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dispute resolution service contract

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June 2017
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Dispute Resolution Service

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Contract

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This contract should be used for the appointment of an adjudicator or dispute avoidance
board member to resolve disputes under an NEC4 contract

An NEC document
June 2017
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(with amendments January 2019)
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The Government Construction Board, Cabinet Office UK

The Government Construction Board (formerly Construction Clients’ Board) recommends
that public sector organisations use the NEC contracts and in particular the NEC4 contracts
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where appropriate, when procuring construction. Standardising use of this comprehensive

suite of contracts should help to deliver efficiencies across the public sector and promote
behaviours in line with the principles of the Government Construction Strategy.

The Development Bureau, HKSAR Government

The Development Bureau recommends the progressive transition from NEC3 to NEC4 in public
works projects in Hong Kong. With suitable amendments to adapt to the Hong Kong local
environment, NEC4 is expected to further enhance collaborative partnering, unlock innovations
and achieve better cost management and value for money in public works projects.

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NEC is a division of Thomas Telford Ltd, which is a wholly owned subsidiary of the Institution

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of Civil Engineers (ICE), the owner and developer of the NEC.

The NEC is a suite of standard contracts, each of which has these characteristics:

• Its use stimulates good management of the relationship between the two parties to the

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contract and, hence, of the work included in the contract.

• It can be used in a wide variety of commercial situations, for a wide variety of types of

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work and in any location.

• It is a clear and simple document – using language and a structure which are
straightforward and easily understood.

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NEC4 Framework Contract is one of the NEC suite and is consistent with all other NEC4
documents. Also available are User Guides and Flow Charts.

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ISBN (complete box set) 978-0-7277-6391-4
ISBN (this document) 978-0-7277-6221-4
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ISBN (Establishing a Procurement and Contract Strategy) 978-0-7277-6223-8
ISBN (Preparing and Managing a Dispute Resolution Service Contract) 978-0-7277-6245-0
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ISBN (Selecting a Supplier) 978-0-7277-6234-4

ISBN (Dispute Resolution Service Contract Flow Charts) 978-0-7277-6277-1 (e-only)
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First edition June 2017

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Reprinted with amendments January 2019

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British Library Cataloguing in Publication Data for this publication is available from the
British Library.
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© Copyright nec 2017

All rights, including translation, reserved. The owner of this document may reproduce the
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Contract Data and forms for the purpose of obtaining tenders, awarding and administering
contracts. Except as permitted by the Copyright, Designs and Patents Act 1988, no part of
this publication may be otherwise reproduced, stored in a retrieval system or transmitted in
any form or by any means, electronic, mechanical, photocopying, recording or otherwise,
without the prior written permission of the NEC Director, Thomas Telford Ltd, One Great
George Street, Westminster, London SW1P 3AA.

Typeset by Manila Typesetting Company

Printed and bound in Great Britain by Bell & Bain Limited, Glasgow, UK

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 Contents

Contents

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Foreword v

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Preface vii

Acknowledgements ix

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Amendments January 2019 x

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Conditions of Contract 1
1 General 1
2 Adjudication 2

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3 Dispute Avoidance Board 3
4 Payment 4
5 Termination

Contract Data pr 5

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Index 8
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 Foreword

Foreword

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Continuous improvement in project delivery is required to build confidence in the UK
construction sector so that we can attract more investment. The Infrastructure and Projects

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Authority (IPA) is the government’s centre of expertise for infrastructure and major projects.
We sit at the heart of government, reporting to the Cabinet Office and HM Treasury.

The application of the right contract is central to the success of the overall project delivery
system. The NEC suite of contracts has been in existence for over the 20 years and has linked

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the projects, people and processes together to create the correct environment for successful
delivery.

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This new and updated NEC4 contract embraces the digital changes that are happening in the
construction industry, especially around BIM, which I believe will be central to creating a step
change in performance. Whilst looking forward it also builds on the fundamentals required

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for an effective contract.

The use of NEC4 on public sector projects will help to deliver the Government Construction

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Strategy as we seek to improve central government’s capability as a construction client to
deliver further savings in the order of £1.7bn across the Government estate. The IPA looks
forward to collaborating with industry to make the delivery of projects more efficient and
effective.
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Tony Meggs, Chief Executive, Infrastructure and Projects Authority
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Reporting to Cabinet Office

and HM Treasury
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 Preface

Preface

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NEC was first published as a new and innovative way of managing construction contracts in
1993 – some 24 years ago. It was designed to facilitate and encourage good management of

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risks and uncertainties, using clear and simple language.

