God, such as war, rebellion, strikes or riots, and radioactive
contamination among others.

Clause 81 simply states:
From the starting date until the Defects Certificate has been issued, the risks which are not carried by
the Employer are carried by the Contractor (ECC, 2007).

Under the ECC the chosen method of dispute resolution is adjudication. The process has been
introduced to provide a relatively quick and cost-effective process for resolving disputed matters.
The adjudication is held by a single adjudicator who is engaged to act once a dispute is referred to him
or her by either party.

The adjudicators have a duty to act impartially and their decision is binding on the parties unless/until
it is appealed via arbitration or litigation.

Chapter 5: The Fidic Suite of Contracts
The Fidic Conditions of Contract for Construction is one of four contracts published by the
Fdration Internationale des Ingnieurs-Conseils (Fidic). This forms the contract found within the
colloquially titled Red Book, which is recommended for building or engineering works designed by
the Employer, or by his representative, the Engineer. Under the usual arrangements for this type of
contract, the Contractor constructs the works in accordance with a design provided by the Employer.
It continues However, the works may include some elements of Contractor-designed civil,
mechanical, electrical and/or construction works (Fidic, 1999).

The most arresting aspect of this contract on first reading is the size and scope of it. It is long, more
than one hundred and ten pages in total, and utilises complex legal terminology. Fidic have recognised
that certain sub-clauses will be modified for each individual construction project, as circumstances
vary, and states the General Conditions and the Particular Conditions will together comprise the
Conditions of Contract governing the rights and obligations of the parties. It will be necessary to
prepare the Particular Conditions for each individual contract, and to take account of those sub-
clauses in the General Conditions which mention the Particular Conditions (Fidic, 1999).

Communication between parties is stressed in sub-clause 1.3. Communication must be:

in writing and delivered by hand (against receipt), sent by mail or courier, or transmitted using any of
the agreed systems of electronic transmission as stated in the Appendix to Tender; and be delivered,
sent or transmitted to the address for the recipients communications as stated in the Appendix to
Tender. However:
(i) If the recipient gives notice of another address, communications shall thereafter be delivered
accordingly; and
(ii) If the recipient has not stated otherwise when requesting an approval or consent, it may be sent to
the address from which the request was issued.

As such, the contract appears highly rigid, and allows little or no interpretation of contract statements,
as seen in the introductory clause 1.2, marginal words and other headings shall not be taken into
consideration in the interpretation if these Conditions. The contract explicitly defines minute details,
such as gender, plural and the definition of written and agreed (Fidic, 1999).

Main party responsibilities are set out in the contract in a similar, albeit in a more strictly defined way,
to the ECC contract. The difference here is that Fidic includes a later sub-clause that allows the
Employer to indemnify himself against several of his previously-stated responsibilities. This can
create confusion and lead to this contract being interpreted as creating adversary or confrontation
between the parties.

Standard construction terminology is used which can be beneficial to experienced professionals and
the format is very legalistic.

The contracts also contain guidance notes but these only extend to the preparation of the particular
conditions as opposed to the operation of the contract in practice. Such guidance as provided with the
ECC forms is beneficial and could be a useful addition to the Fidic suite. One beneficial feature of
ECC is the inclusion of example standard forms such as Performance Security, Advance Payment
Guarantees, and Form of Agreement (Heaphy, 2012).

It is interesting to note that all three forms have introduced an independent dispute resolver as part of
the contract process.

Under the ECC the chosen method of dispute resolution is Adjudication; under the Fidic forms it is
Dispute Adjudication Boards (DAB), while under the GCCC the favoured process is Conciliation.
The processes are very similar in principle and have been introduced to provide a relatively quick and
cost-effective process for resolving disputed matters.

According to Heaphy (2012), under Fidic the DAB can be three adjudicators and can either be a
standing board, that is to say a board constituted at the commencement of the project and that is kept
regularly involved in the project and able to make a decisions when a matter is referred to it, or an ad
hoc board which is engaged only when a dispute is put to it. Under all processes the adjudicators have
a duty to act impartially and their decision is binding on the parties unless/until it is appealed via
arbitration.

