NEC recently published a new suite of Facilities Management Contracts, 'hard' copies of which are to be available from June 2021. Louise Shiels and Stuart Murray summarise the new NEC4 suite of contracts here.

However, traditionally, the NEC Term Service Contract (TSC) has been commonly used for the provision of facilities management (FM) services.

The TSC is intended to be used for the appointment of a contractor for a period of time to manage and provide a service, and is used widely both in the public and private sector.

While an NEC guidance note is available, we have set out below questions we are frequently asked about the operation of the TSC:

Are there any restrictions on the services that can be procured using a TSC?

The TSC can be used for the provision of a wide range of services of varying values, however, is most frequently used for 'hard' FM services. There are no express restrictions within the TSC or the NEC guidance notes around the type of services the TSC is designed to cover. The TSC is often used for local authority highway maintenance contracts and property maintenance and repair contracts.

What pricing options are available under the TSC?

There are three Main Option Clauses, including:

  • Option A: Priced contract with activity schedule.
  • Option B: Target contract with price list.
  • Option E: Cost reimbursable contract.

The most common Main Option Clause selected is Option A, where the risk of carrying out the services at the agreed prices largely sits with the Contractor. Given the fact that the TSC is frequently used by public sector organisations, we have rarely seen Option E being used due to the fact most public sector clients require cost certainty from the outset.

What are the key differences between the NEC4 TSC and the NEC3 TSC?

The fundamental principles and processes under the NEC4 TSC are largely the same as those under the NEC3 TSC, however, there have been a number of key changes. Some of these changes are consistent across the NEC suite of contracts, such as the standardisation of terms, and some are specific to the TSC and designed to enhance the processes under the contract and management of the contract.

Some key changes include:

  • NEC4 introduces a number of new Secondary Option Clauses, including: X1 – Price adjustment for inflation
  • X8 - Undertakings to the Client or Others
  • X10 - Information modelling
  • X11 – Termination by the Client (replacing the NEC3 option for the Employer to terminate for any reason at Clause 90.2)
  • X19 – Termination by either party
  • X21 – Whole Life Cost
  • X23 – Extending the Service Period and
  • X24 – the accounting periods.
  • NEC4 moves the Task Order provisions into the Core Clauses and out of the Secondary Option Clauses, reinforcing the use of Task Orders as an integral part of the TSC rather than simply an option. NEC4 also introduces a quotation process for each task.
  • The Service Manager may instruct a change to the Affected Property, such instruction being a compensation event (subject to certain exceptions). This introduction is aimed at allowing for fluctuations in the client's assets/properties (which may be likely to occur in the current economy).
  • A failure by the Service Manager to reply to a contractor's plans or a Task Order programme can result in them being “treated as accepted”.
  • NEC4 introduces two new compensation events addressing material differences in anticipated versus actual quantities, and the correction of mistakes in the Price List.
  • Options W1 and W2 have been amended to include dispute escalation procedures with senior representatives.

This is not an exhaustive list and there are other differences between the NEC3 TSC and the NEC4 TSC.

Are the TSC conditions of contract commonly amended?

Often the TSC conditions of contract are amended by way of bespoke Z Clauses, which typically enhance the employer/client position. The extent of any Z Clauses largely depends upon the nature and value of the services and the extent to which project specific amendments need to be incorporated. We typically see numerous amendments made by public sector bodies to incorporate 'public sector' style clauses, such as data protection provision, anti-bribery provisions and community benefits requirements.

Does the TSC include any exclusivity rights in favour of the contractor?

The TSC does not give a contractor exclusive rights in relation to any services required by the Employer/Client. Such a provision would need to be incorporated by way of a Z Clause, but this is not common in our experience and in fact most employers/clients, particularly in the public sector, include 'non-exclusivity' provisions. Such provisions typically provide that the Employer/Client is not prohibited from, and has no liability to the Contractor for engaging others to carry out services, which may otherwise be instructed under the TSC.

When would a Task Order be issued rather than an instruction, to change the Service Information/Scope?

Task Orders are usually issued for distinct pieces of work which are managed as 'mini projects', with specific starting dates, completion dates and delay damages for late completion. The Contractor is also required to prepare and maintain a Task Order programme.

Changes to the Service Information/Scope are typically used to document changes to the service, the introduction of new service areas, changes to constraints and short-term changes to the service. Any such instruction will then be assessed under the contract as a compensation event.

Contributors

Jane McMonagle

Partner & Head of Transactional Construction, Infrastructure and Projects

Harriet Rutherford

Senior Associate