Global energy and petrochemical group, Shell successfully completed a multi-million Euros environmental enhancement project in North Africa in 2010 using the NEC3 Engineering and Construction Contract (ECC).
A UK-based project team from Shell Global Solutions led the project, which comprised on-site remediation work and a shipment of soils to Europe for specialist treatment under the Basel Convention.
More collaborative approach
Traditionally Shell had used standard fixed-price engineering contracts for such projects but Andrew Lee, a senior consultant with the groups soil and groundwater management team, saw the need for a more modern and collaborative approach to reduce the potential for contractual conflict that could arise from such a technical and logistically complex project.
The NEC3 Engineering and Construction Short Contract was initially proposed but the successful contractor, Bilfinger Berger Environmental, proposed a target contract better to incentivise collaboration between both parties.
"We considered it would be best to retain the risk of the correctness of the bill of quantities in particular the quantities of soil requiring treatment," says Lee. "ECC offers target options and, from the choice of payment options, we thus chose option D target contract with bill of quantities."
Training and advice workshops
Shell's project manager David Reinke organised training and advice sessions by Richard Patterson via the NEC office in London to assist in preparing the contract documents. Reflecting the result of the negotiations with the contractor was a key part of this and risks that could not be managed or priced sensibly were included in the contract as additional compensation events.
Another workshop was organised with counterparts from site-based supervisor Royal Haskoning and the contractor's team. "This proved a very good investment as all parties understood the contract and agreed in some detail exactly how they were going to use it," says Reinke.
Managing change effectively
As is usual on such projects, there were employer changes and other compensation events over the 18 month contract. According to Reinke, "The structured change-management process within the contract assisted the project team in agreeing the effects of compensation events immediately or soon after they became known.
There is no doubt that we would look to NEC3 contracts for future projects. The flexibility, clarity and stimulus to good management at the heart of NEC3 contracts, together with the fact they can and have been used successfully across the world, means they are ideal as the basis for a consistent set of contracts to be used by a global and diverse organisation such as Shell. We will be seeking to communicate their benefits to our colleagues across the group."
Benefits of NEC3
- Modern collaborative approach reduces the potential for contractual conflict on technically and logistically complex projects.
- Structured change management process helps project team agree the effects of compensation events very quickly after they become known.
- NEC3 stimulates good management and provide a consistent set of clear, flexible and contracts for a global and diverse client organisation.