Insights — Procurement and Contracts JCT or NEC: which contract is right for your project?

Choosing the right building contract is one of the most important decisions you’ll make on a construction project. It sets out who carries which risks, how changes and payments are managed, and what happens when things don’t go to plan. In the UK, most projects use one of two families of contracts: JCT or NEC. Here’s a clear guide to how they differ, and how to decide which suits your project.

JCT contracts in brief

The Joint Contracts Tribunal (JCT) publishes the most widely used standard contracts in UK building work, and they’re particularly common on private sector building projects, such as residential, commercial, retail and industrial schemes. The JCT suite includes contracts for different procurement routes and project sizes, for example:

• Standard Building Contract: for larger projects procured traditionally, where the client’s team completes the design
• Design and Build Contract: where the contractor takes responsibility for completing the design and building the project
• Intermediate and Minor Works contracts: for smaller or simpler projects

JCT contracts are well established, familiar to most contractors and consultants, and set out the parties’ rights and obligations in a fairly traditional way. Under traditional JCT contracts, a Contract Administrator administers the contract and certifies payments impartially. On JCT Design and Build, the client is represented by an Employer’s Agent.

NEC contracts in brief

The New Engineering Contract (NEC) was designed to encourage active, collaborative project management. It’s widely used on infrastructure and public sector projects, and increasingly on building projects too. The main contract for works is the Engineering and Construction Contract (ECC), which offers several main options to suit different approaches to payment and risk, including:

• Priced contracts (Options A and B)
• Target cost contracts (Options C and D), where the client and contractor share savings or overruns
• Cost reimbursable and management contracts (Options E and F)

The parties are required to act in a spirit of mutual trust and co-operation. Key features include:

• Early warnings: both parties must flag potential problems as soon as they become aware of them
• The programme: the contractor’s programme is a live, central management tool, regularly updated and accepted by the Project Manager
• Compensation events: a structured process for assessing changes and their cost and time impact, with strict time limits

The contract is administered by the NEC Project Manager, often supported by a Supervisor who checks quality.

The key differences

• Style: JCT is more traditional and sets out rights and obligations. NEC is designed as a project management tool, encouraging problems to be raised and resolved as they arise.
• Management effort: NEC needs active, timely administration from both sides, with strict deadlines for notices and responses. JCT is generally less demanding day to day.
• Payment and risk options: NEC offers more flexibility (priced, target cost or cost reimbursable) from the same contract. JCT uses different contracts for different procurement routes.
• Typical use: JCT dominates private building projects. NEC is common on infrastructure and public sector work, and is often preferred by public bodies and utilities.

How to choose

The right contract depends on your project and your organisation. Questions to consider:

• What type of project is it? Infrastructure and complex public sector projects often suit NEC; many private building projects suit JCT.
• How will the project be procured? Traditional, design and build, or a collaborative approach such as target cost?
• Do you have the resources to manage it? NEC works best when the client’s team can respond promptly and manage the contract actively.
• What will your supply chain and funders expect? Contractors, consultants and lenders in different sectors are often more familiar with one family than the other.
• How do you want to share risk? NEC’s target cost options can align incentives; JCT offers well-understood, more traditional risk allocation.

Whichever you choose, the most important thing is that the contract is set up correctly (with clear amendments, requirements and procedures) and administered properly throughout the project.

How October Projects can help

October Projects advises clients on procurement and contract strategy, and administers both forms in practice: as Employer’s Agent or Contract Administrator under JCT, and as Project Manager under NEC. Every appointment is led by a chartered surveyor (MRICS) with 15 years’ experience, for clients across Birmingham, the West Midlands and the UK.

Not sure which contract suits your project? Get in touch to talk it through, or read our guide: What does an Employer’s Agent do?

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