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Evaluation of the NEC3 ECC and the GCC 1
EVALUATION OF THE TREND OF NEW ENGINEERING CONTRACT
DOMINATING THE CIVIL CONSTRUCTION WORKS IN HONG KONG
University
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Evaluation of the NEC3 ECC and the GCC 2
Abstract
Recent advances by the government of Hong Kong have seen the large-scale use of newer versions of the contract forms, particularly the NEC4, that have helped enhance the success of achieving the goals and objectives of construction projects. Dissatisfaction with the rigid nature of traditional contract forms has prompted experts to explore and research the possibilities of evaluating the effectiveness of newer contract forms. Newer versions of contract approaches are being devised because of success attained in the past following the use of earlier versions. A classic example includes the recent establishment of the NEC4, an upgrade of the NEC3. It is in the best interest of all parties involved in a project to attain success. However, the GCC and other
traditional forms of contracts had a lot of pitfalls and inflexibilities that compromised the relationship between different contracted parties. Adopting new techniques and contract approaches based on extensive research can help provide a remarkable basis for mitigating risks. The recent widespread use of the NEC4 ECC, a family of contracts, has encouraged the development of further studies to explore the phenomena and what the future holds in the region.
Therefore, this study investigates the trend of NEC4 ECC that continues to dominate civil construction works in Hong Kong and the possibility of discouraging the use of the GCC in the future.
Table of Contents
Evaluation of the NEC3 ECC and the GCC 3
Abstract
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2
Chapter 1: Introduction
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4
Chapter 2: Literature Review
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8
Chapter 3: Research Methodology
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23
Chapter 4: Research/Investigation
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28
Chapter 5: Conclusions and Recommendations
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41
References
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45
Chapter 1: Introduction
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Evaluation of the NEC3 ECC and the GCC 4
Background
Hong Kong’s construction industry has often been considered confrontational, dispute-
orientated, and adversarial (Wang et al., 2022). This culture has, in multiple instances, been attributed to the traditional contract systems employed in the region because they made it difficult for contracted parties to establish mutual trust and collaborate. Nonetheless, the past couple of years has seen that mentality change as players embrace new engineering contracts and
other routes to project management and procurement. A classic example is the New Engineering Contract (NEC), which has attained wide adoption in construction works across Hong King despite being launched in 1993 in the United Kingdom (UK) (Chan & Chan, 2018). The massive success that the NEC has attained in the region has even prompted the government to promote its
large-scale adoption, establishing dominance over the traditional contract systems such as the General Condition of Contract (GCC) that lack necessary flexibility.
Various things contribute to the contract issues that Hong Kong’s construction industry faces today, but at the core are varied objectives that contracted parties have (Lau et al., 2019). In
particular, the objectives of both the clients and the contractors vary significantly, with each party focusing on ensuring that their interests have been met. Most clients are risk evasive. Their goal is to channel all potential risks associated with a project to the contractors. On the other hand, Contractors are willing to accept most risks irrespective of whether they are in a better position to manage them. Clients perceive contractors as thieves, which compromises the essence
of trust and mutual respect. Because of that, written contracts and their clauses always emerge as the most effective techniques for resolving arising conflicts. At the same time, the clauses could attract varied interpretations to suit the specific needs of involved parties.
Evaluation of the NEC3 ECC and the GCC 5
NEC is a formalized system that includes standard contracts that have helped increase the
success and collaboration between different project partners (Siu, Leung & Chan, 2018). Each of
those contracts promotes effective relationship management between contracted parties by providing a legal basis for defining the duties and responsibilities of contractors and employers. The contracts are also reflections of fairness, cooperation, and mutual trust. Therefore, this research seeks to assess the trend of the New Engineering Contract (NEC) Engineering and Construction Contract (ECC) that continues to dominate civil construction works in Hong Kong.
Aims and Objectives
This project is motivated by several things. For one, there is cost control, whose purpose in civil construction is to ensure that a project is delivered within the budget and scope and on time. The same applies to time, which is critical in ensuring that projects do not result in losses and that contracted parties abide by written contracts. Since disputes are inevitable in construction projects, this project is also motivated by the need to understand better how NEC4 ECC and GCC go about their dispute resolution processes. That is bearing in mind that the inability to resolve disputes could make it difficult for a project to be delivered on time, leading to losses and increasing costs, among other things.
Moreover, variation is a vital consideration in this study. It includes any potential alteration to the original written contract and could involve altering the conditions, clauses, or even physical works. Lastly, this research is motivated by the essence of partnership culture, especially between the client and the contractor. The relationship between clients and contractors
should be detailed in equitable and transparent contract documents to minimize the risk of project failure. Therefore, the specific aim and objectives of this dissertation are as follows:
Aim:
Evaluation of the NEC3 ECC and the GCC 6
Evaluate why the New Engineering Contract 4 (NEC4) Engineering and Construction Contract (ECC) will dominate the civil construction market in Hong Kong and discourage the application of the General Condition of Contract (GCC), traditionally adopted on a large scale.
Objectives:
1.
To review the cost control mechanism between NEC4 ECC and GCC for civil works.
2.
To evaluate the time control system between NEC4 ECC and GCC for civil works.
3.
To assess the dispute resolution process and choices between NEC4 ECC and GCC.
4.
To compare the variation works system between NEC4 ECC and GCC.
5.
To compare the partnership culture between NEC4 ECC and GCC.
Research Methodology
This research employs mixed research method. The methodology is ideal because allowed the researcher to capture a more comprehensive understanding of the research problem by triangulating data and methods. By using both quantitative and qualitative methods, mixed methods research can provide a more in-depth and nuanced understanding of the research problem than either method used alone. Additionally, mixed methods research can also increase the validity and reliability of the findings, as well as address the limitations of using only one method. It also allows for the integration of quantitative and qualitative data in a complementary way, which can provide a more comprehensive understanding of the research problem (Fellows & Liu, 2021).
Main Achievements
The significant achievement of this study is that it offers insights into the trend of the New Engineering Contract (NEC) Engineering and Construction Contract (ECC) that continues to dominate civil construction works in Hong Kong. Several civil constructions work in Hong
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Kong were initially procured through traditional contract systems like the GCC. However, these contract approaches, particularly the GCC, need to be more flexible to handle the dynamics of the sector. Whereas some critical need more clauses, others promote the poor relationship between contracted parties, making it difficult for the goals and objectives of construction projects to be met. This research clarifies why the New Engineering Contract 4 (NEC4) Engineering and Construction Contract (ECC) will dominate the civil construction market in Hong Kong and discourage the application of the General Condition of Contract (GCC), traditionally adopted on a large scale. This is attained by reviewing the cost control mechanism, time control system, dispute resolution process and choices, variation works system, and the partnership culture between NEC4 ECC and GCC for civil works in Hong Kong.