The NEC approach to managing contracts was endorsed in “Constructing the team – The
Latham Report”, which was a government/industry review of procurement and contractual
arrangements in the UK construction industry. This led to a second edition in 1995

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incorporating the further recommendations of that review. This contract was used increasingly
in the UK and overseas, and a major revision was made with the third edition in 2005.

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NEC has played a part in helping the industry do things differently and better. It has done
so by introducing effective project management procedures into the contract itself. These
require pro-active management of risk and change, and the day-to-day use of an up-to-date

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programme. The range of pricing options has given Clients flexibility in the allocation of risk
and the ability to share risk and manage it, collaboratively.

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The NEC suite has evolved over three decades, embedding consultation responses and user
feedback, and reflecting industry development, including new procurement approaches and
management techniques such as alliances, management of information (BIM) and supply
chain engagement. This feedback and the new procurement approaches formed the driver
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for the development of the next generation contracts and the launch of NEC4.

There were three key objectives in drafting NEC4:

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• provide greater stimulus to good management

• support new approaches to procurement which improve contract management and

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• inspire increased use of NEC in new markets and sectors.

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It was to be evolution, not revolution.

Some features of NEC4 include:

• a new design build and operate contract to allow flexibility between construction and
operational requirements in timing and extent
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• a new multi-party alliance contract based upon an integrated risk and reward model

• new forms of subcontract to improve integration of the supply chain.

Further enhancements include:

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• finalising cost elements during the contract

• incorporating a party-led dispute avoidance process into the adjudication process

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• increasing standardisation between contracts and

• providing enhanced guidance to give greater practical advice to users.

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NEC has always been known for its innovative approach to contract management, and this
revision continues that approach. No other contract suite has had such a transformative effect
on the built environment industry as NEC. It has put the collaborative sharing of risk and
reward at the heart of modern procurement. It is also unique in providing a complete, back-to-
back procurement solution for all works, services and supplies in any sector and any country.

NEC4 continues to set the benchmark for best practice procurement worldwide.

Peter Higgins BSc (Hons), CEng, FICE

Chair of NEC4 Contract Board

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 Acknowledgements

Acknowledgements

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The original NEC was designed and drafted by Dr Martin Barnes then of Coopers and
Lybrand with the assistance of Professor J. G. Perry then of the University of Birmingham,

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T. W. Weddell then of Travers Morgan Management, T. H. Nicholson, Consultant to the
Institution of Civil Engineers, A. Norman then of the University of Manchester Institute of
Science and Technology and P. A. Baird, then Corporate Contracts Consultant, Eskom, South
Africa.

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This fourth edition of the NEC suite was produced by the Institution of Civil Engineers
through its NEC4 Contract Board.

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The NEC4 Contract Board is:

P. Higgins, BSc (Hons), CEng, FICE (Chair)

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P. T. Cousins, BEng (Tech), DipArb, CEng, MICE, FCIArb
I. Heaphy, BSc (Hons), FRICS, FCIArb, MCInstCES, MACostE
J. N. Hughes-D’Aeth, BA (Hons), MA (Cantab)

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S. Rowsell, BSc, CEng, FCIHT, FICE, MCIPS

The NEC4 drafting team consisted of:

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M. Garratt, BSc (Hons), MRICS, FCIArb
R. Gerrard, BSc (Hons), FRICS, FCIArb, FCInstCES
R. Hayes, BSc (Hons), MEng, CEng, MICE, MAPM
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S. Kings, BSc (Hons), MRICS, MCIPS, PhD

T. Knee-Robinson, BEng (Hons), CEng, MICE, MAPM, MCIHT
J. J. Lofty, MRICS
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R. Patterson, BA, MBA, CEng, MICE

B. Trebes, BSc (Hons), MSc, FRICS, FInstCES, FAPM
B. Walker, BSc (Hons), GMICE, ACIArb
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Proofreading by:

P. Waterhouse, BEng (Hons), MBA, CEng, FICE, FCIArb, FCInstCES, FCMI

The Institution of Civil Engineers acknowledges the help in preparing the fourth edition
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given by the NEC4 Contract Board and NEC4 drafting team and the support of the following
organisations in releasing their staff:

Anthony Collins Solicitors LLP

Berwin Leighton Paisner LLP
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CEMAR
Costain plc
Mott MacDonald Ltd
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 Amendments January 2019

Amendments January 2019

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The following amendments have been made to the June 2017 edition.