Chapter 6: The GCCC Suite of Contracts
The Government Construction Contracts Committee (GCCC) contracts, commissioned by the Irish
Government, are fixed-price lump sum contracts with a substantially different risk profile for
contractors than its international counterparts. The GCCC was encouraged to abandon the well-
established principle that contractual risk should be borne by the party best able to manage it in favour
of transferring it to contractors irrespective of their ability to either predict it at tender stage or manage
it during construction. (Ng and Loosemore, 2007)

When the GCCC contract is referenced throughout this project, it refers to the GCCC contract for
Public Works Designed by the Employer. The GCCC contract is drafted in a highly legalistic
language and may be difficult for the layman to interpret. There is much referencing of sub-clauses
throughout the contract; as such, it can be difficult to keep track of certain elements within the
contract.

The administrative and project management burden on contractors in this contract is quite large. This
administrative responsibility arises from the dearth of claims procedures, the programme and progress
report requirements, the evaluation of the employers proposals, and other procedural elements of the
contract. Dynamic project management on the contractors behalf is crucial to project success, and the
impact which poor project management on the employers side could have on the contractor is
considerable (Howley and Lang, 2008).

Sub-clause 4.1 provides a nod to cooperation and communication between parties, but following sub-
clauses dispel this notion by creating contradiction, such as in sub-clause 4.3, which allows any
assessment of the employers representative to be revised in accordance with disputes, except for
decisions stated in the contract to be conclusive.

In terms of claims clauses, there is virtual elimination of claims for increases in labour and materials
prices, and a restriction placed upon the contractors ability to claim for amounts over the initial
contract sum (PW-CF1, 2014).
In terms of defining the scope of works, and thus setting out clear employer/contractor
responsibilities, the contract asserts that the completed works are fit for their intended purpose as
stated in or to be inferred from the works requirements. Works requirements or changes to these can
be updated and according to this contract, must be accepted by the contractor as works requirements.
As such, there is scope for change later on in the project timeline, thus no stated obligation on the
employer to unambiguously outline and define the intended purpose in the original contract
documentation.

Conciliation is the favoured method of dispute resolution, and the contract very definitely states that
the conciliator shall not be an Arbitrator and the Arbitration Acts 1954 to 1998 and the law relating
to Arbitration shall not apply and if the dispute is not resolved by agreement within 42 days after
the conciliator was appointed, or a longer period proposed by the conciliator and agreed by the
parties, the conciliator shall give both parties a written recommendation. The conciliator shall base the
recommendation on the parties rights and obligations under the Contract (PW-CF1, 2014).

Discussion
The common wisdom amongst Irish contractors currently is that the GCCC is a contract that places
the greatest burden of risk onto them. This is perpetuated by the large administrative encumbrance
accompanying the use of this contract. Irish contractors may have international experience due to
working on projects abroad, projects utilising more reader-friendly contracts such as the ECC or the
Red Book. While this is undoubtedly true, the question remains: which contract is more beneficial if
contractual issues were to go to arbitration, litigation or conciliation?

The ECC is user-friendly; it is easy to read and as such may be more easily interpreted. A loosely-
defined contract may not be as useful in the courtroom, in which case interpretability will be to the
detriment of the plaintiff or the defendant. In terms of conciliation, where the conciliator bases his
recommendations within the confines of the contract, the GCCC contract is strict enough to allow him
to do so. The contract is structured and well-defined. It allows no room for negotiation or debating of
the meaning of terms- which allows both the contractor and the employer to understand more
comprehensively his position on conciliation day, and to construct his arguments based on the
contract. While the NEC3 is drafted in plain English purposefully to create a spirit of collaboration,
this may lead to ambiguity and confusion in the adjudication process. This could be costly for both
employer and contractor. The same applies to the Fidic contract; as mentioned previously, the
favoured method is DAB, which is essentially a form of adjudication. The combination of a well-
defined contract with conciliation as the dispute resolution method may be the most effective
contractual arrangement in the current economic climate; this is what the GCCC provides.
In Ireland, contractors opinions of the GCCC suite of contracts vary from mild disapproval to total
abhorrence. They are reviled as onerous on the contractor and archaic. They stem from the days of the
Celtic Tiger, where small contractors expanded rapidly and perhaps could not cope with the amount
of works on their books. This resulted in disputes and claims abounding. A contract was developed
that placed a large amount of risk on the contractor and not on the party best able to bear this risk.
This is probably not the most effective way to enter into a contract. It is true that NEC and Fidic
provide relief from such onerous conditions. Not all risk can be transferred effectively however, and
someone will always have to bear unfavourable risk; that is the nature of the challenge faced by both
Client and Employer. It is conceivable that mere opinion on the subject, the notion that the GCCC
contracts are draconian that creates the stigma around them.

