I have previously discussed how construction contracts can play an important part in the fight against climate change.
It is promising to see that the industry is taking note of this as demonstrated by NEC releasing a new X29 secondary Option for consultation last week. The new clause is aimed at incentivising carbon reduction throughout the course of a project. NEC is a widely used family of contracts, so the introduction of this new clause, where adopted, could have an important impact. The clause is currently in consultation form to allow users to provide NEC with feedback before it is finalised - a sensible approach.
So, how does the new clause work? In summary, the clause introduces a number of new provisions which incentivise the contractor to achieve green targets with contractual consequences if these targets are not achieved. The clause includes, amongst others, the following provisions:
- Climate Change Requirements – these are technical requirements which must be set out in the Scope. If the Contractor fails to provide the works in accordance with the Climate Change Requirements then this would constitute a defect.
- Performance Table – this should include targets accompanied by positive and/or negative financial incentives contingent on whether the targets are achieved. If the Contractor fails to meet a target, then it does not constitute a defect but instead is dealt with through the financial incentives alone.
- Early Warning Procedure - the Contractor and Project Manager are obliged to notify the other as soon as they become aware of a matter which could negatively impact the achievement of the Climate Change Requirements.
It should be recognised that this clause cannot function in isolation as it needs to be backed up by clear technical requirements. If an Employer wants a project to meet specific sustainability requirements, it will need to start thinking about these at procurement stage. If left to when the contract is entered into, it will likely be too late. However, clauses such as this can be extremely useful to ensure that contractors are held accountable for promises made when they submitted their tender bids.
NEC has now released the new X29 secondary Option in consultation form. The new Option will be used to support, incentivise and tangibly demonstrate carbon reduction initiatives on future builds across the sector.