The Local Democracy, Economic Development and Construction Act - NEC3 September 2011 Amendments

The UK’s Local Democracy, Economic Development and Construction Act 2009 has introduced amendments to the Housing Grants, Construction and Regeneration Act 1996 (the ‘Construction Act’), requiring a number of changes to NEC3 contracts. The changes are published on the NEC web site for free download by users on the following link.

http://www.neccontract.com/amendments.asp

The amendments to the Construction Act apply to all construction contracts in England and Wales from 1 October and those in Scotland from 1 November. They are likely to apply to contracts in Northern Ireland in the future.

The resulting NEC3 changes are in two areas: adjudication and payment. In the Engineering and Construction Contract (ECC), Engineering and Construction Subcontract (ECS), Professional Service Contract (PSC) and Term Service Contract (TSC) this is effected through revisions to clause W2 and Y(UK)2.

An additional clause is provided in the short forms, namely the Engineering and Construction Short Contract, Engineering and Construction Short Subcontract and Term Service Short Contract. The changes are summarised below.

Changes to adjudication provisions

The provision allowing for correction of slips has been revised to comply with the new statutory requirements. This has affected the timing of the correction as well as the wording of what can be corrected.

It is now no longer permissible to allocate fees and expenses of an adjudication equally between the parties through the contract. The adjudicator must be given the right to allocate them. The Act has also fixed the timing of any payment due following an adjudication decision, which has required a further change.

Changes to payment provisions

Under ECC, ECS and TSC, a payment certificate and details of how the payment was calculated must be issued together and defined as a payment notice. If the project manager fails to give a payment notice, the contractor may give the notice. Under short forms and the PSC, there is no certificate so the contractor/consultant’s submission will constitute the payment notice.

In all forms, the timing of issue of the payment notice must be fixed as not later than 5 days after the payment due date. The amount stated in the payment notice must be paid unless a notice of intention to pay less is issued. The arrangement is superficially similar to the withholding notice, but terminology and timing are different.

As the Act now requires payment to be made for suspending performance for non-payment, the short forms have also been amended to include this as a compensation event to ensure the assessment is carried out as for other events.