One of the promoted benefits of the NEC3 suite of contracts is that they are flexible, written in simple
language and promotes a partnering attitude to contracting. Partnering is the incorrect mind-set to
have in the case of a contract. The writers of the contract use this word which, by legal definition this
means one of the co-owners and investors in a "partnership" which is an on-going business enterprise
entered into for profit.

According to Heaphy (2012), a contract form:
cannot either create a partnering culture between the parties or create animosity and conflict; this
will always be down to the attitude of the parties.

The ECC contract does however, encourage effective collaboration between the parties, as previously
discussed. It is fair to say that if an Employer and a Contractor entered into an agreement in each of
the contracts discussed with a fair and collaborative attitude to the contract, and each agreed to bear
the risk he can bear most effectively, each contract would run smoothly and there would be very few,
if any disputes, as each party would behave in a fair and equitable manner. But what if there were
parties who set out to take advantage of the other party? The construction industry has an injurious
reputation for this; stories of contractors underbidding, circumventing certain clauses and forcing
issues to dispute resolution in order to recoup costs incurred through the process of underbidding.
This is one of the main reasons so many contracting firms collapsed when the recession transpired;
they under-bid in order to stay in work, could not afford to keep going, tried to recoup monies through
the claims process, and many businesses ceased trading as a result (Howley and Lang, 2008).

If you are a lay person, and you cannot understand legal jargon, you will undoubtedly prefer the ECC
contract. Its easy to read. If you dont have experts in your business, you will prefer this contract.
You will prefer the Fidic suite a little less, and you will dislike the GCCC. The GCCC is a tedious
contract to read, it is complicated; jumping from clause to sub-clause- its written for solicitors and
contract administration experts. One might argue that if you are serious about your business, you will
employ an expert to administrate your contracts, and it will be his job to read and interpret the
difficult contract. The issue is, in times of strife, when all effective collaboration and partnering
has disappeared into the murkiness of delay events, cost overruns and claims, does the contractor want
a contract that is flexible and interpretable, or does he want to know where he stands? A responsible
contractor would want to make the decision whether to enter to dispute resolution process and
whether he could win his case or not.

The ECC utilises adjudication as its primary method of dispute resolution; Fidic a dispute
adjudication board, and the GCCC conciliation. Conciliation and adjudication will be the least costly
method of dispute resolution of the three, as the DAB will incur the costs of three members and
possibly create more of a logistical burden due to the possible conflicting schedules of three
nominated individuals. Fidic and GCCC state arbitration as their secondary means of dispute
resolution, their last resort. ECC can proceed to either arbitration or litigation. This will be a costly
process. The proponents of the ECC contract argue that there is very little evidence of claims
progressing to adjudication and hence to litigation as a result of flaws in this contract. This can be
explained by the fact that the Adjudication Act was published in the UK the same year as the NEC3
suite of contracts, and ensures confidentiality for such disputes. In terms of conciliation, DABs and
adjudication, the mediator must not act as an arbitrator; this implies that he will not apply the
principles of common law or equity. He will operate within the confines of the contract as they are set
out. A loosely defined contract such as ECC can allow interpretation and interpretability, and
surprises are not ideal in a dispute resolution situation. If there is interpretability, it is also more likely
for the judgement passed by the Adjudicator to be deemed moot by either Client or Contractor, and
the dispute will proceed to either arbitration in the case of Fidic, or litigation in the case of ECC. The
GCCC provides a viable alternative to this, whereby the terms of the contract are strictly defined from
the outset, and each party knows their role and responsibilities. It is entirely correct that the GCCC
contract appears more onerous to the Contractor, it places as stated a large administrative burden on
him, is difficult to read and is incredibly strict. It also places an additional amount of risk on him than
the ECC or Fidic. It does however, have its positive sides. It was developed based on a large body of
case law and stems from genuine concerns of Employers in a construction industry that was, at least
for a time, rife with claims and disputes. It can work to protect both employer and contractor in a
more meaningful way than the ECC or Fidic which due to their nature can lead to uncertainty when
entering into dispute resolution. In his 1994 report entitled Constructing the Team, Michael Latham
commented that

"The client who wishes to accept little or no risk should take different routes for procuring advice
from the client who places importance on detailed, hands-on control."
This holds true when evaluating each contract- they have each their own benefits and disadvantages,
but in terms of dispute resolution, a detailed and well-defined contract such as the GCCC will provide
both Employer and Contractor with control over the outcome, and allow works to be completed in as
timely a fashion as possible.