~ Pe r ga mon

International Journal of Project Management Vol. 15, No. 4, pp. 255-261, 1997
1997 Elsevier Science Ltd and IPMA. All rights reserved
Printed in Great Britain
0263-7863/97 $17.00 + 0.130
PII: S0263- 7863( 96) 00078- 6
A compari s on of the cl ari ty of
tradi ti onal const ruct i on contracts
and of the New Engi neeri ng
Cont ract
J C Broome and R W Hayes
Project and Construction Management Group, School of Civil Engineering, The University of Birmingham,
Edgbaston, Birmingham, B15 217, UK
Thi s p a p e r di scusses cl ar i t y and style of dr af t i ng in const r uct i on cont r act s bas e d o n r es ear ch
car r i ed o ut by t he Pr oj ect and Const r uct i on Management Gr oup at t he Uni versi t y of Bi r mi ngham
i nt o t he effi cacy of t he New Engi neer i ng Cont r act . One of t he t hr ee pr i nci pl e obj ect i ves of t he
NEC was t he achi evement of gr e a t e r cl ar i t y. The fi rst section of t he pa pe r asks whet her exi st i ng
c o n d i t i o n s of cont r act achi eve cl ar i t y, deduces t hat t hey do no t a n d i nves t i gat es wh y not . The
s e c o nd sect i on r evi ews t he ori gi nal ai ms of t he a ut hor s ' of t he New Engi neer i ng Cont r a c t
(NEC), bef or e pr esent i ng t he fi ndi ngs of r es ear ch t o dat e on whet her t he cont r act fulfils bo t h
t he needs of t he c o ns t r uc t i o n i ndus t r y a n d t he sel f-st at ed al ms of t he aut hor s of t he NEC. I t
t hen br i ef l y consi der s some gener al legal cr i t i ci sms of it and t he changes ma de t o t he second
e di t i on, t he Engi neer i ng and Cons t r uct i on Cont r a c t ( ECC) . The p a p e r t hen out l i nes t he benefi t s
of cl ar i t y to effect i ve pr oj ect ma n a g e me n t a n d concl udes t hat whi l e ECC is not per f ect , it is a
si gni fi cant i mp r o v e me n t o n ot her f or ms of cont r act in t e r ms of cl ar i t y. 1997 El sevi er Science
Lt d and I PMA
Keywords: New engineering contract, conditions of contract, clarity
This paper discusses clarity of construction contracts. By
clarity, the authors mean the design and layout of the whole
contract document , as well as the use and order of words
within a sentence. Additionally, the authors extend the
definition by saying that clarity requires that the clauses
within a contract should fit together to form a logical
whole, be procedural l y correct and relevant to modern con-
struction practice. Section 1 is a general revi ew of the
traditional contract forms concerning their clarity, while
Section 2 deals specifically with the clarity of the New
Engineering Cont ract (NEC) now published in its second
edition as the Engineering and Construction Contract (ECC).
Section 3 offers some concluding comment s on the benefits
of the NEC.
Although the majority of the research has been carried
out with UK users the NEC was designed to be used inter-
nationally. Where possible international user ' s experi ence
has been accessed via interviews, references and corres-
pondence. Consequently the discussion and conclusions
in this paper should be relevant to those normal l y using
international contracts such as FI DI C.
1. Do c o n v e n t i o n a l c o n t r a c t s a c h i e v e c l a r i t y a n d i f
not , wh y n o t ?
1.1. Do conventional conditions of contract achieve clarity?
This paper started f r om a perception by the authors that the
existing conditions of contract did not achieve the definition
of clarity given above. Evi dence both for and against this
proposition was looked for. Evidence for can be found from:
A postal survey of construction organizations and con-
struction l awyer organizations in 1992. The survey,
which had 23 returned questionnaires, found that both
groups thought that in the drafting of contracts "si mpl e,
plain English is mor e effect i ve" than "t radi t i onal legal
drafting ''~ .
Distinguished legal commentators. Ian Duncan Wallace
states of existing construction contracts that "t hei r ob-
scurities and poor draftsmanship create many anomalies,
i f not downri ght absurdities and i nj ust i ces" and that
" t he draft smanshi p tends to be clothed in a legalistic,
poor quality j argon, ideally suited to conceal and
255
Clarity o f construction contracts: J C Broome and R W Hayes
obscure practical intentions and consequences ''2. He
states that "the draftsmanship of the available standard
forms in all countries is of the poorest kind ''3. A
barrister reviewing the then new ICE 6th edition in
1991 states "There are 13 golden rules for drafting a
contract. Every contract should break at least one rule:
the 6th edition of the ICE breaks 12 of them ''4. The
FIDIC conditions, which originate from the ICE con-
ditions, are "quite obscure" on "the way in which an
appropriate sum (for expenses arising from instructions or
variations) would be calculated" with parties to a contract
being advised by one eminent lawyer to "seek to clarify
what is intended ' ' s before entering into a contract.
The court s, who have consistently criticized the con-
struction industry for its archiac and unsatisfactory
language 6. For instance, they have described the JCT
form as "an extremely complicated form of contract"7,
stated that it is "lamentable that such a form be used to
govern so many . . . activities throughout the country"8
and that it is "deviously drafted with what in parts can
only be a calculated lack of forthright clarity ''8.