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Page Clause/location Amendment

3 3.8 Clause amended

6 Contract Data Preamble amended

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Part one:
General

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Full details of these amendments can be found at www.neccontract.com.

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 Conditions of Contract

Conditions of Contract

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1. GENERAL

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Actions 1.1 The Parties and the Dispute Resolver shall act as stated in this contract and in the contract
between the Parties.
1.2 The Dispute Resolver acts impartially.
1.3

CONDITIONS OF CONTRACT
The Dispute Resolver notifies the Parties as soon as a matter which may present a conflict of

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interest arises.

Identified and 1.4

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In these conditions of contract, terms identified in the Contract Data are in italics and defined
defined terms terms have capital initials.
1.5 Expenses are the costs incurred by the Dispute Resolver for

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• printing, reproduction and purchase of documents, drawings, maps, records and
photographs,

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telephone calls, internet and data charges,

postage and delivery charges,

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• travelling, hotel and similar expenses,

• room charges and

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• charges by others for help.

Interpretation and 1.6 In the contract, except where the context shows otherwise, words in the singular also mean
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the law in the plural and the other way round.

1.7 The contract is governed by the law of the contract.
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1.8 If a conflict arises between this contract and the contract between the Parties then this
contract prevails.

Communications 1.9 Each communication which the contract requires is in a form which can be read, copied and
recorded. Writing is in the language of the contract.
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1.10 A communication has effect when it is received at the last address notified by the recipient
for receiving communications or, if none is notified, at the address of the recipient stated in
the Contract Data.
Corrupt acts 1.11 The Dispute Resolver and the Parties do not
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CONTRACT DATA

• offer, promise, give, accept or solicit an advantage as an inducement for an action which
is illegal, unethical or a breach of trust or
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• abuse any entrusted power for private gain.

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 Conditions of Contract

2. ADJUDICATION

Adjudication 2.1 This clause only applies if the Contract Data states that the Dispute Resolver acts as an
Adjudicator.

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2.2 The Dispute Resolver does not decide any dispute that is the same or substantially the same
as one that the Dispute Resolver or its predecessor has previously decided.

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2.3 The Dispute Resolver decides a dispute referred under the contract between the Parties.
The Dispute Resolver makes a decision and notifies the Parties of it in accordance with the
contract between the Parties.
2.4 After notifying the Parties, the Dispute Resolver may obtain from others help that it considers
CONDITIONS OF CONTRACT

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necessary in reaching a decision. Before making a decision, the Dispute Resolver provides the
Parties with a copy of any information or advice from others and invites their comments on
it.

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2.5 The Parties co-operate with the Dispute Resolver and comply with any request or direction
made in relation to the dispute.
2.6 The Parties and the Dispute Resolver keep the Dispute Resolver’s decision and information

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provided for an adjudication as confidential to those who have a proper interest in them.
2.7 After a decision has been made, the Dispute Resolver keeps documents provided by the

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Parties for the period of retention.
2.8 If as a result of the contract between the Parties another party has become a party to a
dispute which is to be decided by the Dispute Resolver, references to Parties in the contract
include the other party.
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Advanced payment 2.9 If the Contract Data includes an advanced payment, each time a dispute is referred to the
Dispute Resolver the Party referring the dispute pays to the Dispute Resolver the amount
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stated.

An advanced payment is repaid to the referring Party as stated in the Dispute Resolver’s
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decision. The repayment is included in the amount due assessed after the decision on the
dispute has been notified.
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Payment 2.10 An invoice is issued

• each time a dispute is referred to the Dispute Resolver if an advanced payment is stated
in the Contract Data,

• after each decision on a dispute has been notified to the Parties and
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• after termination.
2.11 Unless otherwise agreed, the Parties pay the Dispute Resolver the amount due in equal
shares.
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CONTRACT DATA

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 Conditions of Contract

3. DISPUTE AVOIDANCE BOARD

Dispute Avoidance 3.1 This clause only applies if the Contract Data states that the Dispute Resolver acts as a Dispute
Board Avoidance Board member.

