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Similarities and Differences NEC vs FIDIC contracts ?


NEC (New Engineering Contract) and FIDIC (Fédération Internationale des Ingénieurs-Conseils) are two of the most commonly used standard forms of construction contracts in the world. Both are designed to regulate the contractual relationship between the employer and the contractor, and to provide a framework for the management of a construction project. In this blog post, we will examine the similarities and differences between NEC and FIDIC contracts, and explore the benefits and drawbacks of each. Similarities:

  1. Purpose: Both NEC and FIDIC contracts have the same basic purpose: to provide a framework for the management of a construction project, and to regulate the contractual relationship between the employer and the contractor.

  2. Collaboration: Both contracts emphasize collaboration and teamwork, and require the parties to work together in a spirit of mutual trust and cooperation.

  3. Risk allocation: Both contracts allocate risks between the employer and the contractor in a balanced and equitable manner.

  4. Dispute resolution: Both contracts provide for the resolution of disputes through a variety of mechanisms, including mediation, arbitration, and expert determination.

Differences:

  1. Contract administration: NEC contracts are designed to be administered on a project-by-project basis, while FIDIC contracts are designed to be used on a more global basis, with the same contract being used on multiple projects.

  2. Flexibility: NEC contracts are more flexible than FIDIC contracts, and are better suited to projects that are complex or that have a high degree of uncertainty.

  3. Payment provisions: NEC contracts have more detailed payment provisions than FIDIC contracts, and provide a clearer framework for the calculation and payment of compensation events.

  4. Performance security: NEC contracts require the contractor to provide performance security in the form of a performance bond or a parent company guarantee, while FIDIC contracts do not.

Benefits of NEC contracts:

  1. Flexibility: NEC contracts are highly flexible, and are well suited to projects that are complex or that have a high degree of uncertainty.

  2. Detailed payment provisions: NEC contracts have more detailed payment provisions than FIDIC contracts, and provide a clearer framework for the calculation and payment of compensation events.

  3. Performance security: NEC contracts require the contractor to provide performance security in the form of a performance bond or a parent company guarantee, which provides additional protection for the employer.

Drawbacks of NEC contracts:

  1. Complexity: NEC contracts can be complex, and require a high level of understanding and expertise to administer effectively.

  2. Cost: NEC contracts can be more expensive than FIDIC contracts, due to the additional requirements for performance security and the need for more detailed payment provisions.

Benefits of FIDIC contracts:

  1. Global use: FIDIC contracts are designed to be used on a more global basis, with the same contract being used on multiple projects.

  2. Simplicity: FIDIC contracts are simple and easy to understand, and are well suited to projects that are straightforward and that have a low degree of uncertainty.

  3. Cost: FIDIC contracts are generally less expensive than NEC contracts, due to their simplicity and the absence of requirements for performance security.

Drawbacks of FIDIC contracts:

  1. Inflexibility: FIDIC contracts are less flexible than NEC contracts, and are not well suited to projects that are complex or that have a high degree of uncertainty.

  2. Limited payment provisions: FIDIC contracts have limited payment provisions, and do not provide a clear framework for the calculation and payment of compensation events.

  3. Lack of performance security: FIDIC contracts do not require the contractor to provide performance security in the form of a performance bond or a parent company guarantee, which can be a drawback for the employer.

Conclusion: In conclusion, NEC and FIDIC contracts are both highly regarded standard forms of construction contracts, and are widely used in the construction industry. Both contracts have their benefits and drawbacks, and the choice of contract will depend on the particular requirements of the project and the preferences of the parties. NEC contracts are more flexible and provide more detailed payment provisions, but are also more complex and expensive. FIDIC contracts are simple and easy to understand, but are less flexible and have limited payment provisions. Ultimately, the choice of contract will depend on a range of factors, including the size and complexity of the project, the degree of uncertainty involved, and the preferences of the parties.



 



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