The Pl ai n Engl i sh campai gn 9 and ot hers 1. The language
does not satisfy criteria laid down by them. JCT, ICE
and FIDIC conditions have long sentence length, poor
layout and contain many redundant legal expressions.
For example clause 65 (6)(c) of the ICE conditions
contains a sentence of 252 words with no punctuation,
as well as many other ' fouls' .
Pract i t i oners. It is often said that "on the best pro-
jects, the contract is left in the drawer" and numerous
resident engineers, project managers and contractors'
employees have told these authors that to run a project
by the terms of the existing standard conditions would
mean that progress on site would be at best slow and
often impossible. This suggests that the conditions
are not practical or relevant to modern construction
practice.
The authors have only been able to identify two linked
arguments, not so much against the proposition, but to
justify the status quo:
Fami l i ari t y. " A major advantage of using a standard
document is that those who use it regularly become
familiar with its contents. They thus become aware of
both its strengths and weaknesses, and the suitability
for their own specific purposes ''~1. This reduces the
number of disputes and misunderstandings ~2 and it
is "possible to use the contract, safe in the knowl-
edge that what is learnt today will not be redundant
tomorrow"t3.
Precedent . Because judges must follow previous
decisions, a lawyer or barrister can advise a client on the
outcome of a case ~1. Others would argue that the reason
people need to go to court in the first place is because
the wording is unclear j4 and that personnel at site level
are paid to get on with construction and not to have
an in depth knowledge of case law. Consequently, to
prevent disputes starting in the first place clear English is
required, not a long history of case law on that particular
clause or phraseology.
The weight of evidence criticising the clarity of construc-
tion contracts (and the complete absence of any praising it)
suggest that the original perception--existing conditions of
contract do not achieve clarity--is correct.
256
1. 2. Why are const ruct i on cont ract s l acki ng in cl ari t y?
A number of possible reasons have been found:
Ori gi n. The original contracts were not written by lawyers
specializing in construction. Ian Duncan Wallace states
that, from the wording of these contracts, "the conclusion
is inescapable . . . that the lawyers commissioned to draft
the early contracts were probably Chancery pleaders, with
great experience of leases, but without any knowledge of
the practical or commercial problems and situations on a
building site ''~s. As a consequence, "the draftsmanship of
the available standard forms in all countries is of the
poorest kind, and in the UK and Commonwealth largely
derived from very old precedents, often in archiac language
drafted by lawyers with little or no experience of the back-
ground and needs of a construction project ''3.
Age. Much of the language and many of the phrases used
in existing forms of contract can be found in the contracts
of late 19th century England which evolved from and
closely followed those drafted by lawyers for their own
private clients. For instance, the contracts used for the
construction of the Thames embankments and main London
sewers in the eighteen sixties contain many phrases which
are almost identical to those found in the ICE and FIDIC
conditions ~6. The JCT forms are direct descendants of the
original RIBA form first published in 1870 and much of the
original style, if not content, can be detected in the latest
JCT forms 17. In an industry where the structure and tech-
nology has changed dramatically in the last 30 years, the
legal documents that define relationships between organiza-
tions are still based, albeit with many modifications, on
those in existence 130 years ago.
Devel opment by commi t t ee. During this century the dev-
elopment of construction contracts has increasingly been
done by committee.
For instance, the original RIBA (now JCT) forms were
published after some consultation with the London Builders'
Society. In 1903, the fifth edition was an agreed form and
sanctioned by the two national contractor organizations.
Due to the constant friction, one of these published its own
form between 1922 and 1928. The agreement to bring
them back into the fold led to the formation of the Joint
Contracts Tribunal with the bodies controlling the content
of the contract each having the power of veto and equal
representation ~8.
Similarly, in the early part of this century both the courts
and contractors were coming to the conclusion that a
standard form for civil engineering was needed ~9. Up to
then each major local authority and consulting engineer had
their own bespoke conditions, which were periodically
modified to make good deficiencies or ambiguities. There-
fore, each time a contractor bid for a potential job, he had
to study the documents closely, so that he did not take on
risk without realizing it. In 1930 the Federation of Civil
Engineering Contractors (FCEC) managed to publish a
form with the Association of Consulting Engineers (ACE).
This was not widely used 2. In 1945, the Institute of Civil
Engineers (ICE) together with the FCEC associated its
name with a set of conditions of contract, which was
obviously derived from the 1930s form. In 1950, the ACE
name became associated with it and now all three organiza-
tions are represented on a permanant committee which
published the sixth edition in 1991.
The FIDIC Conditions of Contract came into existence in
1954, are closely based on the I CE conditions and are for
use in contracts havi ng an international element. The fourth
edition, published in 1987, "r emai ns closely related to the
I CE conditions of contract, both in t erms of its structure
and worki ng, and its clause numberi ng ''2~.
Commi t t ee devel opment has not, however, al ways
i mproved clarity, for reasons which include:
Partisanship. Rather than create a consensus as a commi t t ee
approach might i mpl y, it is suggested by these authors that
the partisanship continues to this day 22 with, as one com-
ment at or noted, most i mprovement s being for one side to
gain an advantage over the other and with all of them, to
a great er or lesser extent, trying to promot e the status and
role of their profession 23.
