Cooperative contracts should make the industry less controversial by working together under a project manager. Image generates via Idiogram 2.0 with AI.
“There are so many reasons why things can go wrong,” says Rekha Thawrani, global director of NEC contracts.
A dark feeling maybe, but as Thawrani knows too well, it is a precise in the world of global construction
According to the dispute specialist HKA, based in Great Britain, who examined the data on 2,002 main work in 107 countries at the end of June 2024, is one of the main reasons why so many projects end over the budget, and late that they start on the wrong foot with a contract, who later denied the people who signed him.
HKA found that contractors around the world are currently in disputes over amounts of a total of 84.4 billion US dollars, while the cumulative length of extensions spoke out for 994 years.
In addition, HKA found that conflicts in relation to the formation or the conditions of the original conflict – from administrative defects to incorrect demands and tender errors – were affected by 43.2% of the projects analyzed. This rose to 51.9% in the Middle East and 68% in Africa.
“With many contracts, as soon as they are signed, go into a drawer, and everyone forgets them. In the end, disputes are treated with regard to payment and definition, and the courts are full of it, ”says Thawrani.
What is collaborative contractual recordings?
Thawrani belongs to a growing number of experts who try not only to convince project owners all over the world, to say goodbye to standard construction contracts in order to facilitate an increasingly globalized market, but also to change the whole way, like the industry works.
In the past 30 years, engineers, contractors, government officials and industrial bias have urged to encourage builders and their customers to work together to create projects instead of trying to reduce the risk as far as possible and then at the first to the first Law to hurry.
One of the first supporters of “collaborative contract”, as it is now known from civil engineers in the nineties.
Barnes was shocked by the common practice among the contractors to offer projects that are based at the lowest price and then make their profits by claiming enormous overruns – which in turn led to many major projects that landed in expensive legal proceedings.
Barnes was of the opinion that one of the main reasons why builders and their customers were so often contradicted, consisting of the fact that the contracts they have used were the relationship via a strong transactional model that parties started from the start.
Instead, he set off to find a new type of contract that should make the industry less controversial by encouraging all parties to work together under a project manager. He even wrote a stage play on this topic.
The result was the new engineering contract – a number of documents that supporters say is much more than one contract, since the whole thing focuses on the suggestion of good management.
Rekha Thawrani, global director of NEC contracts. Photo: NEC contracts
“To deliver a successful project, you need a contract that is fair in all parties so that you work together in the spirit of mutual trust and cooperation. These are really the basics of the NEC and actually the first clause in the contract, ”says Thawrani.
Thawrani points out that NEC contracts, now in their fourth edition, include mechanisms such as an early warning system and a risk register in which the parties are encouraged to proactively communicate and solve problems by providing transparency and collective responsibility for risk management support financially.
“We ensure that trust and respect are made by mechanisms such as early warning,” she says. “So if something goes wrong, as the term says, you have to give an early warning. Instead of hiding behind a screen and saying that everything is going well and I will handle it at the end of the project. “
NEC contracts also contain options for important performance indicators (promotion of cooperation, in which the goals of the parties are aligned with the overall success of the project) and cooperation with several parties (to support collaborative work in the entire supply chain).
Since the first form was published in the nineties in the nineties, the order group has become the recommended form of contract for the British public sector and has been used for large British infrastructure projects such as the HS1 rail connection between London and the Channel tunnel. The venues and the infrastructure or the 2012 Olympic Games, the Thames Tides Tunnel and CrossRail.
NEC contracts at event locations for the Pan American Games in Lima, the Square kilometer Array Observatory in South Africa and Australia as well as the partnership of Sydney Water for the success of a 4 -billion dollar -infrastructure program.
Since the publication of the NEC, other standard l were to have the contractual contracts for common styles.
The American Institute of Architects (AIA), one of the most popular publishers of standardized construction contracts in the USA, has been selling standard documents for integrated project delivery since 2008 and published a new collaborative construction management last year through requirements for early engagement and integration and improved communication and transparency .
Who concludes collaborative contracts?
The American Society of Civil Engineers also sponsors a new series of contracts that aim to promote collaborative project provision. This includes tweaks such as the use of the contractor at the beginning of the draft process to carry out construction reviews, to advise the material availability and selection, to evaluate risk factors and to reduce strategies, to develop procurement strategies and to organize work in efficient work packages.
The International Federation of Consulting Engineers (FIDIC), the editor of the FIDIC suite of contract templates, which also publishes standardized construction contracts for international projects and is probably the most frequently used standard contract form for international construction projects, is currently a new one to complete a new suite of collaborative contracts.
Regardless of this, lawyers have also concluded separate “Alliancing” agreements such as the framework alliance contract published by Kings College London, which aims to work together better on the existing contract prices on a complex project.
Thawrani says that admission to NEC contracts has directly reduced the amount of the legal disputes that result from controversial contractual terms.
“One thing that we are really proud is that our knowledge as a standard contract form NEC was not in any major legal disputes,” says Thawrani. “There have been legal disputes in case history in which the customer changed the NEC core clauses, but because disputes are treated by a jury throughout the project, this stage does not occur.”
NEC was used by the British Olympic delivery authority to carry out the construction program for the venues and the infrastructure required to organize the 2012 Olympics 2012. The program was delivered within the budget and in advance in front of the schedule. Photo: Adobe Stock
However, this ignores a number of top-class legal cases that have come to the courts with changed versions of the contract such as Costain against Bechtel (2005) in relation to a dispute over the submission of a contract for work on the channel tunnel connection.
Despite the introduction of work practices and contracts for cooperation, construction projects seem to be more likely to be more likely to stick to their budgets or schedules – or to avoid disputes.
HKA, which has analyzed its database for important construction projects worldwide in the past five years, has the total value of the controversial amounts of EUR 48.6 billion US $ 84.3 billion. The total time in extensions increased from 600 years in 2020 to 994 years in 2024.
One of the best -known projects that have currently been built under NEC is the British HS2 High Speed Rail Link, which was originally designed for the connection between London with Leeds and Manchester, but has been reinterpreted due to massive costs.
Last year, the British government announced that it “restored the supervision of the ministers of the project to ensure greater accountability”.
However, supporters of collaborative contracts argue that the built environment as a whole will use the advantages if collaborative practices can be received.
Are collaborative contracts effective?
“This debate about collaborative contracts is not new. The reason why it made no progress London, the main author of the FAC-1 Alliance Contract.
At the CICA-EIC conference in Paris in November, Mosey argued that projects had to start together from the start, whereby a procurement strategy ensured that the contractors are selected, not with the lowest price, but by evaluating suggestions for improved quality, Efficiency, security, risk management, social value and net zero. Then projects can benefit from their specialist knowledge and the contractors can learn how the efficiency can be improved from one project to another and changes can be implemented.
“If we rely on slogans such as loyal and faith or no guilt or win-win situation, it sounds very nice, but it is not very clear. There is cynical criticism outside the room. People who work with high risk, low margins and dangerous environments are not easy to convince of large words and can easily deter if they are underlaid and say what they should do in a way that is not clear, ”says he. “Despite the logic of another approach, people return to the logic of a financial director, where I got the lowest price or a design consultant that I don't want to see the contractors if they are on site.”
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