5 ways to leverage compliance, collaboration, and control to avoid disputes using NEC4 contracts

March 31, 2023 | 4 minute read
Janet Poses
Product Marketing Director
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Developed in the UK and used widely throughout commonwealth countries, the NEC4 Engineering and Construction Contracts are built based on concepts of mutual trust and collaboration to facilitate robust project management processes.

When implemented and administered optimally, owners, contractors, and projects win.

In this post, we will talk about steps to take to reduce costly, risky, and time-consuming disputes on your projects. Improve owner-contractor relationships and project outcomes.

1. Collaboratively agree on value of work at time of contract initiation

Break down components of scope and associated value. It isn’t enough to measure value based on percentage of the activity completed. Not all steps within an activity are created equal. It is much faster, easier, and clearer to determine and validate the timing and accurate payment amount, when the value of steps has been agreed to up front and measurement tools are in place from the beginning of contract initiation. Top tip: Ensure integration between your cost, scope, and schedule milestone tracking systems.

2. Ensure relevant parties have access to same system to avoid multiple sources of “truth”

As mentioned, the NEC contracts are built based on concepts of mutual trust and collaboration. A big part of a collaborative culture on a project is for all parties to have access to work together in a common system. Not only will the right technology greatly streamline the process of adhering to NEC4 requirements such as the need for all communication to be able to be “read, copied, and recorded,” it can also greatly reduce risk for all parties by provided automated controls to ensure contract compliance. For example, there are strict time requirements to provide notice of defects and resolution in order for a contractor to be entitled to payment for those items. Additionally, if there is a delay by the contractor that causes the owner to pay more money, the contractor must pay that additional cost. Without clear, consolidated cost and schedule data, it is difficult to determine the exact cost impact of a delay.

3. Eliminate siloed information and processes

Disputes often arise from inconsistent or incomplete data. Key to the NEC4 contract is shared risk and shared reward based on the traditional pillars of cost, schedule, and scope. Attaining agreement on outcomes requires the relevant parties to have access to the same connected, up-to-date, and accurate data to value the cost and schedule impacts of changes, delays, and defects. Having integrated cost, schedule, and contract processes accessible from within one system is critical to efficiently and accurately administering NEC4 contracts, leading to reduced disputes, better owner-contractor relationships, and project success.

4. Ensure complete and accurate records across all projects

Think of the time, effort, and stress that is eliminated when you can quickly access the information you need. When all relevant parties have access to the same project cost, schedule, and change information, disputes are prevented and the project is not on hold while multiple parties search for information, compile it, and negotiate outcomes.

5. Apply current learnings to other projects

In contract administration and project management, we want to continuously improve. That means improved schedule and budget adherence, increased margins, and faster operational readiness. Consistent processes, controls, systems, and reporting across your projects improves your ability to pass along learning project to project. If an issue or risk that arises on a project might be applicable to similar projects, that can easily be applied to the other projects with any related cost and/or schedule data learned. These insights, brought in from other projects, help eliminate surprises, which are a key cause of project disputes.

By collaboratively agreeing on the value of components of work, ensuring all relevant parties have access to and are working from the same, current, connected data, having clear, complete and consistent data across your projects, and learning and applying those learnings from project to project, you can dramatically decrease disputes and strengthen owner-contract relationships to improve project outcomes.

Oracle Primavera Unifier has been configured to manage and control NEC4 contracts. Learn how the Oracle solution is improving project outcomes.

The Oracle Smart Construction Platform combines our industry-trusted applications with a common data environment and an ecosystem of partners to help owners and delivery teams work together and continuously improve performance. The platform connects teams and data, synchronizes work, and empowers individuals to make informed, proactive decisions. Power performance with proven Oracle Construction and Engineering solutions for scheduling, portfolio management, construction project management, project controls, construction payment management, and more.

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Janet Poses

Product Marketing Director

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