Lack of direction. Professor John Uff notes that " t he
growt h and proliferation of construction contract forms is
notable and suggests an intention to achi eve some objective.
That object is, however, rarel y defined other than in
generality, usually consisting of a desire to ' i mpr ove' the
operation of the f o r m" with there being "l i t t l e evidence of
policy having pl ayed a significant part in the drafting of
standard forms of construction contract, other than in the
most general t erms ''24. Max Abrahamson agrees saying
" i t can certainly be said that in revising standard contract
forms the tendency has been to start work without any
consideration of basic principles ''23.
Amendment. In practice, the individual users of the contracts
have often not accepted the commi t t ee consensus but
heavily amended and supplemented t hem, qualifying the
original conditions 25 and returning industry back to the
position referred to earlier.
1.3. Is there a call f or reform ?
The defenders of the status quo use the argument s of
familiarity and precedence, yet even the courts, who set
precedence, have called for a ' r evol ut i on' announcing of
the JCT form in 1967 that, "t he t i me has now come for the
whole to be redrafted so that . . . contractors and building
owners alike can understand what are their own duties and
what are those of the architect ' ' 8.
Max Abrahamson wrote: "Cont r act s, codes, standards
and regulations could use the language and forms nowadays
best suited to construction. They could make clear in
various ways that they are intended as practical guides to
achi eve the purposes of design and construction, and that
intention is to be given paramount i mport ance in their
interpretation. With refinement those methods could help
progress towards lawyers approachi ng contracts and codes
on the construction i ndust ry' s t erms, not their own, and
reduce construction semi-legal j argon on other minds and
tongues ''26. The authors, and it would appear the authors
of the NEC, agree with these sentiments.
2. Is the NEC engineering and construction
contract the answer?
2.1. Ai ms of the authors of the NEC
The second part of this paper looks at the issue of clarity
in the New Engineering Contract, now published in its
second edition as the Engineering and Construction
Cont ract (ECC). One of the principal ai ms of the NEC was
to achieve a higher degree of clarity compared to other
Clarity of construction contracts: J C Broome and R W Hayes
existing contracts. According to the specification prepared
for the I CE in 198716, clarity was to be achieved by:
using simple and commonl y occurri ng language and
avoiding legal j argon;
using identical phrases where possible;
excluding contract specific data so that there is no need
to change, delete or add to the core conditions of contract;
setting out duties and responsibilities clearly and precisely,
using engineering t ermi nol ogy common to all disciplines
wherever possible;
not attempting to paraphrase existing law;
settling for clarity above fairness in mi nor matters which
would involve complicated text; and
omitting matters which are mor e effectively covered in
the technical specification.
Additionally, it was intended to have a more logical
structure avoiding cross-referenci ng between clauses, but
treating procedures as processes and checking that they are
logically compl et e by the use of flow charts (which are also
published) and having a modul ar syst em of ' bol t on'
optional clauses through which the contract can be tailored
to meet the requirements of the project. Lastly, it was
designed to reflect modern and up to date construction
pr act i ce- - f or instance, regarding subcontracting as the
normal practice.
These ai ms were subsequently extended by the develop-
ment of a family of contracts with interlinking procedures
and where appropri at e, the same wording for the various
other parties in an engineering project, for exampl e the
design t eam or project manager. The benefit of this for
clarity is self-evident, since compatibility should r emove
confusion. (Barnes has stated that i f ' N' parties are in-
vol ved in a project, then there are ' N- I ' contracts and if all
these are different then there is a likelihood of ambiguity,
lack of clarity and increased uncertainty27.)
2.2. The NEC in practice at proj ect level
Research is being carried out at the University of Birmingham
on the efficacy of the NEC, now published in second edition
as the NEC Engineering and Construction Cont ract (ECC),
in achieving its stated objectives of great er clarity, flexi-
bility and stimulus to good project management compared
with other existing forms of contract. The remai nder of this
paper presents the findings as related to clarity.
Research approach. Much of the research data comes from
projects which have been used the first edition but the
results are generally as relevant to the current second
edition. By the end of March 1996 the author had conducted
81 interviews with personnel f r om empl oyer s' , cont ract ors'
and subcont ract ors' organizations all of whom are or have
had substantial i nvol vement in a contract using the NEC.
The predominant style of questions used invites interviewees
to ' st rongl y di sagr ee' , ' di sagr ee' , ' be neut ral ' , ' agr ee' or
' st rongl y agr ee' with an attitudinal statement which com-
pares the NEC with the other existing forms of contract that
would normal l y have been used on that t ype of contract. As
attitudinal statements have their limitations 28, after each
reply the interviewee is then asked for the richer qualitative
details on why they have this vi ew and what causes t hem
to take it. While the research, therefore, does not test the
legal interpretation of the contract, it does test the clarity
at the level where it is used every day. The majority of the
research has been carried out with the UK users, but where
257
Clarity of construction contracts: J C Broome and R W Hayes
pos s i bl e, i nt er nat i onal user s have been i nt er vi ewed or
c or r e s ponde d wi t h.