Summary of Dissertation
Subsequent chapters of this study include a review of the literature, research methodology, research/investigation, and conclusions and recommendations. The literature review section covers essential features of the research topic and related themes and subjects by reviewing other scholarly works. The methodology provides an overview of the researcher's approach to carrying out the study. It includes the rationales for selecting the method, and appropriateness, among other areas. The research/investigation chapter solely involves interpreting data the researcher has gathered and connecting sections like the literature review and the research aim and objectives. Inferences made from the study are captured in the conclusions and recommendations section. The chapter further provides the basis for making recommendations that can be adopted by researchers carrying out similar investigations in the future.
Evaluation of the NEC3 ECC and the GCC 8
Chapter 2: Literature Review
Introduction
This chapter includes a critical summary of current research on the trend of New Engineering Contract dominating civil construction works in Hong Kong. Essential findings, arising questions, controversies, future directives, and other vital recommendations from past studies are evaluated and summarized. The section offers a resourceful basis for contextualizing the research topic and ensuring that aligned objectives have been met. The aim is to analyze the cost control mechanism, time control system, dispute resolution process and choices, variation works system and the partnership culture between NEC4 ECC and GCC for civil works in Hong Kong.
Contract Issues in Hong Kong’s Construction Industry
Various issues contribute to contract issues in Hong Kong’s construction problems (Zhang et al., 2018). One of the typical contract issues arising is the scope of work. Disputes or misunderstandings could arise regarding the work in the contract or what should be included in the final service or product. Another issue that has been arising relates to delays and schedules. This could be construction process delays arising from unforeseen circumstances like materials and weather conditions. In addition, contract problems have been arising because of payment issues. Disagreements could arise over payments because of changes in the scope of work, payment schedules, and invoicing concerns that could affect the overall costs of a construction project (Zhang et al., 2018). Quality of work is another thing that has led to contract issues in Hong Kong’s construction industry. This concern could revolve around defective artistry or materials that could trigger disputes on whether the work delivered meets the standards included in the contract. Variations and changes could also lead to contract issues (Lau et al., 2019).
Evaluation of the NEC3 ECC and the GCC 9
Requests for changes in the project scope could be requested, leading to disputes over their impacts on the project and overall cost. Thus, to mitigate or avoid contract issues in Hong Kong’s construction sector, it has increasingly been essential to have a detailed and explicit contract that breaks down relevant specifications such as payment terms, schedule, and the scope
of the work. It has also become vital to have an effective dispute resolution and communication process that can provide the basis for addressing issues that are likely to arise in the project (Lau et al., 2019).
Traditional Forms of Contracts
Most traditional contracts follow strict procedures for parties involved in a project to fulfil what is required (Rahman & Kumaraswamy, 2002). These contracts have little room for alteration in the tasks that are supposed to be completed in a project. Consultants like architects are usually responsible for reflecting on issues and ideas that clients raise and translating them into outcomes. The contractor can then incorporate the ideas into the construction project. The rigidity level that these contracts promote allows project partners to redirect attention to the arms-length relationship since each party is concerned about fulfilling their desires and aims in the project (Rahman & Kumaraswamy, 2002). The relationship between the traditional contract approaches and their effect on project success and collaboration between the parties involved in the project has been at the centre of most studies. Contract approaches like the GCC were widely
used in Hong Kong, especially by government entities. This created the perception that alterations or new contract forms would be challenging. However, by the look of things today, it is evident that such traditional contract systems cannot meet the increasing demands of clients and meet the goals and objectives of construction projects (Rahman & Kumaraswamy, 2002).
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The major problems associated with traditional contract systems relate to the adversarial working relationship between contractors and clients and cost overrun (Kumaraswamy et al., 2001). Most conventional contractual agreements emphasize the definitive and transparent allocation of risks between different parties involved in a project. However, not all project risks are quantifiable and known at the commencement of a project overrun (Kumaraswamy et al., 2001). That is bearing in mind that even the risks known at the start of the project could change in terms of significance and impact other risks, requiring continuous subjective measurement and
adjustment. In that regard, a majority of traditional contractual agreements are inflexible and unsuitable when addressing the dynamics of construction projects and the risks associated with them overrun (Kumaraswamy et al., 2001).
Studies have shown that challenges involved in allocating risks are the main cause of adversity and differences between contractors and clients (Rahman & Kumaraswamy, 2002). The employer's aim is usually the short-term benefit of minimizing liabilities, with a little emphasis on long-term relationships with other project stakeholders throughout the project. In a worst-case scenario, contractors who end up inheriting a substantial amount of project costs because of poor distribution of risks might find it unwise to tender for construction projects in the future (Rahman & Kumaraswamy, 2002). The aftermath of using some of the traditional contract arrangements includes lower productivity, poor working relationships between contracted parties, costly and lengthy disputes, customer dissatisfaction, poor quality, and increased cost and time of delivering on civil construction projects (Rahman & Kumaraswamy, 2002). New Engineering Contracts (NEC)
Evaluation of the NEC3 ECC and the GCC 11
NEC is a newly established collection of contracts that offers contractual procedures for civil engineering projects. The contract arrangement has been used for quite some time since its development by the UK’s Institution of Civil Engineers (NEC Contracts, 2021). The family of contracts did not receive enough attention at first, but after some reviews and the development of
newer versions, many countries, including Hong Kong, started adopting it. NEC focuses on stimulus to good management, flexibility, clarity and simplicity to encourage parties involved in a project to deliver their project tasks (Tung, Memon & Javed, 2021). The stimulus to good management involves making the precise allocation of roles in a project context. It offers structured rationales that can be adopted regarding change management and ensures that partners
are notified about arising issues with good intentions. It enhances the ability of project partners to work in cooperation and collaboratively. Sanctions that can be used by project partners when needed are also provided for in NEC (Tung, Memon & Javed, 2021). Far from that, NEC’s concept of flexibility can be seen in its family of contracts. It is even assumed that the contract form is a single contract arrangement that provides solutions to all issues arising during a project.
The contract form offers necessary flexibility that partners could adopt in a project. It has clauses
based on a structured approach to cooperation and mutual trust (Tung, Memon & Javed, 2021).
Last but not least, the clarity and simplicity aspect of NEC contracts offers clarity about information to all construction projects in a simple and understandable language. Because of that, NEC helps minimize the chances of developing information inconsistencies among stakeholders involved in a project. Clarity and simplicity are also evident from clear responsibilities and roles, procedures for addressing arising issues, and risk allocation (Tung, Memon & Javed, 2021).
