New approaches to construction contracts in the 1990s

In 1991 the ICE published a new type of contract called the New Engineering Contract (NEC) which aimed to promote better management of construction contracts to reduce claims and disputes. Under it a Project Manager acting for the Employer administers the contract and a separate Adjudicator is appointed to settle disputes, subject to later arbitration or legal settlement (see Section 4.2(f)).
In 1994 changes to the construction industry to improve its efficiency were proposed by Sir Michael Latham in his report, Constructing the Team, commissioned jointly by the government and industry. He recommended use of standard contracts with payment and dispute terms defined, such as in the NEC, setting up registers of approved consultants and contractors for public work, and measures to protect contractors and subcontractors against delayed or nonpayment.
The more radical of his proposals met opposition and were not adopted; but his report resulted in the UK government passing the Housing Grants, Construction and Regeneration Act 1996, Part II of which, dealing with Construction Contracts, adopted a number of Sir Michaels key recommendations.
This Part II required that all contracts for construction should provide for
the right of a party to the contract to refer a dispute to adjudication;
entitlement of a party to the contract to be paid in instalments;
no withholding of payment due without prior notice;
payment not to be made conditional upon the payer receiving payment
from a third party unless the latter became insolvent.

The Act came into force on 1 May 1998 and, where a contract did not include provisions required by the Act, The Scheme for Construction Contracts (England and Wales) Regulations 1998 applied. This detailed an ajudicators powers and duties; and the payment conditions required by the 1996 Act.
Most standard conditions of contract used by promoters to employ contractors already complied with the 1996 Act, but the Act also applied to contracts between a contractor and his subcontractors. The Act does not, however, apply to works for extraction of minerals, oil or gas; works for an occupier of a dwelling, or any works estimated to be completed within 45 days.
In 1995 the ICE produced a revised edition of the former New Engineering
Contract re-naming it the Engineering and Construction Contract (ECC), details of which are given in Section 4.2(f). Use of the ECC has increased steadily and now matches the traditional ICE forms. Both forms, when well managed, are capable of producing successful works with minimal disputes if the documents are carefully drawn up and the contract terms fairly applied.

4Atechnical paper published by the ICE (Paper No. 9999, 1992) showed how a reduction of 24 per cent in soil shear strength from that expected could result in an increased rolling resistance for earth moving equipment which reduced plant productivity by 37 per cent, costing the contractor that much more.

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