Securing Positive Project Outcomes using NEC3

The NEC3 suite of contracts is growing in use in New Zealand.  The contracts were used with apparent success for the development of the stadium and other facilities for the London Olympics in 2012, and it is the preferred form of contract by the Office of Government Commerce for all public private partnerships in the UK.

In NZ, the engineering and construction contract was used for the development of the Northland Events Centre for the Rugby World Cup in 2011.  At $16.5 million, the development was more modest that some others, but it was on time, within budget, and effective.

This paper was prepared for the NEC Users’ Group Australasia conference in Christchurch on 27 August 2013.


Unforeseen physical conditions and allocation of risk

In the construction industry, we hear many adages like “project risk should be allocated to the party best able to manage it[1].  While commendable, truisms like this do not do justice to the complexities or the subtleties of allocating risk in large construction projects.

Risk is not static[2].  It changes through the construction process at a number of different levels – likelihood, avoidability, severity, downstream impact, foreseeability, manageability and value spring immediately to mind, and yet traditional tendered lump sum contracting procedures force contractors to commit to certain outcomes at a time of greatest uncertainty in a competitive environment[3].  The common thread in any analysis of allocation of risk is identifying initial uncertainty, how responsibility for that uncertainty is allocated, and what to do if the risk associated with that uncertainty does eventuate.

This paper was delivered at the first of two sessions organised by the Society of Construction Law on 1 May 2007.