Key takeaways
Contract Choice Shapes Risk and Project Success
NEC, JCT, and FIDIC differ in approach, flexibility, and obligations.
Collaboration vs Certainty: Know the Trade-Offs
NEC promotes proactive management; JCT and FIDIC offer clearer risk allocation.
Tailored Amendments Require Expert Oversight
Minor changes can have major consequences—legal advice is essential.
When working on construction projects, whether large infrastructure builds or commercial developments, the contract you use sets the tone for how the project is to be managed, how risks are allocated and how disputes are resolved. Both in the UK and internationally, three standard forms dominate the construction industry: NEC, JCT and FIDIC. Each contract has its own style, strengths and should be selected based on project specific requirements.
This article breaks down the core differences between these contract types to assist all parties to better understand which contract might suit their project needs.
The contracts: an overview
The New Engineering Contract (“NEC”): Established in 1986 by the Institution of Civil Engineers with an aim to draft a new form of contract to assist in the application of proactive project management. The NEC has an emphasis on collaboration between the parties and is commonly used across UK projects, particularly in the public sector and infrastructure projects. The updated NEC4 suite of contracts was released in 2017 (with amendments in January 2019, October 2020 and January 2023) to include a design, build and operate contract, an alliance contract followed by the release of the facilities management suite in 2021.
Joint Contracts Tribunal (“JCT”): Established in 1931 by the Royal Institute of British Architects with an aim to produce standard form contracts for use across the construction industry. The suite of contracts is known for its traditional structure and clear approach to risk allocation. The JCT is widely used in the private sector, particularly for a full design and build project. The latest editions of the JCT contract suite were released in 2024, with the new JCT Target Cost Contract due this month - 25 June 2025.
Fédération Internationale Des Ingénieurs Conseils (“FIDIC”): Established in 1913 by France, Belgium and Switzerland with UK joining in 1949, the FIDIC contracts are globally recognised and widely used on infrastructure and engineering projects. FIDIC contracts are known to provide a balanced framework and are often favoured by international clients and funders. The “rainbow suite” of contracts were issued in 2017, with amendments being issued in 2022. The latest forms of contracts include the green book (2021) and emerald book (2019, reprinted in 2023).
Contracts can be tailored (and often are)
Although the forms of contracts are produced as standard forms, ready to use, they are frequently amended to reflect project specific needs and risk allocation. The amendments, commonly referred to as a “Schedule of Amendments”, tend to sit alongside the main contract in JCT contracts. In contrast, NEC and FIDIC have mechanisms to incorporate such amendments, see below references to “Z” clauses and “Special Provisions”. It is vital that any amendments to the contract are carefully curated and considered, a minor clause alteration could have significant knock-on effects.
Legal advice at the early stages is critical to ensure bespoke amendments align with project objectives and don’t inadvertently create conflict or ambiguity.