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3.2 The Dispute Avoidance Board is the Dispute Avoidance Board in the contract between the
Parties.

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3.3 The Dispute Resolver undertakes the duties of a Dispute Avoidance Board member in
accordance with the contract between the Parties. The Parties co-operate with the Dispute
Resolver.
3.4 The Dispute Resolver collaborates with other members of the Dispute Avoidance Board.

CONDITIONS OF CONTRACT
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3.5 The Parties and the Dispute Resolver keep information provided or obtained in connection
with the Dispute Avoidance Board as confidential to those who have a proper interest in
them.

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3.6 After termination the Dispute Resolver keeps documents provided by the Parties for the
period of retention.

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Advanced payment 3.7 If the Contract Data includes an advanced payment, the Parties pay to the Dispute Resolver
the amount stated in the Contract Data before each site visit.

Payment 3.8 An invoice is issued pr

An advanced payment is repaid to the Parties by the Dispute Resolver. The repayment is
included in the amount due assessed after the site visit.
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• each time a site visit is required if an advanced payment is stated in the Contract Data,

• after each site visit and

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• after termination.
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3.9 The Parties pay the Dispute Resolver the amount due in equal shares.
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CONTRACT DATA
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 Conditions of Contract

4. PAYMENT

Assessing the 4.1 The Dispute Resolver assesses the amount due and submits an invoice to each Party for that
amount due Party’s share of the amount due.

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4.2 The first invoice is for the amount due. Other invoices are for the change in the amount due
since the previous invoice.

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4.3 The amount due is

• the Dispute Resolver’s fee multiplied by the total of the time worked on the contract and
the time spent travelling,
CONDITIONS OF CONTRACT

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• the Expenses,

• other amounts to be paid to the Dispute Resolver less amounts to be paid by the Dispute

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Resolver.

Any tax which the law requires the Parties to pay to the Dispute Resolver is included in the
amount due.

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Payment of the 4.4 An advanced payment is made within one week of receiving the Dispute Resolver’s invoice.
amount due Other payments are made within three weeks of receiving the Dispute Resolver’s invoice or, if

4.5
4.6
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a different period is stated in the Contract Data, within the period stated.
Payments are in the currency of the contract.
If a payment is late, interest is paid on the late payment. Interest is assessed from the date
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by which the late payment should have been made until the date when the late payment is
made. Interest is calculated on a daily basis at the interest rate and is compounded annually.
4.7 If one of the Parties fails to pay, the other Party pays the Dispute Resolver the amount due
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with interest. The defaulting Party repays to the other Party the amount paid to the Dispute
Resolver together with interest.
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 Conditions of Contract

5. TERMINATION

5.1 The Parties may, by agreement, terminate the appointment of the Dispute Resolver for any
reason. They notify the Dispute Resolver of the termination.

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5.2 The Dispute Resolver may, by notifying the Parties, terminate the appointment if an advance
payment has not been made or if the Dispute Resolver

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• cannot act because of a conflict of interest,

• is unable to fulfil the role of Dispute Resolver,

• has not been paid an amount due within five weeks of the date by which payment

CONDITIONS OF CONTRACT
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should have been made.
5.3 Unless the Dispute Resolver or the Parties have terminated the appointment, the Dispute

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Resolver’s appointment terminates on the date stated in the Contract Data.

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CONTRACT DATA
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 Contract Data

Contract Data

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The conditions of contract are the NEC4 Dispute Resolution Service Contract June 2017
(with amendments January 2019) and any additional conditions of contract

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The Parties are

  Name
CONDITIONS OF CONTRACT

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   Address for communications

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   Address for electronic communications

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and

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  Name

   Address for communications

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   Address for electronic communications

The Dispute Resolver is

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  Name
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   Address for communications

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   Address for electronic communications

The Dispute Resolver acts as an Adjudicator / Dispute Avoidance Board member (delete
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as applicable)
CONTRACT DATA

The contract between the Parties is

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The period of retention is

The law of the contract is the law of

The language of the contract is

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The amount of the advanced payment is

The Dispute Resolver’s fee is per

The interest rate is % per annum above

The currency of the contract is

The Dispute Resolver’s appointment

terminates on

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 Contract Data

If the period in which The period within which payments are made is
payments are made is not
three weeks

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If additional conditions of The additional conditions of contract are

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contract are required

CONDITIONS OF CONTRACT
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CONTRACT DATA
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 Index

Index

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Index by clause numbers. Terms in italics are identified in the Contract Data, and defined terms have capital
initial letters.