I n wr i t i ng t hi s paper , t he aut hor s have t r i ed t o l i mi t it t o
t he def i ni t i on o f cl ar i t y gi ven in t he i nt r oduct i on; not j us t
t he use and or de r o f wor ds wi t hi n a sent ence, but al so t he
des i gn, l ayout , st r uct ur e and pr oc e dur a l l ogi c o f t he whol e
cont r act document .
Ease of understanding. Bef or e t he i nt er vi ewee is r ead t he
at t i t udi nal st at ement s, t hey ar e asked in an open quest i on
what ( i f any) advant ages or di s advant ages t hey saw in usi ng
t he NEC, bot h when t hey r ead it t hr ough f or t he fi rst t i me
and s ubs equent l y when used i n pr act i ce. The most c om-
monl y r ai sed benef i t was t hat t hey f ound i t eas i er to
under s t and. Thi s can r ange f r om a ma na gi ng di r e c t or o f a
me di um si zed cons t r uct i on c ompa ny st at i ng t hat it was t he
fi rst cont r act whi ch he coul d act ual l y under s t and to a
c ont r a c t or ' s pr oj ect di r ect or , on an i nt er nat i onal cont r act
val ued at 100 mi l l i on, s ayi ng t hat he di d not need t o go
t hr ough t he doc ume nt s epar at i ng out t he powe r s and r i ght s
and t he dut i es and r es pons i bi l i t i es of t he e mpl oye r ,
engi neer and c ont r a c t or whi ch nor ma l l y he f ound essent i al
to under s t and a cont r act . At si t e l evel peopl e have sai d t hat
t hey act ual l y under s t and f or t he fi rst t i me exact l y what t hey
ar e meant and al l owed t o do. I nt er nat i onal l y, one pr oj ect
di r e c t or f or a cont r act or i nvol ved in a l ar ge and c ompl i -
cat ed pr oj ect in Hong Kong t ol d how f or t he fi rst t i me in
hi s exper i ence, engi neer s f r om non- Engl i s h s peaki ng
count r i es wer e r ef er r i ng t o and di s cus s i ng t he cont r act
document .
Clearer text. Wi t h onl y one except i on, t her e has been
unani mous a gr e e me nt wi t h t he st at ement " c o mp a r e d to
ot her f or ms o f cont r act , t he way t he NEC is wr i t t en is
eas i er t o u n d e r s t a n d . " Howe ve r , many i nt er vi ewees have
poi nt ed out t hat t he wor ds o f t he cont r act do not come
' a l i v e ' , nor do t hey appr eci at e t he ful l ma na ge me nt i m-
pl i cat i ons o f t he cl auses unt i l t he pr oj ect is under way.
Fur t he r , s ome s eni or per s onnel have c omme nt e d t hat t he
wor ds ar e " t o o c l e v e r " , as t he pl ai n Engl i s h can l ul l peopl e
i nt o not gi vi ng t he wor ds ful l cons i der at i on. Cons i de r t he
e xa mpl e gi ven bel ow.
Table 1 c ompa r e s t he t wo cr i t er i a f or whet her t he Con-
t r act or is ent i t l ed t o addi t i onal t i me and cost f or phys i cal
condi t i ons and t he t wo a ppr oa c he s to dr af t i ng o f t he ECC
and I CE condi t i ons . The I CE cl aus e 12 has an addi t i onal
fi ve s ub- cl aus es r el at i ng t o t hi s si t uat i on al one on t he
Co n t r a c t o r ' s i nt ent i on t o cl ai m, meas ur es bei ng t aken, et c.
Ta b l e l A c o mp a r i s o n o f p h y s i c a l c o n d i t i o n s c l a u s e s
N E C E n g i n e e r i n g a n d
Co n s t r u c t i o n Co n t r a c t
S e c o n d Ed i t i o n
Cl a u s e 6 0 . 1 ( 12)
I C E Co n d i t i o n s o f Co n t r a c t
S i x t h Ed i t i o n
Cl a u s e 1 2 ( 1 )
The Contractor encounters physical
conditions which
are within the site.
are not weather conditions and
which an experienced contractor
would have judged at the Contract
Date to have such a small chance
of occurring that it would have
been unreasonable for him to
have allowed for them.
