The changing conversation in market about standard contracts

In 2019 Consult Australia was invited to work with NEC to prepare the Y clauses to assist with the adoption of the NEC suite of contracts in the Australian market. The Y clauses are those amendments needed to make the contract compliant with Australian law.

Consult Australia appointed a small working group, myself and Kevin Pascoe, who were sent off to work with Peter Higgins (Chair of the NEC Contract Board Chair) and law firm Pinsent Masons.

The Y clauses were published in March this year by NEC and a local steering group, consisting of representatives from NEC, Consult Australia, HKA and Pinsent Masons that have been working behind the scenes to build local awareness of the NEC contract.

On Wednesday 2 June, the working group had the opportunity to present the NEC contract suite to over 60 government procurement specialists at a webinar hosted by APCC, the Australian Procurement and Construction Council. I had the pleasure of representing Consult Australia at the session to talk about how we went about drafting the Y clauses. I emphasized the hard work it took to produce drafting that met the NEC principles of clarity and simplicity. If the amendments seem short, it is because it took a lot of work to make them so.

The webinar also included the Sydney Water case study, presented by Mark Simister the Head of Program Delivery.

Whilst the webinar content walked the audience through all of the things you’d expect - the history and origins of NEC, the contract suite and their structure, how the Y clauses have been drafted and the Sydney Water case study – I found the session particularly inciteful for the following perspectives that emerged:

1. Contracts should be written for their users.

The problem described was how critical it was for the people delivering the projects, the engineers and the like, to be able to read the contracts and understand them. If a contract can only be understood by the commercial managers and the lawyers, then we are disengaging this crucial group of people responsible for the delivery of the project. This in turn leads to the contract management processes being ignored and an increasing risk of claims. Contracts need to first and foremost be written for the primary users of it.

2. The value of a contract users community

We talked about the wider community that comes with a well established standard contract suite – the guidance, the flow charts, the tools, the training and articles. Where there is a vibrant and active community all working with the same basic documents, you have the foundations for building the capacity of your project team to handle issues as and when they arise with the administration of the contract. Bespoke contracts on the other hand will always take you back to the lawyer who drafted it to find out what it means, coming at a cost and speed and uncertainty. The difference is between being in a constant learning and improvement cycle versus everything being new all the time.

3. Efficiency

The Sydney Water case study highlights what efficiency gains can be obtained by taking the constant negotiation of contracts out of business. Observations about the improvements to supply chain relationships and the speed at which they can bring work from planning to delivery is testament to the waste embedded through the use of bespoke contracts.

4. Mental Health impact of claims and disputes

This was perhaps the most important observation. Business leaders know that holding your people in constant adversarial positioning, let alone the impact of being involved in a claim or dispute, causes distress and has a negative impact on wellbeing. Mark Simister spoke passionately about the impact on wellness and engagement he is seeking to achieve through redefining how they work.

Consult Australia has long advocated for the adoption of standard contracts in the Australian market and will continue to do so. It is gratifying to see the proof of these arguments in a local case study and it demonstrates what best practice clients are doing to make themselves the most attractive client in a supply constrained market.