News & Media
April 21, 2017

Changes to NEC4 service contracts

Changes to NEC4 service contracts With NEC4 comes change to all the service contracts. 

The new service contracts are the NEC4 Term Service Contract (TSC), the NEC4 Term Service Short Contract (TSSC), the NEC4 Professional Service Contract (PSC), the NEC4 Professional Service Short Contract (PSSC) and the new NEC4 Dispute Resolution Service Contract (DRSC – based on the NEC3 Adjudicator’s Contract). 

Since the service contracts have been changed in the same way as all contracts in the NEC4 family, there are a number of changes in common with those in the works and supply forms. This incudes standardisation of terms, with ‘Employer’ becoming ‘Client’ and ‘Service Information’ becoming ‘Scope’.
Other changes in the NEC4 TSC and NEC4 PSC make the total changes arguably more significant. This article looks at the specific changes to the service contracts. 

TSC
The principal changes specific in the NEC4 TSC compared to the NEC3 version are as follows:
 
  • Service manager instructions – NEC3 acknowledged changes to the affected property could occur, but in NEC4 the service manager may instruct them. This will be useful where the extent of a client’s asset fluctuates, for example increases in numbers of houses for housing associations or new roads for highway authorities
  • Task orders – NEC4 reinforces the intended purpose of task orders with clearer distinction over how instructions changing the scope, task orders and ‘call off’ against existing scope work in combination
 
  • Accepted plan and task order programmes – a failure by the service manager to reply to plans submitted for acceptance paves the way for a new sanction, similar to that for compensation events, resulting in it being treated as accepted
  • Payment – NEC4 TSC requires the contractor to submit an application for payment before each assessment date and, following the service manager’s certification of payment, the contractor is required to submit an invoice
  • Compensation events – two new compensation events address material differences in anticipated versus actual quantities, and the correction of mistakes in the price list
  • Schedules of cost components – in NEC4 the TSC, like the ECC, now includes both a schedule of cost components and a short schedule of cost components. A new concept of service areas provides clarity in distinguishing defined cost from fee
  • Extending the service period and accounting periods – the ability for the parties to agree to extend the service period has been elevated into a new secondary option. A further new secondary option provides for a final amount due at the end of each accounting period.

PSC

In drafting NEC4 the decision was taken to bring PSC closer to the other contracts and move away from what might be considered a more traditional way of appointing a consultant or other professional. This has resulted in considerable change – indicated by a name change from Professional Services Contract to the Professional Service Contract to show its relationship to the TSC. While many of the changes are those seen in the TSC, there are some areas where it still differs from it.

The principal changes are as follows:
 
 
  • Service manager and payment – the employer’s agent option X10 has been removed and a service manager introduced as integral to contract. Among other changes this brings, the assessment of the amount due now lies with the service manager rather than with the consultant
  • Defined cost – this has been introduced together with a schedule and shorter schedule of cost components. These follow the principles of the schedule and shorter schedule of cost components in the ECC and, now, the TSC
  • Option G – this has been removed, leaving options A, C and E. A client which wants a call-off arrangement for professional services is now expected to set up a framework using the NEC4 Framework Contract (FC) and PSC contracts for the work packages. Small packages of work could be instructed under the PSSC
  • Termination – by bringing PSC in line with other NEC4 contracts, the termination provisions have been changed, providing the parties with more clear and extensive termination rights
  • Programme – this has retained its importance as a management requirement, and the new sanction of deemed acceptance for a lack of response from the service manager is also included in the PSC.

TSSC and PSSC

The new TSSC and PSSC reflect the procedures adopted in the new TSC and PSC while still retaining simplicity of management. 

Changes include:
  • Modifications to the compensation event procedures, with a defined cost approach now adopted, and one fee percentage quoted
  • A procedure to agree people rates
  • The option of adjustments to the prices for inflation.

DRSC
 
  The DRSC is the NEC4 version of the NEC3 Adjudicator’s Contract (AC), emphasising that 
it is not restricted just to appointing an adjudicator. It can also be used to appoint a member of the dispute avoidance board in an NEC contract.

A new section to apply to the duties of a dispute avoidance board member has been introduced as an alternative to the adjudication section in the AC. Users of the AC should easily transfer to this new form.

POSTED BY ROSS HAYES AND BEN WALKER, NEC4 DRAFTERS
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