NEC4 Alliance Contract – An Overview

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08 July 2020

After reporting on CBRE’s involvement in the Hallam Alliance, an early adopter of the NEC4 Alliance Contract, we take a closer look at how it can be used in the FM world.

Put simply, the NEC4 Alliance Contract is designed for use on major projects where longer-term collaborative ways of working can be created, reflecting best practice in procurement and project management. 

The Hallam Alliance is one of the first partnerships to use this type of contract for a university building programme. It involves three of its partner suppliers: Arup (design-led consultancy), BAM (construction) and CBRE.

But what else is there to know about this contract and what is its significance for facilities management?

 

“We believe NEC4’s diverse range of definitive end-to-end project management contracts will empower users to deliver projects on time, on budget and to the highest standards now and in the future to the benefit of both industry and society.”

–Rekha Thawrani

Global Head, NEC Contracts and General Manager

 

What is the NEC4 ALC and Why Use It?

 

The NEC4 Alliance Contract (ALC) was introduced in June 2018, a contract which incentivises parties to collaborate more closely. 

The contract is known as a “‘true alliance arrangement in which the client and all key members of the supply chain are engaged under a single contract.” All members of the alliance have an equal voice and share in the performance of the alliance as whole, as opposed to their own individual performance. This can help reduce the potential for disputes.

The contract is designed for use on major projects or programmes of work, where longer-term collaborative ways of working are to be created. It can also be used to deliver a programme where a number of lower-value projects can be combined to create a major programme of work.

 

The Structure

 

Key contractors, consultants and suppliers are called “Partners” within the ALC, (which together make up the Members”). All Members of the alliance have an equal voice and share in the risk and reward for the performance of the alliance as a whole. 

According to Clarkslegal, a commercial law firm, the client has two roles within the ALC:

 

1. From the outset setting objectives and selecting the Partners
2. Once the work begins carrying out assurance on cost and quality as stated in the scope and checking and making payment. 

 

An alliance board, which includes a representative from the client and each Partner, has overall responsibility for the alliance and provides the strategy, allocates work, appoints an alliance manager, makes decisions and help to resolve disputes. The alliance manager has similar duties as a traditional project manager under other NEC contracts.

 

The Benefits

 

The NEC describes the ALC as a “contract suite with improved flexibility, clarity and ease of use”. Whether supplying high-value goods or low-risk items, NEC4 enables users to deliver projects on time, on budget and to the highest standards, they claim.

Other benefits include: 

 

• Streamlined processes and updated definitions
• Improved contract administration and reduced administration costs
• Greater clarity and reduced potential for problems
• Provision for building information modelling and early contractor involvement
• Improved risk opportunity and risk management

 

With reference to the earlier mentioned Hallam Alliance, both Sheffield Hallam University and outsourcing FM service provider CBRE agreed that the NEC4 contract provides a unique opportunity to collaborate.

Daniel Vaughan, Director at CBRE, commented at the time: “Having FM services involved from the outset provides the opportunity for operational and user needs to shape design and construction helping to ensure smoother handover of buildings, improved quality and performance and the reduction of in-use costs and user issues, creating the best possible user experience.”

Picture: A photograph showing one person offering another person a pen, to sign a contract

Article written by Ella Tansley | Published 08 July 2020

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