If during the execution of the Works
the Contractor shall encounter
physical conditions (other than
weather conditions or conditions
due to weather conditions) or
artificial obstructions which con-
ditions or obstructions could not in
his opinion reasonably have been
foreseen by an experienced con-
tractor the Contractor shall as early
as practicable give written notice
thereof to the Engineer
258
whi l e t he ECC uses s t andar d pr oc e dur e s f or al l event s
whi ch ma y ent i t l e t he Cont r act or to addi t i onal t i me or
mone y set out s epar at el y in t he cont r act document . The r e
has been cr i t i ci s m by t he l egal pr of es s i on t hat t hese wor ds
do not i mpr ove on t he wor ds in t he I CE condi t i ons , but t he
ECC a ppr oa c h is sl i ght s hor t er , avoi ds r epet i t i on and is
eas i er to abs or b as i t has been br oken up by usi ng bul l et
poi nt s. On a pr act i cal l evel , i t put s an onus on t he Emp l o y e r
t o pr ovi de mor e Si t e I nf or mat i on to make sur e t hat phys i cal
condi t i ons ar e not encount er ed whi ch an e xpe r i e nc e d
c ont r a c t or " wo u l d have j u d g e d t o have had such a smal l
chance o f o c c u r r i n g " r at her t han " i n hi s o p i n i o n " coul d
have been " r e a s o n a b l y . . . f o r e s e e n " . Havi ng done t hi s,
t he onus is t hen on t he Cont r a c t or to anal ys e t he i nf or -
mat i on pr ope r l y. It has, howe ve r , been not ed t hat at si t e
l evel peopl e have not qui t e appr eci at ed t he subt l et y of t he
wor di ng. Cons equent l y, des pi t e bei ng used ext ens i vel y on
s ome pr oj ect s , whi l e t her e has not been any di s agr eement s
ove r t he wor di ng, nei t her has t her e been ent husi ast i c pr ai s e
f or t hem.
Clearer risk allocation. I n r es pons e t o an at t i t udi nal
st at ement , i t has been agr eed wi t hout except i on t hat t he
def i ni t i ons o f t he e mp l o y e r ' s r i sks as compens at i on event s
ar e c l e a r e r t han in t he ot her cont r act f or ms. Bai r d o f
ESKOM, in Sout h Af r i ca, des cr i bes how 34 ' c l a i m' st yl e
compens at i on event s wer e set t l ed in one mor ni ng by t he
Adj udi c a t or . He wr i t es " t h e c ompe ns a t i on event pr oc e dur e
is so pr e c i s e t hat a ver y s i mpl e t est was appl i ed to each
i ssue. Na me l y, was it a compens at i on event or not and, i f
so, whi ch one"29. Pr oj ect par t i ci pant s al l val ue havi ng t he
c ompe ns a t i on event s l i st ed in one pl ace and t her e have been
no compl ai nt s t hat cont r act or s have had ext r a payment or
t i me wi t hhel d becaus e s omet hi ng has not been cover ed in
t he l i st .
Clearer roles. The r ol es and dut i es of t he pr oj ect ma na ge r
and s upe r vi s or ar e gener al l y f el t t o be wel l def i ned in t he
NEC c ompa r e d wi t h t he r ol es o f t he r es i dent engi neer or
ar chi t ect in ot her f or ms . Wh e r e di f f i cul t i es have oc c ur r e d,
it is becaus e of t he i nt er nal st r uct ur es and del egat i on l evel s
wi t hi n t he cl i ent compani es. When t hese have been addr essed
and c ommuni c a t e d to al l par t i es t hen t her e have not been
pr obl e ms . The r ol es and dut i es of t he cont r act or have not
caus ed any pr obl e ms . To quot e a cont r act s ' ma na ge r of a
nat i onal cont r act or , t he NEC " s p e l t out in wor ds o f one
s yl l abl e what you do, what you d o n ' t do and when you shal l
do i t - - s o me t i me s t hat is to our advant age and s omet i mes
n o t . "
Clearer procedures. Wh e n as ked whet her t he NEC is
har der to make wor k at si t e l evel , mos t i nt er vi ewees say
t hat once t he i ni t i al l ear ni ng cur ve is ove r and t he pr oj ect
is pr ope r l y r es our ced to deal wi t h pr obl e ms as t hey occur ,
t hen it is eas i er to ma ke wor k becaus e t he pr oc e dur e s ar e
l ogi cal l y l ai d out and char t ed. I nf or mat i on f r om a number
o f ove r s e a s sour ces 29 31 i ndi cat es t hat ove r c omi ng t hi s
i ni t i al l ear ni ng cur ve is a gr eat er chal l enge in de ve l opi ng
count r i es , wher e t he l evel o f knowl e dge and exper t i s e in
pr oj ect ma na ge me nt and cont r act admi ni s t r at i on is l ower .
Howe ve r , no pr oc e dur e s or ar eas wi t hi n t he cont r act have
been f ound to be i noper abl e at si t e l evel , i ndi cat i ng t hat
t he cont r act is wor kabl e. I ndeed, on t he mor e successf ul
pr oj ect s , par t i ci pant s have used t he NEC' s pr oc e dur e s t o
hel p s ol ve pr obl e ms pr o- act i vel y, r at her t han appor t i on
bl a me af t er t he event .
Reduced sources of conflict. When i nt ervi ewees wer e gi ven
the attitudinal st at ement " t h e NEC has less sources o f
confl i ct or di sput e within the cont r act document compar ed
with ot her f or ms o f c ont r a c t " t here is unani mous agr ee-
ment . The r eason c ommonl y gi ven was t hat the draft i ng is
mor e preci se, so that when an event occur s or an er r or is
exposed, it is cl ear whi ch per son or par t y is responsi bl e
f or it.
