JCT vs NEC 17th April 2019

Introduction

JCT and NEC contracts are standard form of contracts that have stood the test of time in the UK. Both
contracts provide a variety of options that suits the needs and requirements of employers. However, it is
necessary to understand projects requirements and the level of control aspired by the employer when
selecting a contract form and a procurement route. What follows provides an overview of the fundamental
differences between the contracts and their suitability to types of projects followed by a review of the
suitability and mechanisms for selecting the most appropriate contract form.

So, what about the Contract Forms?

NEC was published in 1993 and is designed for both the UK and international community while the JCT
standard form dates back to 1931. JCT may be seen as a ‘traditional’ form of contract that has been long used
as a standard for contracts in the United Kingdom while the NEC lays its foundation on the contemporary
requirement for clarity, flexibility and collaboration. NEC, in essence, provides a fair balance of risk between
the parties to the contract and therefore takes a proactive approach in effective contract management and
administration. Conversely, JCT maintains a comparatively traditional (master and servant) approach that
concentrates on the transfers of risks and liabilities under the contract.

Main differences under the Contract forms

Project Management and Contract Administration

Under the JCT , the Contract Administrator (CA) administers the contract on behalf of the employer and has
a duty to act impartially between parties to the Contracts. The CA main emphasis is on payment
administration and usually guide the parties though the procedures and processes under the contract. This
can be seen as reactive administration that tends towards a contractual attitude which fosters an adversarial
relationship between the parties.

Under the NEC, the Project Manager fulfils responsibility for contract administration. The PM assumes a
proactive project management and collaborative role with a pre-requisite to act in a spirit of mutual trust
and co-operation with both the employer and the contractor. At its outset, this fosters the optimization of
project delivery while aiming to reduce disputes. Responsibility under NEC 3 is shared and not merely
transferred and thereby ensures an effective team dynamics while maximizing the level of administration
toward efficiency.

Time-Programme and Progress

The programme requirement under NEC is often described as the ‘beating heart’ of the contract. The fair
balance of risks under the NEC provides a burdensome obligation on both parties. This is therefore to say
that it pays for both parties to allow sufficient resources to this task. As such, the contract mechanism
mandates a periodical programme update with the PM’s approval required as a prior condition for
implementation. JCT on the other hand pays little attention to the programme and exclude any requirement
for regular submission of programme for approval. JCT rather emphasise on the submission of a master
programme and only commands a revised programme if an extension of time is granted. The hands-on
attitude under NEC enhances project delivery and resources optimization. NEC requirement provides an
efficient tool for managing the programme; the accepted programme is used to assess delays and extension
of time under the contract in real time under the compensation events procedures.

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JCT vs NEC 17th April 2019
Pricing under the contract forms are different.

The flexibility of the options (A to F) under NEC provides a mean for contemporary project delivery while JCT
maintains a relatively firm stand on pricing options. JCT for instance is mostly based on lump sum contract
with or without quantities while NEC provides an array of options with six pricing options amongst which are
the target contract with activity schedule, target contract with BOQ, cost reimbursable contract and
management contract, options that are not available under JCT. However the inclusion of several pricing
options with secondary clauses makes it harder to choose if you are used to the conservative options under
JCT.

JCT NEC

With quantities (Lump sum contract) The Employer Option A- Priced Contract With Activity Schedule
provides drawings and bills of quantities that specifies
the quality and quantity of work
Option B – Priced Contract With Bill of Quantities

Option C – Target Contract With Activity Schedule

Without Quantities (Lump sum contract)

The Employer provides drawings together with a Option D – Target Contract With Bill of Quantities
description of works and either a specification or work
schedules Option E – Cost Reimbursable Contract

With Approximate Quantities (Measurable) Option F – Management Contract

The Employer provides drawings and approximate bills
of quantities.

Contains Provisional Sums NEC Contract does not include provisional sums

Figure 1. Pricing Options under the Contract Forms

Payment

Both contracts requires the certification for any amount due under the contracts. Under JCT the CA has 5
days to issue the interim payment certificate against 7 days for NEC, following which payment is effected by
the employer within 14 days unless a pay-less notice is issued. Both NEC and JCT takes account of the
provision of the Housing Grants and Land Regeneration Act 1996. The following diagram illustrate the
provisions under the contracts for payment administration.