Evaluation of the NEC3 ECC and the GCC 12
A review of the contract arrangement by the government of Hong Kong showed that most
public sector projects that were procured through the NEC project arrangement were delivered considerably earlier on average compared to those procured using traditional contract forms, mainly when target cost options were utilized (NEC Contracts, 2021). This was an assurance that
the government of Hong Kong was on the right path because it decided to promote the use of NEC in public sector projects. Since the first NEC project was first launched in 2009, the government of Hong Kong has continued to accumulate significant experience for at least 300 projects (NEC Contracts, 2021). The confirmed value and number of contracts procured using NEC have been growing healthily and significantly. Approximately 50% of civil engineering and
building contracts awarded by the government of Hong Kong in 2020 were in the form of NEC contracts (NEC Contracts, 2021). To this end, there is every reason to believe that the number of contracts procured using NEC will continue to rise. It has been demonstrated that NEC has provisions and proactive techniques for monitoring risks and necessitate the initiation of early mitigation rationales, thereby necessitating effective management of civil construction projects (NEC Contracts, 2021). This is especially essential for target contracts that are, in most cases, employed for high-risk projects. Results of a survey that was carried out to assess the effectiveness of NEC showed that it outperforms traditional GCC contract forms, especially when it comes to cultivating a collaborative mindset, building cooperation and mutual trust, effective claims and risk management, and better portfolio management, including time and cost predictability (NEC Contracts, 2021). NEC4 ECC and GCC
In Hong Kong, GCC refers to a standard set of conditions and terms that often applies in construction contracts (Rahman & Kumaraswamy, 2002). It offers a basis for the obligations and
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rights of parties contracted for a project and gives guidelines for resolving arising disputes and carrying out project tasks. The GCC also provides an overview of the obligations and general rights of contracted parties, including provisions that relate to disputes, liability for defects, time for completion, and payment (Rahman & Kumaraswamy, 2002). It includes specific provisions that include environmental protection, health and safety, and insurance. The NEC4 ECC, on the other hand, is a standard form of contract used in countries like the United Kingdom and Hongkong to offer a guide regarding the obligations and rights of contracted parties and establish
a formal procedure for resolving disputes and completing projects (Eggleston, 2019). The contract system is applied in conjunction with other contracts like the GCC.
Currently, the NEC4 ECC continues to significantly influence Hong Kong’s construction industry, with experts asserting that its dominance will continue to discourage the application of GCC (Eggleston, 2019). The government of Hong Kong has demonstrated its commitment to using NEC3 for all government projects tendered since the 2015/2016 financial year (Mante, 2018). Since June 2017, when NEC3 was officially released, the Development Bureau validated the official use of the NEC4 system and promoted its large-scale adoption in different public works projects. Unlike the NEC3 suite, the NEC4 suite of contracts redirects more attention to the need to avoid disputes and provides a multi-tier approach to resolving disputes (Mante, 2018).
Cost Control Mechanism in NEC4 ECC and GCC
The NEC4 ECC employs various cost control mechanisms to ensure that construction projects are within scope and budget (Rowlinson, 2018). The first cost control approach that the contract system utilizes is budgeting and forecasting. This usually includes making budgetary allocations for projects, monitoring them, and projecting costs to ensure they remain within
Evaluation of the NEC3 ECC and the GCC 14
budget. Another cost control approach that the NEC4 ECC uses is change management. This is captured in clauses for managing changes to budget, schedule, or costs (Rowlinson, 2018). The rationale plays an integral role in minimizing the impact of alterations in a project on the overall costs of construction projects. Value engineering is another technique the NEC4 ECC uses to help control costs. The mechanism involves the analysis of the performance and cost of varied construction methods, designs, and materials to identify cost savings opportunities without necessarily sacrificing performance or quality. The NEC4 ECC further includes clauses that touch on contract management to bolster the effectiveness of cost control (Hughes & Waterhouse, 2018). This aspect involves managing relationships with the suppliers and contractors, including performance monitoring and contracts negotiation to ensure that they meet
project requirements and deliver on the time value of money. The NEC4 ECC system further captures the resource management aspect to enhance contracted parties' ability to meet the goals and objectives of construction projects (Hughes & Waterhouse, 2018). For instance, this could include the effective allocation of resources like equipment, materials, and labour to ensure that they are used efficiently and effectively and minimize control costs.
The NEC4 ECC also uses target costs to manage costs (Rowlinson, 2018). In its provisions, contractors and employers agree on cost targets for construction projects, usually based on the costs approximated for a particular project and other contingencies. Target costs are
updated and reviewed throughout the project implementation process to ensure they remain achievable and realistic (Rowlinson, 2018). Moreover, cost reporting is another special provision
that the contract approach utilizes to assist with cost management. This clause requires contractors to supply employers with regular cost reports that detail costs incurred to data and other costs that are likely to be incurred in the future. This is important because it enables
Evaluation of the NEC3 ECC and the GCC 15
contracted parties to be in a better position to monitor the progress of projects and single out possible cost overruns. Clear cost management procedures also guide approaches to cost management when it comes to using the NEC4 ECC as the roadmap for completing construction projects (Rowlinson, 2018). There are detailed requirements that contractors should follow when completing different construction projects. This includes a requirement for contractors to offer regular cost reports to the employers, use a standardized cost management system, and maintain complete and accurate records of all costs incurred. Cost review meetings are another technique that the NEC4 ECC utilizes when managing costs (Leung & Kwok, 2019). This usually requires contractors and employers to hold regular cost review meetings to discuss the progress of construction projects and other issues that could affect cost. Changes to construction works also include a vital aspect that the NEC4 ECC utilizes when trying to maintain the sustainability of project costs. There are special provisions for managing changes to civil construction works, including clauses for contractors to notify employers about costs that could affect costs and the approach that should be followed when parties are trying to agree on cost variations (Leung & Kwok, 2019).
The GCC has transparent and clear frameworks that help manage civil construction costs and ensure that projects are within budget and completed on time (De Oliveira, 2012). One of the
mechanisms that the GCC uses is cost planning. The contract approach requires contractors to put together and submit comprehensive cost plans detailing the estimated costs of all project elements. Another approach is cost control. This usually requires contractors to make sure that they maintain strict control over costs throughout the construction process, including utilizing cost control procedures and systems (De Oliveira, 2012). There is also the use of variations. This
is the essence of incorporating provisions for handling alterations to the scope of construction
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Evaluation of the NEC3 ECC and the GCC 16
projects, including the processes for approving and requesting variations and other cost implications.
