29/04/24
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Newsletter #4 Highlights:
Public Works in Ireland, the Emergence of NEC4
Construction Industry Remains Largest Sector for Insolvencies
Environment Agency - CDF Contract
X29 Climate Change Explained
Liverpool City Council Seeks Contractors for £850m Framework
1 General
Here we see Philip Lee LLP take us through the maturing Irish market as the “pro-Employer” approach which has often created challenging relationships begins to see the benefits of NEC4.
Clare Cashin and Michael Cahill take us through the history of the public works contracts (PWC) setup, introducing NEC4, making a PWC vs NEC4 comparison, and drawing conclusion.
This short explanation is an interesting and well document piece, well worth a read.
9 Termination
This recent article re-confirms a worrying but all too common statistic within the construction industry. In the previous 12 month one fifth of insolvencies was in the construction sector. 4,403 companies followed this path.
The construction industry is a challenging sector with slim margins and exposure to local and global economics which continue to challenge the market.
NEC contracts aim to play fairly between clients and contractors, yet the use of contract amendments and Z clauses can often protect the client and expose the contractor. We wonder how many of these insolvencies relate to contractors who mainly operate with NEC contracts.
Secondary Option Clauses
Environment Agency - CDF Contract
The Environment Agency is seeing continued success with its Collaborative Delivery Framework (CDF). The success of this framework is explain here, diving into the core benefits delivered through the use of NEC4. Whilst the benefit are plentiful the EA has focussed on some key elements in this 8 year, £1.2bn portfolio:
Programme level delivery, changing Option C incentivisation to programme not just projects
KPI’s were a core part of the programme level strategy, with stretch targets ensuring optimal performance
Leading software in the form of Power BI and FastDraft (Built Intelligence) enabled rapid trend analysis
Embedding X29 Climate Change in all contracts going forward
The use of contract amendments when needed to buffer impacts outside of contractors control
X29 Climate Change Explained
The Environment Agency use of X29 is no surprise given the EA’s focus, but what exactly is X29 and how does it provide benefit? Let’s discuss:
Before X29 there wasn’t a pre-defined means of including sustainability targets and goals within NEC contracts, yes amendments could be made to the contract to force inclusion but this isn’t an overly useful approach for clients.
X29 formalises the need for ‘Climate Change Requirements’ to be met (X29.1 (1)). These requirements forming the base needs of a client and their desired outcomes in relation to sustainability targets. Using standard definitions and features of NEC contracts has meant the new clauses build on existing structure, rather than adding complication. To achieve client ‘Climate Change Requirements’, suppliers need to submit and manage ‘Climate Change Plans’ (X29.1 (2)), working alongside the ‘Climate Change partners’ in accordance with the ‘Performance Table’ which establishes targets for overall delivery.
X29 is neatly dovetailed with the following existing NEC principles:
Early warnings - Inclusion of a new reason for notifying
Submission and acceptance of the ‘Climate Change Plan’
Acceleration and Defects
Compensation events
Proposals
Overall this new approach and use of X29 allows an environmentally conscious client to define and promote targets which the supply chain is incentivised to work towards and deliver. Whilst X29 is relatively new, only being introduced in July 2022. Adoption generally takes several years, however as seen with the Environment Agency, this could be accelerated.
Contract Data
Liverpool issued a Prior Information Notice (PIN) notice on 19th April alerting contractors to the upcoming £850m opportunity . Procurement is expected to commence in or around July 2024 with the framework commencing in January 2025.
With a 4-year horizon giving an average annual spend of c. £210m, its no surprise multiple lots will be offered with multiple suppliers on each.
Lots are expected to be split between project up to £1.5m and project above £1.5m
It is anticipated that call-off contract will be NEC4 Engineering and Construction contract based.
Training courses:
Recommended reading:
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