Govt pressing ahead with NEC forms

Govt pressing ahead with NEC forms

Danny Chung

The government is continuing with its pilot programme of procuring public works contracts using the New Engineering Contract (NEC) form with the eventual goal of establishing a procurement policy using the form.

In a recent written response to enquiries by Construction Post, the Development Bureau said as at the end of February, a total of 26 pilot projects have used the NEC form.

Out of this total, one has been completed while nine were under construction, two were under tender assessment while the remaining 14 were under planning stage.

“These include capital works contracts (varying from building contracts to civil engineering infrastructure contracts), maintenance contracts and consultancy agreements,” the bureau said.

After the government decided to use the NEC form in 2006, the first pilot project was for the Drainage Services Department nullah improvement project at Sai Kung for which the contractor was Chun Wo Construction and Engineering while the consultant was Black & Veatch Hong Kong.

This contract was substantially completed in May 2012 with final contract sum at five percent below target cost and construction period cut by six months.

Of all works departments, DSD has used the NEC form the most, with six contracts.

List of Tendered Pilot Public Works Projects using NEC (as at 28 February 2013)  (Source: Development Bureau)

List of Tendered Pilot Public Works Projects using NEC (as at 28 February 2013) (Source: Development Bureau)

In February, the government awarded its biggest NEC contract by value, at HK$2.97 billion for the design and building of Tin Shui Wai Hospital that was awarded to a Leighton – Able joint venture.

The bureau said that as part of the policy making process, it has established six key performance indicators including dispute avoidance, cost control and time management.

“With more experience gained in delivery NEC contracts, we aim to establish our procurement policy in the coming few years,” bureau said.

The NEC form originated from the UK in 1993 when the Institution of Civil Engineers drafted a new contract form that used plain English, had better procedures for handling disputes and was written with partnering techniques in mind.

The form, in its third edition, is now known as the Engineering and Construction Contract.

The UK Olympic Delivery Authority adopted the NEC form for the construction contracts for the facilities for the London Olympic Games held last year.

About 10 percent of the work for London’s Heathrow Airport Terminal 5 project was procured using the British Airports Authority’s version of the NEC form.

Asked about the performance of the NEC form so far, the bureau said that delivery of the pilot projects was smooth generally.

“In regard to the first NEC contract of DSD, we understand it took some time for the frontline staff of both the consultant and the contractor to adapt to the collaborative style of working,” the bureau said.

Various measures such as regular partnering workshops, senior management meetings and social activities were used to foster the partnering relationship between DSD, the consultant and the contractor.

As regards wider application of the NEC form away from the public sector, the bureau said it would work with the Construction Industry Council to promote wider use of partnering in the industry.

The CIC issued in August 2010 a guideline on partnering which covered application of the NEC form and has set up a task force to study the suitability of using NEC in the construction industry.

Drainage Services Department is currently using the NEC form for its Happy Valley Underground Stormwater Storage Scheme project  (Danny Chung)

Drainage Services Department is currently using the NEC form for its Happy Valley Underground Stormwater Storage Scheme project (Danny Chung)

On the use of NEC in Hong Kong Henry Sherman, a senior consultant at law firm Minter Ellison, noted that on trial projects, people would generally be on their best behaviour which could skew the assessment of the performance of an NEC project.

Still Sherman considered the government was sensible to approach the NEC form cautiously as people needed to training and experience before adopting the form for the big projects.

“The new HK$2.97 billion Tin Shui Wai project will be a real test of how prepared it is,” Sherman said.

There were potential areas of concern for contractors facing the adoption of NEC on public works contractors.

“The main issues are the pressure on management resources imposed by the NEC compensation event regime and the issues thrown up by Government’s detailed amendments to the form in Special Conditions of Contract or Z clauses and those of other Employers, sometimes with uncertain implications for the NEC core clauses,” Sherman said.

According to Sherman the big well-financed showpiece projects would benefit the most from use of NEC forms where Building Information Management (BIM) was used and where the client has the resources and experience to take an active role and where full advantage can be taken for collaboration on matters such as developing designs that maximise efficiency in use or life cycle benefits.

“The third runway [at Hong Kong International Airport] may well be the ideal project for this,” Sherman said.

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