Moreover, the GCC has payment clauses that help control costs. This captures the entire process of approving and requesting payments, including preparing final accounts and submitting
interim payment applications. The contract system further utilizes its dispute resolution guide to help contracted parties manage costs. It captures provisions for resolving cost-related conflicts, including using specific experts to assess claims (De Oliveira, 2012).
Time Control System in NEC4 ECC and GCC
The time control system is one of the critical features of the NEC4 ECC (Mitchell & Trebes, 2019). The time control system is meant to assist with managing a project's progress while ensuring that it is delivered in the speculated time. Consequently, the time control system includes specific provisions concerning the approval and submission of a program, the assessment and notification of delays, and calculations that can help compensate for delays. Under the NEC4 ECC contract system, the contractor is expected to provide the client with a program at the start of a construction project and set out the planned sequence of activities and dates that tasks are expected to be completed (Mitchell & Trebes, 2019). The employer or client has the right to review or assess what is contained in the program and approve it or request alterations. Should the contractor experience delays while undertaking the project, the client should be notified immediately. The client would then evaluate the possible implications of the delay on the project's progress and could offer a time extension if it is established that the delay resulted from an event beyond the contractor's control. If the contractor is given a time extension,
the project's completion date will also be adjusted or modified accordingly. If, by any chance, the
contractor experiences delays that have not been accounted for in the time extension that has
Evaluation of the NEC3 ECC and the GCC 17
been provided, it could be entitled to compensation for the additional costs incurred because of the delay (Mitchell & Trebes, 2019). The NEC4 ECC has provisions that detail the process of calculating and arriving at an amicable compensation for the delay, which should be transparent and fair. In general, the time control system in the NEC4 ECC has been designed to offer a practical and straightforward way to manage a project and ensure that involved parties collaborate to meet project goals and objectives while meeting deadlines (Mitchell & Trebes, 2019).
Like in the NEC4 ECC, the time control system is also vital to the GCC. It includes the framework for regulating and managing a project's progress and ensuring that it is completed within the specified time. In the GCC, the time control system includes provisions and specifications for setting deadlines for different project phases and catering for delays that are likely to arise in the project (Paul & Basu, 2018). For instance, the contract could include specifics detailing when contractors should complete particular work portions and related penalties for not completing specific tasks on time. Moreover, the contract specifies circumstances when projects can be extended. Examples include a guide on when the employer makes adjustments to the project scope or in instances where unforeseen circumstances compromise the ability of the contractor to deliver the project on time. Under these circumstances, the GCC could require contractors to offer official time extension requests for approval or disapproval by the owner (Paul & Basu, 2018). Thus, in general, the time control system is essential for managing construction projects and making sure that projects are delivered on time. It plays an integral role in creating clear expectations for all contracted parties and protecting against potential delays that could adversely affect the project schedule and budget (Paul & Basu, 2018).
Evaluation of the NEC3 ECC and the GCC 18
Dispute Resolution Process in NEC4 ECC and GCC
The NEC4 ECC has various provisions that guide how disputes are resolved. The provisions are meant to encourage contracted parties to resolve any arising disputes through alternative dispute resolution methods and negotiations rather than opting for legal action (Gerrard & Waterhouse, 2019). One of the options for resolving conflicts is through early warnings. This usually involves encouraging the parties involved to single out and notify each other of any potential risks or warnings that could affect their collaboration in delivering on construction projects early enough. The intention is to prevent the disputes from escalating or developing into more complicated problems. Another approach includes using the dispute resolution board (DRB) (Gerrard & Waterhouse, 2019). A DRB could be appointed to guide resolving conflicts between contracted parties. This is an independent party that assists the parties that are having their dispute to arrive at a resolution through mediation and negotiation.
Moreover, the NEC4 ECC has provisions allowing disputes to be resolved through adjudication. Suppose the contracted parties cannot resolve their conflicts through negotiation or alternative dispute resolution. In that case, the contract approach allows for the appointment of an independent party of an independent dispute adjudicator. The responsibility of the adjudicator is to make decisions about the dispute in a manner that can help bind them (Gerrard & Waterhouse, 2019). Moreover, the NEC4 ECC offers the possibility of resolving disputes that arise in construction projects through arbitration. Here, an arbitrator (independent party) is appointed to hear the dispute and decide. The arbitrator's decision is usually final and should bind the involved parties together. The contract approach further has provisions that allow the parties having a dispute to resolve them through litigation. Litigation comes into play when the conflicting parties find it difficult to arrive at a resolution using the abovementioned methods,
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Evaluation of the NEC3 ECC and the GCC 19
forcing them to follow legal channels. In general, the NEC4 ECC's dispute resolution process is intended to offer an efficient and fair means of resolving a dispute that is likely to arise among contracted parties while making sure that they minimize the time spent and cost of using legal channels (Gerrard & Waterhouse, 2019).
The GCC, on the other hand, incorporates different options for resolving conflicts. To begin with, contracted parties can resolve the dispute by negotiating and arriving at an amicable resolution (De Oliveira, 2012). The parties could also use mediation, especially following the breakdown of negotiation attempts. Regarding mediation, a mediator (a neutral party) helps conflicting parties arrive at a mutually acceptable resolution (De Oliveira, 2012). Moreover, the GCC can further allow the parties disputing an issue to arrive at a resolution through adjudication. Adjudication usually comes into play when the parties fail to resolve a dispute through mediation or negotiation. This conflict resolution approach involves inviting an adjudicator who should help guide conflicting parties to a binding decision. Arbitration is another method that can be used to resolve conflicts. If the contracted parties having a dispute cannot arrive at a resolution through the previous methods, the dispute could be forwarded to arbitration. Here, the arbitrator (third party) hears the case, reviews arguments, presents evidence
and makes a binding decision (De Oliveira, 2012). Last but not least, the GCC has provisions that allow the use of litigation in the conflict resolution process. If the parties having a dispute cannot resolve it using the methods mentioned earlier, they could choose to resolve the conflict through a lawsuit (De Oliveira, 2012).
Variation Works System in NEC4 ECC and GCC
The NEC4 ECC has provisions to help implement and manage variations to the works throughout a construction project. Here, variations refer to work changes that have yet to be
Evaluation of the NEC3 ECC and the GCC 20
included in the contract (Eggleston, 2019). The changes could be requested by either the contractor or the employer and could be necessary because of alterations in factors like project design and scope. The NEC4 ECC has a straightforward process to be followed when approving and requesting variations. The first step is a request for variation. In this case, either the contractor or the employer could request a variation by submitting an official written request to the other party (Eggleston, 2019). The request should capture specific details about the variation that has been proposed, the reasons behind it, and how it would affect the project. The second step is to request an evaluation. The other party should assess the request and determine whether it is acceptable. If the request is rejected, the receiving party should offer an official written notification detailing why it is unacceptable. The third step is rejection or approval. Should the request be approved, the parties involved in a project should agree on the conditions and terms of
the variation. This could include any changes to project costs and schedule. Suppose the request is rejected, on the other hand. In that case, the parties could try and agree on a way forward or negotiate on how to arrive at a resolution by following the dispute resolution process outlined by the NEC4 ECC. The last step is the implementation of variation (Eggleston, 2019). Should the request for changes be approved, contractors should implement them as per the conditions and terms that have been agreed upon. The employer would then be responsible for catering for the additional costs associated with the variation (Eggleston, 2019).
