A New Normal in Contractual Practice

Earlier this year, Build UK issued new guidance designed to help the construction industry implement its recommendation on contract terms, published in April 2019.

Entitled A New Normal in Contractual Practice, the guidance provides a detailed rationale for why the six contract terms identified in the recommendation are problematic and should be avoided. NEC have contributed by providing context within the guidance on how best to implement the recommendations using the NEC contract clauses.

It is widely recognised that current contractual practices can actively inhibit collaboration, create inefficiencies, and result in risk being passed down the supply chain. The Build UK recommendation, which was developed with the support of legal counsel to ensure compliance with competition law, seeks to form a new common ground between clients and the supply chain, with the focus on managing these risks rather than passing them on.

Their efforts have been met with support from across the construction sector, including endorsement by the Construction Leadership Council, with Co-Chairman Andy Mitchell saying it is ‘a first step towards fairer and more responsible contractual practices’. Build UK hopes the publication of this guidance will help all parties to implement the recommendation.

For each of the following six terms in the recommendation, there is context explaining the relevant term, the reasons why it should be avoided, and recommendations on how to more effectively manage the underlying issues:

• Fitness for purpose
• Unquantifiable risks
• ‘Specified perils’
• Breach of contract
• Uncapped liabilities
• Performance securities

Former Build UK Chairman Mark Castle, who has championed the development of the recommendation, said:

“This new guidance is a huge step forward. By helping all of us to understand the dynamics underlying these six terms, the rationale for avoiding them, and how exactly we can solve the challenges in a more collaborative way, it can help to create a ‘new normal’ in contractual practice.”

“Ultimately, by avoiding these terms, the industry can spend less time negotiating contracts, reduce the incidence of disputes, and become more sustainable in terms of productivity, innovation and profitability.”

The recommendation is non-binding and Build UK members are free to negotiate their own contractual terms with their clients.