Key differences
NEC | JCT | FIDIC | |
|---|---|---|---|
Approach | Encourages a flexible and collaborative approach with parties to “act in a spirit of mutual trust and co-operation”. The collaboration clause sits as the first clause in the contract, setting the agenda for the project (although parties struggle to understand and implement the intent of the drafting). More responsibility on the employer (its project manager) and requires experience and resources with a greater management capability. | Allows for a more “hands off” approach for the employer with risk allocated from the outset. Within the JCT Design and Build Contract 2024 Edition, the collaboration provision is now included within the articles. JCT encourages the parties to work together and with the project team in a “co-operative and collaborative manner, in good faith and in a spirit of trust and respect”. Previously, in the 2016 suite, this was an optional provision. | Designed as an international engineering contract with the aim to minimise disputes and distribute risk fairly. The contracts are designed to be adaptable to project needs with optional clauses to customise the contract. FIDIC promotes early dispute resolution with clear lines of communication between the parties and mechanisms for early warning of events which may impede progress of a project. |
Language | User-friendly and written in plain English. A small amount of case authority to aid interpretation. | Legally drafted with more precise terms. JCT 2024 editions introduced gender-neutral language. A significant body of case law to assist in interpretation. | Drafted with a consistent approach making its forms adaptable to different legal systems (sometimes multilingual). Limited case law to assist interpretation. Current case law mainly derives from ICC arbitration awards. |
Use | Recognised for its use with major engineering and infrastructure contracts but adaptable to suit construction works. Often used by government bodies and the public sector due to the promotion of collaborative behaviours which better reflects a positive working relationship between the parties. | Generally used for construction works of all sizes but adaptable to suit engineering works. Often preferred by funders due to the transfer of risk. | Generally used on international construction and engineering projects or domestic projects with international parties. Most widely used form of construction contract across the globe. |
Risk | “Early warning register” allows the parties to flag risk and include plans to reduce the impact of such risks. The register is not intended to allocate risk to a particular party. The contractor and project manager must notify the other of any risks which may impact the cost, progression or performance of the works with meetings held to discuss any required actions. | No early warning process or risk register but instead, a greater number of contract terms allocating risk. Design and build contract provides greater certainty on risks and more risk transferred to the contractor. This approach is generally preferred by funders due to the allocation of risk away from the employer. | Risk is managed through an early warning mechanism requiring both parties to promptly notify one another of events that may impact time, cost or performance. Seeks to pre-allocate risk and responsibilities between the parties. The grounds for claims for extensions of time are clearly specified within the contracts. |
Administration | A project management contract resulting in many time-consuming project management activities for both parties. A project manager deals with the management/administration of the contract. A proactive role with positive obligations to notify the contractor even where it may lead to compensation events. NEC experience is critical to performing the role. | A contract administrator (or employers agent depending on the contract type) is responsible for the administration of the contract, focusing on delivery. A more limited role than the NEC. JCT 2024 now allows email notices and electronic signatures, slightly easing the administrative burden. | An engineer is responsible for the administration of the contract, project and supervision of the works. The engineer is employed by the employer and there is no requirement for the engineer to act impartially in their duties, they do however need to act as a “skilled professional” in carrying out their duties for the employer. |
Payment provisions | Provides additional payment options with a more flexible approach to pricing (e.g. Option C – Target Cost). Six pricing options: Priced (fixed) with activity schedule (Option A); Priced (re-measurable) with bill of quantities (Option B); Target price with activity schedule (Option C); Target with bill of quantities (Option D); Cost reimbursable (Option E); and Management Contract (Option F). | Payment is on a lump sum basis with or without quantities, with approximate quantities and prime cost. Defined interim payments – either fixed instalments or monthly valuations. Recently introduced a target cost contract. | Payment is typically on a lump sum basis with the option to include a detailed schedule of payments within the contract (yellow and silver books). FIDIC also supports various other pricing approaches such as re-measurable (red book) and other books within the “rainbow suite” allow for target costs if agreed and incorporated (green book). Milestone or periodic payments as per conditions. |
