Twelve years after the release of the highly credible NEC3, a new contract was published. In March 2017, the NEC4 suite was announced, with usage starting in June 2017.
As anyone working in construction knows, changing industry culture is slow, like moving a boulder. That’s why NEC3 is still commonly used today. But NEC4 introduced some important updates designed to simplify processes, reduce disputes, and make contracts clearer. So lets look at the differences between NEC3 vs NEC4.
Key Changes in NEC4
The changes can be grouped into four main areas:
- New terminology
- New contracts
- New secondary options
- New features
New Terminology
NEC4 modernised language to make contracts clearer and more inclusive:
- “Employer” → “Client”
- “Works Information” → “Scope”
- Gender-neutral language (no “him” or “his”)
- “Risk Register” → “Early Warning Register” (to better separate project risks from early warnings)
- “Employer’s Risks” → “Client’s Liabilities”
New Contracts
NEC4 introduced additional contract types to broaden its use:
- Professional Services Subcontract (PSS): The PSC in subcontract form.
- Term Service Subcontract (TSS): The TSC in subcontract form.
- Design, Build and Operate (DBO): Covering whole-life delivery.
- Dispute Resolution Services Contract (DRSC): For appointing adjudicators.
👉 You can find a full list of NEC4 contracts here
New Secondary Options
Several X Clauses were updated in NEC4, alongside new dispute resolution measures:
- Senior Representatives: Introduced to encourage parties to meet and resolve disputes before adjudication (applies to W1 and W2). Though optional, it creates an extra step for resolution.
- W3 Clause (ECC only): A new dispute avoidance and resolution option aimed at the international market.
New Features
NEC4 also brought in several functional improvements to address gaps in NEC3:
Value Engineering (VE)
- NEC3 only incentivised VE under target cost options.
- NEC4 introduced the Value Engineering Percentage, allowing parties to share savings across all options (including A & B).
Programme Acceptance
- Under NEC3, a lack of response from the Project Manager meant no programme acceptance.
- NEC4 fixes this: if no response is given, the contractor can issue a prompt notice, and after one week, the programme is deemed accepted.
Fee Percentage
- NEC3 had separate fees for subcontract works.
- NEC4 simplifies this to a single fee percentage.
Payments
- The contractor must now submit an Application for Payment.
- The Project Manager is not required to produce an assessment if the contractor does not submit an application.
Defined Cost
- NEC4 introduces a time-based process for agreeing defined cost.
- This avoids disputes where clients try to claim disallowed costs years later, promoting a more collaborative approach.
Final Account
- NEC4 adds a time-based process for closing the Final Account, giving conclusive evidence and reducing uncertainty for both parties.
Final Thoughts
While NEC3 remains widely used, NEC4 represents a significant step forward. By refining terminology, adding contract options, and addressing pain points like programme acceptance, payments, and final accounts, NEC4 aims to:
- Simplify processes.
- Reduce disputes.
- Encourage collaboration.
As more organisations adopt NEC4, it’s set to become the new industry standard in the years ahead.
Why not watch our video on the changes here:
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