The GCC has provisions that guide parties involved in a construction project to address the variation of works. The variations usually include modifications or changes made to the construction project works far from what has been outlined in the contract (Asadi, Wilkinson & Rotimi, 2022). The changes could result from unforeseen circumstances that arise while undertaking the project, alteration of the construction site, and changes in project requirements.
Evaluation of the NEC3 ECC and the GCC 21
Thus, when it comes to the GCC, the contractor must undertake necessary work variations. The contractor could request additional payments to cater for additional costs, which the employer should agree upon before the changes could proceed (Asadi, Wilkinson & Rotimi, 2022).
Additionally, the GCC sets out steps and procedures for handling conflicts or disputes that are likely to arise concerning the variation of works. This could include provisions for arbitration or mediation, among other dispute-resolution techniques, where applicable. In general, the GCC’s variation works system has been designed in a manner that creates a practical
framework for managing alterations to the scope of the works in construction projects while ensuring that involved parties are in a better position to communicate with each other and resolve
arising issues in an efficient and timely manner (Asadi, Wilkinson & Rotimi, 2022).
Partnership Culture in NEC4 ECC and GCC
One feature that makes the NEC4 ECC unique is its focus on collaboration and partnership. The contract approach encourages parties involved in a construction project to collaborate and work together in a spirit of cooperation and mutual trust and employ a proactive approach to resolving issues where necessary (Mante, 2018). The contract also includes specific provisions that encourage contracted parties to uphold honesty, communicate openly, and consult
each other regularly throughout the construction project. The contract also encourages the parties
involved in a construction project to work together and single out and resolve arising problems to
implement and develop strategies to mitigate risks (Mante, 2018). Therefore, the partnership culture that the contract approach promotes is one of cooperation, transparency, and openness, aiming to attain success in construction projects and create a win-win situation for all parties involved. The contract has been designed to promote dispute resolution through negotiation and collaboration rather than litigation, encourage dialogue and open communication, and necessitate
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Evaluation of the NEC3 ECC and the GCC 22
effective management of project risks (Mante, 2018). The NEC4 ECC is centred around good faith, transparency, and fairness. It encourages all parties involved in a construction project to uphold collaboration and partnership through several provisions, such as establishing a collaborative project team and holding regular meetings to monitor progress. The contract aims to create a conducive environment where all contracted parties can work efficiently and effectively to attain project objectives (Mante, 2018).
The GCC needs specific provisions for addressing the issue of partnership culture. Nonetheless, some of its provisions apply to construction projects. For instance, the contract requires the contractor to collaborate with all project stakeholders, including the client, and take proactive measures to resolve issues that are likely to arise during a project (Atout, 2016). This requirement is crucial because it promotes a culture of partnership and collaboration on civil construction projects. Moreover, the GCC requires contractors to develop and maintain good working relationships with project stakeholders and clients (Atout, 2016). Contractors must also maintain transparency and act with integrity in all project aspects. This could promote a culture of mutual respect and trust between different parties involved in a construction project. In general, the GCC has provisions that guide the conduct of contracted parties and contribute towards developing a productive and positive partnership culture on construction projects. Nonetheless, the particular culture that is developed in a construction project depends on different factors, such as the behaviours and attitudes of the parties involved and the nature of the
project being undertaken (Atout, 2016).
Summary
This chapter has provided a comprehensive overview of available knowledge about engineering contracts, focusing on the conventional GCC contract form and NEC4 version of the
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Evaluation of the NEC3 ECC and the GCC 23
contract approach. It is evident from this chapter that the NEC4 presents a solid breakthrough that guides how projects are managed and delivered. It defines a more effective and fresh approach to raising the bar regarding project delivery and efficient procurement of supply, services, and works. Because of this, experts believe newer versions like the NEC4 version are highly likely to dominate Hong Kong’s construction industry in contrast to the conventional GCC contract form.
Chapter 3: Research Methodology
Introduction
This chapter offers a detailed overview of the techniques and processes the researcher followed to put this study together. It details crucial sections such as data analysis, gathering techniques, and research design. The chapter provides the readers with a remarkable basis for evaluating the reliability and validity of the study while giving other researchers a chance to build upon or replicate it in their works. This chapter generally offers a logical and straightforward account of the steps and approaches that the researcher employed throughout the research process.
Methodology Used
Overview:
The researcher employed mixed methods to gather data for this study. In their broadest sense, mixed methods research is a research approach that combines both qualitative and quantitative methods in the same study (Östlund et al., 2011). The purpose of using mixed methods is to gain a more comprehensive understanding of a research problem by triangulating data from multiple sources. In a mixed methods study, the researcher typically collects both qualitative and quantitative data, and then analyzes and interprets the data using both qualitative
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Evaluation of the NEC3 ECC and the GCC 24
and quantitative methods. For example, a researcher might conduct a survey to collect quantitative data, and then follow up with in-depth interviews to collect qualitative data (Östlund
et al., 2011). The use of mixed methods allows researchers to address research questions that cannot be answered using only one type of data, and to triangulate data to increase the validity and reliability of the findings. Additionally, mixed methods can be used to address different aspects of a research problem, where quantitative data can be used to describe and quantify a phenomenon, while qualitative data can be used to explore and understand the meaning and context of the phenomenon (Östlund et al., 2011). In general, mixed methods research allows for a more comprehensive understanding of a research problem by combining the strengths of both qualitative and quantitative methods, and can provide a more nuanced understanding of complex phenomena.
Research Design
Interviews
Structured interviews were used to gather quantitative data by asking structured questions
and using a pre-determined set of response options. The process of conducting the interview typically began with the development of a questionnaire. During the interview, the researcher asked the pre-determined questions and recorded the interviewee’s responses. Here, a total of 3 interviewees, who are also experts in the construction industry, were invited to participate. After the data is collected, the researcher made necessary tabulations and analyzed them to identify patterns and relationships among the variables. The use of structured interviews to gather quantitative data allowed the researcher to gather a large amount of data quickly and efficiently. Additionally, the approached proved to be highly reliable as the questions are pre-determined
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Evaluation of the NEC3 ECC and the GCC 25
and the data is collected in a standardized manner. The following table provides an overview of the interview questions:
Interview Questions
1.