Reduced 'gamesmanship'. When asked i f t here are mor e
cont ract ural games that ei t her the client or the cont r act or
can pl ay whilst usi ng the NEC, t he general repl y is that
while t here are some, the scope f or pl ayi ng t hem is r educed
and i f you are to pl ay t hem, t hen you have to be much
cl everer. Furt her, as the scope for pl ayi ng games is reduced,
the i nt ervi ewees when asked agr ee that the r ewar ds f or
pl ayi ng t hem are less. Take the Accept ed Pr ogr a mme as an
exampl e: t he NEC lists what is to be i ncl uded in the first
pr ogr a mme (i ncl udi ng met hod st at ement s and r esour ce
levels), what is to be shown on each addi t i onal pr ogr amme;
reasons why the proj ect manager can rej ect a pr ogr a mme
(and retain moni es until one is accept abl e) and the t i me
scales within whi ch these submi ssi ons and not i fi cat i ons
have t o be made. Lat er, the NEC states the cri t eri a on
whi ch the pr oj ect manager ext ends the Compl et i on Date.
Wi t h onl y one except i on, i nt ervi ewees have agr eed that " i t
is ver y cl ear what is and is not meant to be i ncl uded in the
Accept ed Pr o g r a mme . " Thi s sect i on has been re-wri t t en in
the ECC, so cl ari t y shoul d be i mpr oved furt her. Whi l e
there have been some pr obl ems in get t i ng t he cont r act or s t o
show all the requi red i nf or mat i on, this mai nl y seems t o
be because use o f the ECC is ai med at a wi de r ange of
di sci pl i nes and pr oj ect sizes. Ther ef or e, to state exact l y
' h o w' a pr ogr a mme is to show i nf or mat i on, rat her than in
mor e concept ual t erms ' wha t ' it is to show, woul d ei t her
lead t o excessi ve and i nappropri at e amount s o f i nf or mat i on
bei ng shown or the opposi t e dependi ng on t he si ze and t ype
o f proj ect . It is t her ef or e suggest ed that it is mor e appr o-
pri at e f or the empl oyer to state the level o f detail requi red
and t he met hod o f present at i on in speci fi cat i on.
Clearer payment f or change. One area whi ch has t aken t i me
for peopl e t o become fami l i ar with is the met hod o f
wor ki ng out the cost of a compensat i on event by the
Schedul e o f Cost Component s. Thi s is part l y because the
oper at i on o f this schedul e is di fferent in the NEC and part l y
because the gui dance notes wer e initially defi ci ent in
expl ai ni ng it. The publ i cat i on o f additional gui dance not es
in the second edi t i on shoul d have r educed uncert ai nt y. Put
si mpl y, the Accept ed Pr ogr a mme pr ovi des a base f or com-
pari son o f what r esour ces the cont r act or ori gi nal l y pl anned
to use f or an operat i on. I f a compensat i on event occur s
whi ch affects t hat operat i on, t here is a compr ehensi ve list
o f what the cont r act or can char ge f or as ext ra r esour ces (the
Schedul e o f Cost Component s) . Any ot her additional cost s
to the cont r act or are i ncl uded in a per cent age fee whi ch is
appl i ed t o the monet ar y sum f or t he ext ras. Compar e this
with the somewhat wool l y " f a i r val uat i on" ( I CE 6t h and
FI DI C) or " f a i r rates and pr i c e s " ( JCT 80) in ot her
st andard condi t i ons. Wi t h exper i ence, the pr ocedur e has
gener al l y not caused pr obl ems and the vi ew expressed by
t he most exper i enced i nt ernat i onal empl oyer is that, once
under st ood, it is "absol ut el y mar vel l ous as a st ruct ured
way o f ar r i vi ng at a pr i ce" . An indication o f the pr ocedur e' s
success is t hat it is unusual f or the final account not to be
settled wi t hi n a coupl e o f mont hs o f Compl et i on.
Clarity of construction contracts: J C Broome and R W Hayes
Clearer disputes procedures. Up t o end o f Mar ch 1996, t he
aut hor o f this paper was awar e o f onl y six cont ract s on
whi ch referral s t o t he Adj udi cat or had been made, all but
t wo o f whi ch wer e abroad. No di sput es have so far
pr oceeded beyond adj udi cat i on. The aut hors t her ef or e have
insufficient evi dence t o eval uat e t he cl ari t y o f the document
or the pr ocedur e.
Clearer guidance. The most commonl y used adj ect i ve,
when i nt ervi ewees wer e asked i f the gui dance not es wer e
hel pful in underst andi ng t he cont ract , was " e s s e nt i a l " .
Nor mal l y, peopl e read t hr ough the NEC with the gui dance
not es bef or e the cont r act or at t ender and become awar e o f
the i mpl i cat i ons o f t he cl auses and phi l osophi es behi nd the
cont ract . Dur i ng the const r uct i on phase, peopl e woul d r ef er
to t hem when t hey came across a new situation and con-
sequent l y their use di mi ni shes as the pr oj ect pr ogr esses.
The pat t ern o f use o f the fl ow chart s is different, t hey tend
t o be ei t her used ext ensi vel y or not at all. When t hey wer e
used, i nt ervi ewees said that t hey f ound t hem ver y useful as
a way o f finding their way ar ound the cont r act and con-
sequent l y became fami l i ar with the NEC ver y qui ckl y.
Agai n, dur i ng the const r uct i on phase users r ef er t o t hem to
find out what to do next.
