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During the construction boom in 2007, leading UAE developer Aldar Properties took the pioneering step of adopting the third generation of the New Engineering Contract, the NEC3, to procure the development of the vast mixed-use waterfront development at Al Raha Beach in Abu Dhabi. It was believed to be the first time an NEC contract had been used anywhere in the Middle East and is still one of the largest single contracts ever let in the Emirates.
Despite this, the NEC suite has struggled to gain traction in the GCC due to the historical prevalence in the region of the FIDIC forms of contract since the oil boom in the 1970s.
Will the newly released NEC4 suite of contracts be more widely received in the GCC construction markets? Let us look at some of the key features of the NEC4 suite.
Two brand new contracts have been added to the suite – the NEC4 Design, Build and Operate Contract (DBO) and the consultative NEC4 Alliance Contract (ALC). The DBO is aimed at clients who wish to procure design, construction, operation and/or maintenance from a single contractor. It can include a range of different services to be provided before, during and after the construction works are completed, such as operation of the asset and more straightforward facilities management.
The ALC is a revolutionary multi-party contract based upon an integrated risk and reward model. It suits clients who wish to enter into a single collaborative contract with a number of participants. The potential benefit of using this contract is a much deeper collaboration between all project participants, bound by common interests and reduced grounds for dispute.
Key features of the NEC4 suite include:
The NEC4 is likely to be a popular form of contract in the UK given the success of its predecessor. The challenge however is to become routinely considered for construction projects in the GCC, given the current predominance of the FIDIC forms of contract.
The NEC suite, much more so than the FIDIC forms of contract, relies on the parties conducting themselves in accordance with principles of good faith, a concept well recognised across the GCC and expressly enshrined in many of the GCC countries' laws.
Transitioning to the NEC would however still require a substantial change in mindset of all project participants, away from the traditional adversarial attitudes that plague the construction industry in much of the world. It will be interesting to see how the GCC construction industry responds to the new NEC4 suite – a contract suite specifically developed to appeal to a wider "global" audience.
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