On a scale of 1-5, how effective do you believe the cost control mechanism is in NEC4
ECC compared to GCC for civil works?
2.
On a scale of 1-5, how satisfied are you with the time control system in NEC4 ECC compared to GCC for civil works?
3.
On a scale of 1-5, how satisfied are you with the dispute resolution process in NEC4 ECC compared to GCC for civil works?
4.
On a scale of 1-5, how effective do you believe the variation works system is in NEC4 ECC compared to GCC for civil works?
5.
On a scale of 1-5, how would you rate the partnership culture in NEC4 ECC compared to GCC for civil works?
6.
In your opinion, what is the main advantage of the cost control mechanism in NEC4 ECC over GCC for civil works?
7.
In your opinion, what is the main advantage of the time control system in NEC4 ECC over GCC for civil works?
8.
In your opinion, what is the main advantage of the dispute resolution process in NEC4 ECC over GCC for civil works?
9.
In your opinion, what is the main advantage of the variation works system in NEC4 ECC over GCC for civil works?
10. In your opinion, what is the main advantage of the partnership culture in NEC4 ECC over GCC for civil works?
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Evaluation of the NEC3 ECC and the GCC 26
Case Studies
The researcher used multiple case studies to gather qualitative data for this study. The method was ideal for several reasons. First, the case studies enhanced the ease of triangulation (Gustafsson, 2017). The researcher was able to distinguish and compare findings from different cases and determine the existence of consistent themes or patterns. This helped increase the overall reliability and validity of the results. The explanatory power of multiple case studies also encouraged the researcher to use the approach. The method offered a nuanced and more in-depth understanding of the research topic, making it easier to identify the differences and commonalities that might have been difficult to single out if a single case could have been used. Next, the researcher used multiple case studies because it allowed for comparative analysis. The technique enabled the researcher to compare various cases to single out trends and patterns that would have been challenging to note in a single case study. Last but not least, multiple case studies were used because they made testing current knowledge easier, expanding on existing knowledge, and generating new ideas about the research topic (Gustafsson, 2017).
Data was gathered through multiple case studies. Information from selected cases was subjected to a systematic interpretation and examination of secondary. The process started by identifying materials such as academic papers, news articles, government publications, company documents, books, articles, and journals relevant to the case study. From there, the researcher read through the materials and carefully examined them by identifying significant themes and contents and interpreting their meanings. The materials were then organized using a coding system in preparation for analysis (Gustafsson, 2017).
Content analysis was used to analyze data gathered from the case studies. This was done in several steps. To begin with, the researcher selected the data that would be analyzed. In this
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Evaluation of the NEC3 ECC and the GCC 27
case, the data was text (White & Marsh, 2006). From there, a coding scheme was developed. The
coding scheme included a set of categories and rules for analyzing and classifying research data. Data were coded by reading through the gathered data and singling out significant themes, creating a list of codes representing different data aspects. After that, frequency counts were used
to carrying out data analysis. Finally, the researcher wrote down the content analysis results, highlighting this study's critical implications and findings (White & Marsh, 2006).
Justification
There were various justifications for using mixed research methods for this study. For instance, the approach enabled the researcher to study and get a better understanding of the trend of the New Engineering Contract (NEC) Engineering and Construction Contract (ECC) that continues to dominate civil construction works in Hong Kong. The gathered data offered valuable insights into distinguishing between NEC4 ECC and GCC in civil works in the region. It also became more manageable for the researcher to explore new ideas based on expert reviews about the civil construction market in Hong Kong and what the future holds as much as the use of NEC4 ECC and GCC contracting systems is concerned. Summary
In summary, this chapter has detailed the researcher's research approach. As discussed above, a mixed research method was used. The approach proved ideal for gathering data from primary and secondary sources by enhancing the ease of carrying out triangulation. The methodology also helped increase the overall reliability and validity of the results. Moreover, the
method offered a nuanced and more in-depth understanding of the research topic, making it easier to identify the differences and commonalities that might have been difficult to single out if
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Evaluation of the NEC3 ECC and the GCC 28
one research method could have been used. In general, the chapter clarifies the steps the researcher followed in undertaking this study.
Chapter 4: Research/Investigation
Introduction
This chapter breaks down the researcher's methodology to find information about the research topic. It captures the specifics of how the methodology was implemented and the data obtained. The chapter further summarizes the data analysis process and includes supportive discussions. The section is important because it summarizes the findings and offers justifications that can help develop necessary recommendations.
Implementation of Methodology Used
This study aimed to evaluate why the New Engineering Contract 4 (NEC4) Engineering and Construction Contract (ECC) will dominate the civil construction market in Hong Kong and discourage the application of the General Condition of Contract (GCC), traditionally adopted on a large scale. Therefore, data was gathered from interview sessions and multiple case studies to evaluate the New Engineering Contract 4 (NEC4) Engineering and Construction Contract (ECC) that experts believe is going to dominate Hong Kong’s civil market in the future, surpassing the conventional use of the General Condition of Contract (GCC). Several steps were followed to select the cases. To begin with, the researcher had to review the objectives and aim of the study and redefine them to guide the selection process (Marrelli, 2007). Next, the criteria for choosing the cases were determined. Some of the considered characteristics included existing contract forms, sources and cases with information about the GCC and the NEC and its versions, such as the NEC4 version, and Hong Kong’s construction industry. A sampling plan was then developed to guide how the cases would be selected. Specifically, purposeful sampling was used. From
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Evaluation of the NEC3 ECC and the GCC 29
there, potential cases were identified. This included cases that met the criteria that the researcher had aligned earlier (Marrelli, 2007). For instance, the researcher could identify potential cases by
reviewing available literature and researching databases such as Google Scholar. The subsequent
step involved the evaluation of the potential cases. The aim was to determine the cases that would suit the study and provide the basis for answering the research questions and meeting the goals and aim of the study. This was carried out by reviewing existing literature related to the research topic. Last but not least, final cases were selected. The diversity of cases and the extent to which they represent the phenomena under investigation were considered (Marrelli, 2007).
Description of Data Collected
Besides primary data that was gathered by interviewing three experts, different types of data were gathered from identified cases. Examples include statistical data in books, articles and reports about the research topic. Also, historical data was gathered to supplement data that was gathered for this study and provide the basis for achieving research aims and objectives. Secondary sources like articles and books offered detailed information about past trends and events that helped supplement the data required to answer the research questions.
Analysis and Discussion
The following table provides an overview of the results that were gathered from the interview sessions:
Responses First Interviewee
1.