One o f the c ommon cri t i ci sms o f the NEC is that it is re-
i nvent i ng the wheel and that havi ng all new draft i ng
det ract s f r om legal cert ai nt y. Davi d Cor nes states in a
paper on t he legal i mpl i cat i ons o f the NEC: " i f it is I CE
5t h or 6th or J CT 80, peopl e general l y know wher e t hey
are. I f t hey use t hem all the t i me, t hey become i ncreasi ngl y
fami l i ar with their t erms, t he risk al l ocat i on and di sput e
resol ut i on met hods"32. Yet this research has i ndi cat ed that
even t hose who have substantial experi ence in t he const r uc-
t i on i ndust ry gener al l y rat e the cl ari t y o f the NEC hi gher
t han the ot her f or ms o f cont r act after usi ng it on onl y one
cont ract . The small level o f cri t i ci sm f r om t hose who have
act ual l y used it suggest s t hat when the i ndust ry is fami l i ar
wi t h and underst ands t he ECC (and the phi l osophi es behi nd
it) the real benefits will be seen.
2.3. Changes made to the first edition in the ECC
I n June 1995, t he second edi t i on o f the NEC was publ i shed
as the ECC. Thi s was mai nl y t o compl y fully wi t h t he
cri t eri a f or the most effect i ve f or m of cont r act in moder n
condi t i ons as set out by the Lat ham report 33. However , t he
panel devel opi ng the condi t i ons al so under t ook some
i mpr ovement s t o the text o f the cont r act ari si ng f r om feed
back of the cont ract in use (including some vi a this research)
and cri t i ci sm f r om the legal professi on.
Some o f the cri t i ci sms f r om the legal communi t y can be
answer ed by r ef er ence t o t he ori gi nal speci f i cat i on- - t he
panel wri t i ng t he cont r act , ri ght l y or wr ongl y, deci ded on
the issue as a mat t er o f pol i cy. For i nst ance:
no pri ori t y was assi gned to the di fferent document s
maki ng up t he cont r act , t o encour age good i nf or mat i on
in t he proj ect speci fi cat i on;
t here is no cr oss- r ef er enci ng o f cl auses within t he NEC
cont ract . Inst ead, t he aut hors have used flow chart s t o
ensure l ogi cal cl ari t y;
gui dance not es are publ i shed wi t h the cont ract . Lawyer s
ar gue t hat i f t he NEC was cl ear, peopl e woul d not need
gui dance notes t o underst and it. The Gui dance Not es t ry
to expl ai n the i mpl i cat i ons o f the cl auses t o users and the
phi l osophi es under pi nni ng the cont ract . The aut hors
o f t he NEC j ust i fy their publ i cat i on because o f the
259
Clarity of construction contracts: J C Broome and R W Hayes
innovative and ' radical' nature of the contract. It could
be argued that this is more pro-active than having the
regular legal columns in construction journals and
magazines explaining the implications of court judgements
on the standard forms, which the construction industry
then has to take on board--besides other contracts also
have guidance notes!
Other detailed criticisms were undoubtedly justified and
have been addressed. For instance:
the criticism that the delay damages clause will fail if
there is partial hand over32;
that there are no Articles of Agreement 32. A specimen
form is now included with the Guidance Notes;
the adjudication clauses were poorly drafted 34. These
have been completely re-written in the second edition
and received a much more favourable reaction from the
legal profession.
Despite these changes, the ECC is still not without its
detractors from the legal profession--see David Cornes
paper in the I nt ernat i onal Const ruct i on Law Re v i e w 35.
However, as the editors of that journal state "there are few
if any contracts which cannot be questioned by a skilful
lawyer and yet most continue to be used by the industry
despite inadequacies far greater than any to be found in the
NEC"36
3. Benef i t s a nd Conc l us i on
Some of the benefits ascribed by interviewees to the more
precise risk allocation, definition of roles and more defined
procedures for evaluating and coping with change (combined
with the stimuli to good management) within the NEC are
that:
people are made more responsible for their actions or as
one interviewee put it, "there are no hiding places"
within the contract;
as risk is more visible, people are encouraged to take
appropriate action to reduce or eliminate its impact and
probability of occurring;
there is evidence that people at site level are gaining an
appreciation of risk and its allocation;
there is much less argument and acrimony over whether
the contractor has an entitlement to extra time or money
when an event occurs.
As Baird of South Africa writes "the nat ure of adversity
has changed from being slanging sessions of a judgemental
nature . . . over rigidly held opinions of merit and contract
interpretation, to issues of fact relating to application of
resources and their Actual Cost as defined in the con-
tract"29. The interpretation of legal language into language
comprehensible by engineers and project managers,
whether it is done by trained legal advisers or the people
involved who have 'picked up' the skills, costs time and
money and "the serious risk, often realized is that much is
lost, distorted or overlooked in the process"37. This poten-
tially causes acrimony between the parties and the process
of translation introduces what most project managers wish
to minimize--uncertainty and consequent risk. This inhibits
effective decision making during the contract period, if
risks are not satisfactorily defined then it is unclear who is
responsible for them; if roles, duties and processes are
unsatisfactorily or are inappropriately defined, then it is
unclear how risks are to be managed. Further, while the
project may be physically completed on time and to quality,
the cost may well escalate afterwards as the contractor
mounts a claim or starts legal action based on the turn of
a phrase or a supposed action or inaction of the acting
project manager--be it the architect, resident engineer or
employer' s representative. The act of contesting this claim
or dispute is wasteful for both parties, whether the claim is
justified or not. The awareness of this contractual manoeuv-
ring is likely to affect relationships and co-operation during
the construction phase. A report by the American Business
Roundtable appears to back this up, stating that "a rep-
resentative sample of major owners and contractors
estimates that the way construction contracts are written
can add 5 % to the cost of a typical project."38.