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accommodation expenses 1.5 and previous dispute decisions 2.2
actions 1.1–3 termination of appointment 5.1–3
additional conditions of contract Z documents
cost of 1.5

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address for communications 1.10 period of retention 2.7, 3.6
adjudication 2.1–8 drawings 1.5
Adjudicator, Dispute Resolver as 2.1–8

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advanced payment(s) 2.9, 2.10, 3.7, 4.4, 5.2 Expenses 1.5, 4.3
amount due
assessment 2.9, 3.7, 4.1–3
failure to make payment(s) 4.7

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definition 4.3
payment of 2.11, 3.9, 4.4–7 fee, Dispute Resolver’s 4.3
taxes 4.3

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assessment, amount due 2.9, 3.7, 4.1–3 hotel expenses 1.5

co-operation 2.5, 3.3 identified terms 1.4–5

collaboration 3.4 information provision 2.4, 3.5
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communications 1.9–10 interest
compound interest 4.6 compound calculation 4.6
conditions of contract 1.4 defaulting Party 4.7
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on late payment 4.6

confidentiality 2.6, 3.5
interest rate 4.6
conflict of interest 1.3, 5.2
internet charges 1.5
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contract between the Parties

actions 1.1 interpretation, legal 1.6–8
Dispute Avoidance Board 3.2–3 invoices 2.10, 3.8, 4.1–2, 4.4
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dispute resolution 2.3, 2.8

law of the contract 1.8
language of the contract 1.9
Contract Data/contract data
addresses for communications 1.10 late payment(s) 4.6
adjudication 2.1 law, interpretation 1.6–8
Dispute Avoidance Board 3.1 law of the contract 1.7–8
payment(s) 2.9, 3.7, 4.4
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plural/singular word forms 1.6

termination of Dispute Resolver appointment 5.3 maps 1.5
costs, Dispute Resolver 1.5
currency of the contract 4.5 notification
of conflict of interest 1.3
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Dispute Resolver decisions 2.3–4, 2.10

data charges 1.5 termination of Dispute Resolver appointment 5.1–2
defined terms 1.4–5
delivery charges 1.5 Parties
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Dispute Avoidance Board 3.1–6 actions 1.1

Dispute Resolver advanced payment(s) 2.9, 3.7
actions 1.1–3 co-operation 2.5, 3.3
as Adjudicator 2.1–8 confidentiality 2.6, 3.5
conflict of interest 1.3
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advanced payment(s) 2.9, 2.10

amount due assessment 4.1, 4.3 defined terms 1.4
collaboration 3.4 Dispute Resolver decisions 2.3–4, 2.6
confidentiality 2.6, 3.5 failure to make payment(s) 4.7
costs incurred by 1.5 information provision 2.4, 3.5
decisions of 2.3, 2.6, 2.9, 2.10 invoices 4.1–2
defined terms 1.4–5 other party references 2.8
Dispute Avoidance Board 3.1, 3.3–6 payment(s) 2.9, 2.10, 2.11, 3.7, 3.9, 4.7
documents 2.7, 3.6 taxes 4.3
fee 4.3 termination of Dispute Resolver appointment 5.1–3
help from others 2.4 payment(s)
identified terms 1.4–5 advanced 2.9, 2.10, 3.7, 4.4, 5.2
information provision 2.4, 3.5 of amount due 2.11, 3.9, 4.4–7
payment(s) 2.9, 2.10, 4.3, 4.7

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 Index

currency of the contract 4.5 repayment of advanced payment(s) 2.9, 3.7

Dispute Resolver 4.3 room charges 1.5
failure to pay 4.7
interest 4.6
invoices 3.8, 4.1–2 singular/plural word forms 1.6
late 4.6

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site visits 3.7, 3.8
repayment 2.9, 3.7
time 4.4, 5.2 submission(s), invoices 4.1

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period of retention 2.7, 3.6
photographs 1.5 taxes 4.3
plural/singular word forms 1.6 telephone charges 1.5
postage charges 1.5 termination of Dispute Resolver’s appointment 2.10, 3.8, 5.1–3
printing costs 1.5 time, payment(s) 4.4, 5.2

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travel expenses 1.5, 4.3
recorded communications 1.9

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records 1.5

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