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nec issues contract guidance during covid-19 uncertainty.

If you've worked on a large scale infrastructure project, the chances are you've used NEC. The New Engineering Contract suite of documents, published by Thomas Telford Ltd (TTL), has been used for projects including the Thames Tideway sewer. 

Responding to clients and contractors with queries regarding contractual complexities during the coronavirus crisis, TTL - the commercial arm of the Institute of Civil Engineers - has issued new guidance. One of the critical points relates to Clause 19 (concerning prevention) where sites have been shut or work delayed as a result of Covid-19 disruption.

TTL said that it recognises that the biggest challenge was likely to be the scarcity of resources, not only plant and people but equipment and materials. Contractors who are trying to make sense of their obligations during this unprecedented time will benefit from the key points outlined, regardless as to where the contract was based and how that country had been affected by Covid-19.

A compensation event
 

Peter Higgins, chair of the NEC4 board, says it's critical that contractors or project managers continue to identify mitigation measures. As the picture around the virus develops, he recommends further early warning meetings be held to discuss the impact of restrictions in the movement of goods and people. 

Where a potential change to the law, Option X2, has been incorporated into the contract, this would trigger a compensation event. Where work has ceased entirely, Clause 19 could apply. It would be difficult, Higgins argues, for a contractor to have anticipated the situation or made allowances. Therefore, the provisions of Clause 19 apply and the project manager needs to take control of the situation.

A strict test
 

Higgins urged caution, saying that tests set out under Clause 19 are strict. For example, the delay must impact the critical path of the project and significantly impact the completion date for the project. Clause 19 and an accompanying compensation event will then only apply if the virus causes a delay, rather than impacting on cost. "Where the effect of the virus is having, or going to have, a significant impact on the work in the contract, it would be sensible for the project manager to manage the effects of the virus on the works in the interests of the client," Higgins said. 

That could mean that the project manager instructs the contractor to stop work or changes the scope of the works to overcome the difficulties encountered as a result of the Covid-19 crisis.


If an NEC4 Service contract is in place, Clause 19 and a corresponding compensation event are not an issue. But Higgins believes that the service manager should follow best practice and be proactive by taking the same early warning approach. 

Higgins believes that all parties should work together to best manage the impact of the Covid-19 pandemic on delivery and service. The early warning procedure emphasises the need for clients to actively manage the effects of the coronavirus in order to take decisions that best serve the needs of the project.

The newly issued guidance relates to the most frequently used Engineering & Construction Contract (ECC). However, if modifications have been made, the contract should be checked to see whether the TTL guidance applies.

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