While different individuals, who have been involved
in contracts run under the NEC family of contracts,
have varying strengths of opinion, some common benefits
are emerging as a result of better clarity (and its stimulus
to good management). The parties to a contract feel they
have greater knowledge of the likely financial and time
outcome of the project at any time during its duration,
as risks are identified, allocated and the financial and
scheduling consequences settled closer to the time they
occur. With this knowledge employers and their project
managers have greater certainty of completing the project
to their time and cost objectives, as they have been able
to use that knowledge, via the mechanisms in the NEC, to
influence the outcome. A strong view is that the final
account is settled much sooner after Completion, often
within two months if not faster. The reduced level of
argument over responsibility for risks that have occurred
has contributed to the greater degree of cooperation and
openness compared with normal contracts, which may be
reflected in the relatively few referrals to the Adjudicator.
Lastly, the effect of the ECC in highlighting any defi-
ciencies and shortcomings should, if viewed constructively,
lead to a steady improvement in the professionalism
of engineering and project management personnel and
organizations.
Considering the origins and development of the standard
construction forms, it would be unsurprising if the standard
of drafting and clarity, in the broadest sense, was as good
as it could be. This appears to be confirmed by comments
of the courts, legal commentators and the actual daily users
of the contract who all appear to be of the opinion that it
could be improved. It is concluded that the research so
far indicates that the NEC and ECC, while not being
perfect, are significant steps forward in clarity compared
with traditional conditions of contract for construction,
including overseas where FIDIC or other conditions would
be used.
Ac kno wl e dg e me nt s
The authors would like to thank a range of people and
organizations: the Engineering and Physical Sciences
Research Council, National Power plc and more recently
London Underground Ltd for their financial contributions
to the research; numerous companies and their employees
for the time they have given to the research and construc-
tive comments from the referees and members of the Pro-
ject and Construction Management Group at the University
of Birmingham.
260
Cl ar i t y o f c ons t r uc t i on c ont r ac t s : J C B r o o me a n d R W Ha y e s
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Appendix
Cont ract s referred to in t he text are:
ACE: For m of Agr eement and General Condi t i ons of Cont ract for use in
connect i on with Wor k of Civil Engi neer i ng Const ruct i on (1930).
FIDIC: Federation Internationale des Ingeni eurs-Consei l s, Conditions o f
Cont ract f o r Works o f Civil Engineering Construction : Part 1, General
conditions with f or ms o f t ender and agreement; Part I1, Conditions o f
part i cul ar application with guidelines f o r preparat i on o f par t 11 cl auses
(4th edn, 1987).
ICE: Condi t i ons of Cont ract and For ms of Tender , Agr eement and Bond
for use in connect i on with Wor ks of Civil Engi neer i ng Const ruct i on ( l s t
edn, 1945).
JCT: Joint Cont ract s Tri bunal . A fami l y of st andard forms of cont ract s
publ i shed by the Building Empl oyers Federat i on.
NEC: The institute of Civil Engi neers. The Ne w Engi neeri ng Contract (1 st
edn, 1993) Thomas Tel ford Servi ces Ltd. Includes: Black Book; Gui dance
Not es and Fl ow Char t s.
ECC: The Institution of Civil Engi neers. The NEC Engineering and
Construction Contract (2nd edn, 1995) Thomas Tel ford Services Ltd.
Includes: Black Book; Gui dance Not es and Fl ow Chart s.
Jon C Broome gai ned a degree at the
University o f Bi rmi ngham in 1990 and
spent three years on various construc-
tion sites in the UK while worki ng f o r
a national contractor. He ret urned to
Bi rmi ngham in 1993 to research how
the Ne w Engi neeri ng Cont ract was
operating in practice, reporting to the
Panel developing the f ami l y o f NEC
document s via Prof essor John Perry.
He cont ri but ed to the second edition
of the NEC- - now the NEC Engineering
and Construction Contract, especially
in t he checki ng o f the logic o f the
contract through the f l ow charts and
has publ i shed ot her papers on the NEC.
Ross Hayes is a lecturer and admini-
st rat or in the School o f Civil
Engi neeri ng at the University o f
Birmingham. A chart ered engineer,
he has previ ousl y hel d a number o f
posi t i ons with contractors and con-
sultants in the building and civil
engi neeri ng industry. He has a BSc
and MSc f r om Not t i ngham and
Manchest er, UMI ST Universities,
respectively. He has in the past under-
taken research into procurement
procedures, and now lectures and
provi des consul t ancy on the Ne w
Engineering Contract.
261