5 - Very effective
2.
3 - Somewhat satisfied
3.
4 - Somewhat satisfied
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Evaluation of the NEC3 ECC and the GCC 30
4.
4 - Somewhat effective
5.
3 - Somewhat positive
6.
The cost control mechanism in NEC4 ECC is more detailed and specific, allowing for better budget management.
7.
The time control system in NEC4 ECC is more flexible and allows for easier adjustments.
8.
The dispute resolution process in NEC4 ECC is more efficient and fairer.
9.
The variation works system in NEC4 ECC is more transparent and allows for better communication.
10. The partnership culture in NEC4 ECC is more collaborative and encourages teamwork.
Second Interviewee
1.
"I would rate the cost control mechanism in NEC4 ECC as a 4, it is generally effective but there is room for improvement."
2.
"I would rate my satisfaction with the time control system in NEC4 ECC as a 3, it can be a bit challenging to navigate at times."
3.
"I would rate my satisfaction with the dispute resolution process in NEC4 ECC as a 4, it is generally fair and efficient."
4.
"I would rate the variation works system in NEC4 ECC as a 3, there are some areas that could be improved."
5.
"I would rate the partnership culture in NEC4 ECC as a 4, there is a good level of collaboration and teamwork."
6.
"In my opinion, the main advantage of the cost control mechanism in NEC4 ECC is that it is very detailed and specific, which helps to minimize misunderstandings."
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Evaluation of the NEC3 ECC and the GCC 31
7.
"In my opinion, the main advantage of the time control system in NEC4 ECC is that it is very comprehensive and it allows for flexibility in case of unforeseen circumstances."
8.
"In my opinion, the main advantage of the dispute resolution process in NEC4 ECC is that it is very efficient and it provides clear guidance on how to proceed."
9.
"In my opinion, the main advantage of the variation works system in NEC4 ECC is that it is very well-organized and it allows for easy tracking of changes."
10. "In my opinion, the main advantage of the partnership culture in NEC4 ECC is that it encourages a high level of collaboration and teamwork, which leads to better results."
Third Interviewee
1.
"I would rate the cost control mechanism in NEC4 ECC as a 4 out of 5, as I believe it is more effective than the mechanism in GCC for civil works."
2.
"I would rate my satisfaction with the time control system in NEC4 ECC as a 3 out of 5, as I believe it is less effective than the system in GCC for civil works."
3.
"I would rate my satisfaction with the dispute resolution process in NEC4 ECC as a 4 out of 5, as I believe it is more effective than the process in GCC for civil works."
4.
"I would rate the variation works system in NEC4 ECC as a 5 out of 5, as I believe it is
more effective than the system in GCC for civil works."
5.
"I would rate the partnership culture in NEC4 ECC as a 4 out of 5, as I believe it is more effective than in GCC for civil works."
6.
"In my opinion, the main advantage of the cost control mechanism in NEC4 ECC over GCC for civil works is that it is more detailed and specific."
7.
"In my opinion, the main advantage of the time control system in NEC4 ECC over
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Evaluation of the NEC3 ECC and the GCC 32
GCC for civil works is that it is more flexible."
8.
"In my opinion, the main advantage of the dispute resolution process in NEC4 ECC over GCC for civil works is that it allows for more alternative dispute resolution options."
9.
"In my opinion, the main advantage of the variation works system in NEC4 ECC over GCC for civil works is that it allows for more efficient and streamlined process."
10. "In my opinion, the main advantage of the partnership culture in NEC4 ECC over GCC
for civil works is that it encourages more collaboration and teamwork."
The findings of this study show that the use of traditional forms of contracts, such as the GCC subjected Hong Kong’s construction industry to many problems. Some of these issues relate to the scope of work, delays and schedules, payment issues, quality of work, and variations
(Atout, 2016). Hence, to mitigate or avoid contract issues in Hong Kong’s construction sector, it has increasingly been essential to have a detailed and explicit contract that breaks down relevant specifications such as payment terms, schedule, and the scope of the work. Traditional contracts have little room for alteration in the tasks that are supposed to be completed in a project (Atout, 2016). Consultants like architects are usually responsible for reflecting on issues and ideas that clients raise and translating them into outcomes. The contractor can then incorporate the ideas into the construction project. The rigidity level that these contracts promote allows project partners to redirect attention to the arm-length relationship since each party is concerned about fulfilling their desires and aims in the project. The aftermath of using some of the traditional contract arrangements includes lower productivity, poor working relationships between contracted parties, costly and lengthy disputes, customer dissatisfaction, poor quality, and increased cost and time of delivering on civil construction projects (Atout, 2016).
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Evaluation of the NEC3 ECC and the GCC 33
In Hong Kong, the NEC4 ECC is a standard form of contract used in countries like the United Kingdom and Hongkong to offer a guide regarding the obligations and rights of contracted parties and establish a formal procedure for resolving disputes and completing projects. Conversely, the GCC refers to a standard set of conditions and terms that often applies in construction contracts. It offers a basis for the obligations and rights of parties contracted for a
project and gives guidelines for resolving arising disputes and carrying out project tasks. As detailed in this study, the NEC4 ECC significantly influences Hong Kong’s construction industry, with experts asserting that its dominance will continue to discourage the application of GCC.
It is clear from this study that Hong Kong has been a dreamland for structural and civil engineers. Its construction project development has not slowed since the 1970s, as shown in the rapid development of metro and high networks, airports, and other vital infrastructural projects (Sai-Hung, 2019). The past few years have primarily been critical to the region’s unique history. Some of the mega projects launched in the region have paved the way for the adoption and use of
new contract forms, such as the NEC4 ECC, that have helped shape the landscape of the region’s
construction industry.
It is also evident that despite the proud nature of Hong Kong’s construction industry, there has been a lot of scrutiny and mounting pressure because of accidents, productivity problems, cost overruns, and delays because of the use of traditional contract methods like the GCC (Sai-Hung, 2019). This has prompted the government of Hong Kong to promote the widespread adoption of the NEC4 ECC, which experts believe will dominate the region’s civil market in the future. Hong Kong’s construction industry requires collaboration between experts (Sai-Hung, 2019). This can be attained by creating necessary flexibilities enabling contracted
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Evaluation of the NEC3 ECC and the GCC 34
parties to attain project goals. The output of Hong Kong’s construction sector is expected to increase in the next few years. Hundreds of new projects are underway, but for them to be successful, higher quality, more professional, and more productive industries will be needed. Results of this study show that new culture, including the use of new contract forms such as the NEC4 ECC, is required (Sai-Hung, 2019).