Time and cost | Dealt with together as “compensation events”, the project manager has control over the time and cost when determining a change to scope. A process driven set of conditions, includes more events, including unforeseen ground conditions as a variation. An administrative burden. Contains a condition precedent to an entitlement for certain compensation events. Cost assessed on a prospective basis, albeit the courts have accepted a retrospective assessment of a compensation event (using known costs). Contractor takes the time/cost risk when quoting for a compensation event. | Dealt with separately as “relevant events” and “relevant matters”. An extension of time does not guarantee a recover for loss and expense. Retrospective assessment would be the usual approach. The standard form process can cause frustration due to a lack of detail relating to the information required for a contract administrator to make a full assessment. | Extensions of time to the completion date may be awarded as a result of i) variations, ii) failure by the employer to provide access, iii) unforeseeable physical conditions, iii) exceptional events etc. The responsibility is on the contractor to notify the engineer of any such event and submit a detailed claim within the specified time period. The contractor may claim for additional costs in limited circumstances including i) delays caused by the employer, ii) changes in law, iii) unforeseeable conditions, iiii) exceptional events etc. Fixed claims procedure must be followed with timely notification and details of the event set out. |
Clause structure | All contracts follow the same structure. Contains 9 core clauses with secondary optional clauses allowing the contract to be adapted for its use. Secondary option W – 3 options for resolving disputes. Secondary option X – 29 clauses to be selected depending on the project requirements. Secondary option Y – payment terms for construction contracts. Bespoke clauses can be inserted into the contract as “Z clauses”. | 2016 Edition introduced the same structure throughout all forms of contract making it easier to use the JCT suite. Bespoke clauses included by way of a schedule of amendments to the contract. | Contracts largely follow the same structure, with consistent chapter headings and numbering albeit the content within the clauses varies. Core clauses contained within the general conditions with the specifics of the contract to be set out with the contract data section. Special provisions are to be included within part B of the particular conditions. FIDIC strongly advises that the Golden Principles are taken into account when drafting any special conditions. |
Design responsibility | Highly flexible – design responsibility is defined within the scope and contract data. Fitness for purpose included unless clause X15 is selected. | Several options to divide design responsibility – with design falling on the employer in traditional contracts, the contractor in design and build contracts and an option for partial design in some forms. | Clear separation of design dependant on contract type. |
Specification | Detailed within the scope, including both employer and contractor specified items. | Contained within the employer’s requirements/specification and/or the contractor’s proposals. | Contract dependant (e.g. yellow book – specification included within the employer’s requirements). |
Retention | A percentage is paid upon completion with the remainder released upon issue of the defects certificate. | Retention deducted from interim payments with a percentage paid upon practical completion. Remainder of retention fee paid upon completion of making good defects. | Similar to JCT, retention is deducted from each interim payment. Released in two stages: first half upon taking-over certificate and second at the end of defects notification period. |
Defects | Defects are to be corrected by the contractor even where they have not been notified of the same by the project manager. | Defects, shrinkages and faults to be made good with defects to be notified to the contractor no later than 14 days after the end of the rectification period. | Engineer must notify contractor of any defects within the defects notification period. |
Programme | At the core of the NEC Contract. Proactive with built-in mechanisms to prevent and mitigate delay. It contains requirements for a detailed programme of works and is used as a management tool for the project manager to monitor progress and compensation awards. NEC4 includes a deemed acceptance provision which remedies the difficulties caused by NEC3 whereby a project manager failed to accept a submitted programme. | Requires the contractor to use “best endeavours” to prevent a delay to the works. No requirement for a detailed programme. Delay prevention is more reactive than proactive. | Similar to NEC, there is a requirement for a programme. Programme is used to assess extensions of time. Failure to submit or update the programme can lead to withholding interim payments. |
Dispute Resolution (primary approach) | Adjudication (with optional additional steps). Encourages early resolution via early warnings and dispute avoidance. | Adjudication (statutory right), then litigation or arbitration (subject to agreed terms of contract). | Dispute avoidance / adjudication board (DAAB) is mandatory, then arbitration (typically ICC). |
Legal advice adds value from day one
Selecting the appropriate construction contract isn’t just a box-ticking exercise – it is a key part of managing risks, costs and keeping the project on track. Understanding the differences between each contract from the outset can make all the difference.
At Hill Dickinson LLP, our Construction and Engineering team provide expert advice to clients throughout the full contract cycle, whether it is selecting the right form and negotiating terms or managing claims and disputes. Our team have a wide range of expertise and have a vast amount of experience in both UK and international projects.
Whether you’re a developer, contractor, funder or consultant, we can help to ensure your contract reflects your commercial priorities.
N.B – intended only to provide a general overview of common forms of construction contracts within the UK construction industry.
N.B – comments are generalised and specific references to a particular clause or wording within the contracts may not be present in all forms of relevant contracts.
N.B – not intended for use as a contract selection tool and expert advice should be sought to ensure project needs are sufficiently addressed.
