NEC4 January 2023 amendments - what are the key changes to the ECC?

NEC published amendments in January 2019 and October 2020 and following industry feedback, have now issued a further set of amendments (January 2023) to almost all contracts in the NEC4 suite. Among the amendments are the following key changes to the Engineering and Construction Contract ('ECC'):

W2.3(2) Adjudication timetable (all contracts including the Y(UK)2 Option)

Dispute resolution Option W2 has now been amended to bring it in line with the requirements of the Housing Grants, Construction and Regeneration Act 1996. The adjudication timetable is now a matter wholly for the Adjudicator and the previous, often impractical requirement for all submissions to be made within 14 days has been removed.

Working from home part of Defined Cost (also included in ALC, DBOC, ESC, FMC, FMS, TSC and TSS)

Amendments have been made to the Schedule of Cost Components (SCC) to tackle the issue of people working outside of the Working Areas. An option has been added in the Contract Data for users to note whose costs will be recoverable as part of Defined Cost even when working outside of the Working Areas. This would include people working from home and from other locations.

22.1 Use of Contractor's design (also included in ALC, DBOC, ESC, FMC, FMS and SC)

The ability of the Client to use the contractor's design has been extended to include documents prepared for design. Parties are still required to look to the contract (as well as the Scope) to see whether the right to use the design has been amended. In practice, clause 22.1 is often amended so that an irrevocable, royalty free licence with the right to grant sub-licences is granted (including after termination), This is a clause that will no doubt continue to be amended through Z clauses despite the new enhancements.

X22 Early Contractor involvement clauses amended

Secondary Option X22 has been amended to enhance collaboration in Stage One and to provide further certainty where works do not proceed to Stage Two. We have seen an increase in the use of X22 in the last few years. The amendments:

1. The Project Manager and Contractor can agree a change to the Site Information during Stage One;
2. Compensation Events ('CEs') under Stage Two are judged against the date of the notice to proceed rather than the Contract Date, allowing any information gathered during Stage 1 to be taken into account when assessing CEs.
3. CEs before the date of the notice to proceed are deemed to be included within the changes in Prices and Completion Date in the notice to proceed. This allows settlement of outstanding CEs before Stage Two works commence, providing greater clarity.

X29 climate change clause included (all main contracts)

X29 was published in July 2022 as a secondary Option and it is now included in all main contracts. Climate change requirements and plans can now be included in the Scope. This will assist with the push towards net zero and other similar targets. The Option allows the option of a performance table with financial incentives, which should encourage contractors to achieve climate change targets.

Notable changes to other NEC contracts

One notable change to other contracts is that a clause equivalent to X15 is included in the ECSC and ECSS, which allows a reduction of the Contractor's standard of care to 'reasonable skill and care' rather than the higher, fitness for purpose standard. This reflects the reluctance of contractors, certainly within the UK, to accept the higher standard of care. It also brings the clause in line with standard PI insurer requirements.

A limitation of liability in the short contracts has also been introduced as an optional clause.

Summary

The improvements made by the January 2023 amendments further enhances the NEC4 suite of contracts following constructive suggestions from users in the industry.

A schedule of amendments is available to reflect these changes and NEC4 contracts published from January 2023 will include the amendments. You should consider whether these amendments are appropriate to include as part of any new contracts when issuing tenders or negotiating terms.