Figure 2. Payment Procedure under JCT

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JCT vs NEC 17th April 2019

Figure 3. Payment Procedure under NEC

Additional Time and Money

Both contract forms contain mechanisms and events that entitle the Contractor to claim for additional time
and money. An event providing an entitlement to additional time and money must be a Relevant event under
JCT and a Compensation Event under NEC. JCT contiguously deals with time and money separately under the
contract and therefore an extension of time does not necessarily provide an entitlement to additional money.
On the other hand, the decision of the PM under NEC may directly lead to both time and money benefits.
Both contracts have nevertheless a common condition of precedent nature that waives the contractor’s
entitlement to additional time or money if the event in question is not notified in accordance with the
contract provisions. Both contract provides for the PM/CA to issue instruction for carrying out variation work.
JCT contains provisions that enables the Contractor to disagree to the application of the variation procedure
hence waiving his obligation to submit such quotation unless the CA instruct for the work to be done and be
valued by a Valuation. NEC again takes a proactive approach since the PM’s approval as a prior condition for
implementation or the implied condition for deemed acceptance under the mechanism for compensation
events mitigates potential disagreement that may otherwise occur under JCT.

Unforeseen Ground Conditions

NEC provides that the discovery of unexpected ground conditions, which an experienced Contractor would
have judged, at the date of the contract, had such a small chance of occurring that it would have been
unreasonable to allow for them, constitutes a Compensation Event. JCT has no equivalent clause, which
therefore mean that the risk for unexpected ground conditions on site is a Contractor’s Risk and the discovery
of any unexpected ground conditions will not normally entitle the contract to an extension of time for
completion of the works or any additional cost.

Conclusivity of Decision Making

Under JCT, the CA has to be reasonable in his judgements and hence provides a certain amount of protection.
The provisions of the final certificate makes in conclusive to the fact that quality and standards are to a
reasonable satisfaction, any adjustment including additions and or omission have been correctly made, all
and only those extension of time contained in the certificate have been given and all reimbursement of direct
loss and expenses have been made to the contractor. Conversely, NEC does not possess such conclusivity
clauses but there is an implied condition for the assessment of additional time and money. That is unless the
a disapproval is given in writing within the time bar allowed under the contract, save then, the contractor’s
proposal is deemed as accepted.

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JCT vs NEC 17th April 2019
Type of Scenario that are best suited for the Contract Form

The JCT form of contract would be best suited in situations where the employer would require more control
on the project delivery. For instance, it remains the most popular form of contract by volume in the private
sector. The commercial development community generally utilize the JCT form of contract since it provides
a comprehensive balance of risk between Employers and Contractors. On the other hand, NEC is the contract
of choice in the public sector and being nearly used by all national and local government bodies and agencies
following Cabinet’s Office endorsement in 2008. NEC provide more of a collaborative approach to contract
and therefore has a higher level of risk in its administration. It is advised that NEC be adopted for
infrastructure and building contracts that are over £ 5m while JCT is suitable for contracts between £ 5
million- £25 million. The choice of contract is closely linked to the value of the work to be undertaken as is
illustrated in the below figures.

Figure 4. Value of Work by Contract Form (NBS 2018)

Circumstances where you should avoid one contract or the other

It is advisable to adopt the JCT where the client wants more control over the works. It provide certainty in
legal meaning and the industry usually prefer its contract structure, as there are more familiarity within the
industry.

On the other hand, if you want a proactive and contemporary project delivery with a shared level of risk,
which of course comes at a cost, then go for NEC. The changing dynamics of the construction industry
mandates a collaborative approach. NEC are for projects that requires faster project delivery where usually
the contractor gets in at an earlier stage and hence optimizes efficient project delivery.

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Administration Cost under the Contract Forms

From a practical perspective, the level of contract administration is proportional to the complexity of the
contract since both contract have administrators that acts as guardians. Yet, the industry is used to the JCT
culture and its contractual nature that has been around for a long time. While the JCT approach requires a
complex procedure necessitating an increased level of administrative cost resulting from the team involved
together with long and onerous procedures, NEC on the other hand promotes trust and collaboration
between parties at the core of its contract. It nonetheless requires investment in efficient project
management, resources, training and systems for it to work effectively. Seemingly, the benefits associated
with NEC through its reduction in the likelihood of post contract claims and expensive arbitrations and court
cases counterpoise its initial investment cost.

Questions to ask prior selection of a contract, the procurement route and benefits for the project.

The choice of procurement and the basis of the contract selection is dependent on the way that the employer
wants the construction team to operate. So, selecting the most appropriate contract would depend on the
following questions:

 Time-which contract is more likely to ensure that the project is finished on time or at least based on
the requirement of the employer,
 Cost-which contract would provide better value and more cost certainty or provide the most
competitively economical solution,
 Quality-which contract will bring a greater value, and finally
 Risk- Do I want to transfer the risk or share the risk?

Irrespective of the contract form, it is essential to consider the experience and competence of the employer’s
personnel in dealing with the contract form as it is undeniably risky to venture blindly into a new contract
form. The essence is to select an administrator who possesses the skills and competence for the job. If you
want good contract administration, select a CA who has the skill to tightly control the project account and
who has a proactive hand on effective claims management for time and money. If you want a collaborative
and value inherent project then choose a PM who has appropriate competence in project management and
has a good understanding of the NEC for collaborative contract management.

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