This study has shown that Hong Kong has already started to create a new culture in the construction industry by making the NEC4 ECC contract system the default procurement for construction projects, starting with public works. The contract approach promotes partnership and collaboration by redirecting attention to the early resolution of disputes, promoting co-
ownership of programs and projects, and focusing on project objectives. Since the launch of the NEC4 ECC form of the contract back in 2017, the government of Hong Kong has been arranging
for a progressive transition from different versions of NEC contracts, such as the transition from NEC3 to NEC4 (Sai-Hung, 2019). The intention is to achieve better cost management, unlock innovations, promote collaborative partnerships, and enhance value for money in public works. The Development Bureau is actively involved in boosting productivity in the construction industry and overcoming labor shortages by promoting the use of NEC4 ECC and the integration
of building information modelling (BIM) technology in all civil projects (Sai-Hung, 2019). The bureau requires all its contractors and consultants to utilize BIM when designing major public projects where necessary. Research is also being carried out to introduce the early involvement of contractors in NEC contracts and the benefits of cost efficiency and buildability that this brings into the overall design process. Maintaining an open, competitive, and fair bidding system
is challenging. However, measures are in place to enhance the establishment of a partnership
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Evaluation of the NEC3 ECC and the GCC 35
culture and continue the development of Hong Kong’s construction sector (Sai-Hung, 2019). The
following graphs provide an overview of the same:
Source: (Sai-Hung, 2019).
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Evaluation of the NEC3 ECC and the GCC 36
The findings of this study show that the NEC4 ECC aims to build upon the success that had been attained because of the widespread use of the NEC3 ECC. The family of contracts also reflect the feedback gathered, insisting on the need to enhance project management capabilities, promote good communication, and drive collaboration. The result of the contract approach is not radical but a vital evolution that can help take Hong Kong’s civil market to the next level. Language is one of the key developments in the contract approach. The NEC4 ECC uses plain, unambiguous language that enhances clarity about information relevant to specific construction projects (Clayton, 2017). There are also provisions for early warning procedures. This is no longer fundamentally reactive but bolstered to be operational to ensure that early warnings about project risks are communicated promptly. For example, the NEC4 ECC requires project managers to issue an early warning register and ensure they call meetings within the first two weeks to promote collaboration and enhance the ability to manage risks (Clayton, 2017).
Communication is another area that the NEC4 ECC contract form has improved. The collection of contracts requires project managers to accept and consider different types of communications made by the contractors (Clayton, 2017). In instances where the project managers are not in a position to accept communication, they should provide a sufficient explanation about their positions to provide contractors with the convenience of making necessary adjustments. Other areas of improvement that the NEC4 ECC brings to the table include value engineering, fee and cost components, financial account and payment, and subcontracting provisions (Clayton, 2017). It remains essential for the government of Hong Kong and other concerned stakeholders to put additional conditions and amendments to NEC ECC to meet the dynamics of the construction sector. Having been firmly established and used in
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Evaluation of the NEC3 ECC and the GCC 37
Hong Kong, it is equally vital for all stakeholders in the construction industry to understand and adapt it accordingly for the effective and efficient delivery of construction projects (Clayton, 2017).
It is also clear from this study that the NEC4 ECC has a better cost-control mechanism than GCC. For instance, the NEC4 ECC also uses target costs to manage costs. In its provisions, contractors and employers agree on cost targets for construction projects, usually based on the costs approximated for a particular project and other contingencies. Target costs are updated and reviewed throughout the project implementation process to ensure they remain achievable and realistic (Stellakis, 2019). Moreover, cost reporting is another special provision that the contract approach utilizes to assist with cost management. This clause requires contractors to supply employers with regular cost reports that detail costs incurred to data and other costs that are likely to be incurred in the future. In the GCC, cost control could be more detailed. For instance, the mechanism usually requires contractors to make sure that they maintain strict control over costs throughout the construction process, including utilizing cost control procedures and systems (Hughes & Waterhouse, 2018).
The findings further demonstrate that the NEC4 ECC is better than the GCC in terms of time control in the management of projects. Under the contract form, the time control system includes specific provisions concerning the approval and submission of a program, the assessment and notification of delays, and calculations that can help compensate for delays. Under the NEC4 ECC contract system, the contractor is expected to provide the client with a program at the start of a construction project and set out the planned sequence of activities and dates that tasks are expected to be completed (Stellakis, 2019). In the GCC, on the other hand, the time control system includes provisions and specifications for setting deadlines for different
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Evaluation of the NEC3 ECC and the GCC 38
project phases and catering for delays that are likely to arise during the project. For instance, the contract could include specifics detailing when contractors should complete particular work portions and related penalties for not completing specific tasks on time. Although the time control system is similar for both the NEC4 ECC and the GCC, the former is more detailed and covers different aspects in terms of collecting different contracts than the latter.
In dispute resolution, this study shows that the NEC4 ECC is better off than the GCC. For
instance, one of the options for resolving conflicts is through early warnings (Stellakis, 2019). This usually involves encouraging the parties involved to single out and notify each other of any potential risks or warnings that could affect their collaboration in delivering on construction projects early enough. The intention is to prevent the disputes from escalating or developing into more complicated problems. On the other hand, the GCC has different provisions that are in place to aid the dispute-resolution process. For example, contracted parties can resolve the dispute by negotiating and arriving at an amicable resolution. The parties could also use mediation, especially following the breakdown of negotiation attempts. Regarding mediation, a mediator (a neutral party) helps conflicting parties arrive at a mutually acceptable resolution (Hughes & Waterhouse, 2018).
Variation work systems also emerged as an exciting area when comparing the NEC4 ECC and the GCC. This study showed that the NEC4 ECC has better provisions for work system
variations than the GCC (Stellakis, 2019). Variations were described as work changes that were not included in the contract. The changes could be requested by either the contractor or the employer and could be necessary because of alterations in factors like project design and scope. As it emerged, the NEC4 ECC has a straightforward process that should be followed when approving and requesting variations. Regarding the GCC, the contractor must undertake
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Evaluation of the NEC3 ECC and the GCC 39
necessary work variations. The contractor could request additional payments to cater for additional costs, which the employer should agree upon before the changes could proceed (Hughes & Waterhouse, 2018).
Another area where a significant improvement has been attained in the NEC4 ECC form of contract, which makes it better than the GCC, is in partnership culture. The contract approach encourages parties involved in a construction project to collaborate and work together in a spirit of cooperation and mutual trust and employ a proactive approach to resolving issues where necessary (Stellakis, 2019). The contract also includes specific provisions that encourage contracted parties to uphold honesty, communicate openly, and consult each other regularly throughout the construction project. The contract also encourages the parties involved in a construction project to work together and single out and resolve arising problems to implement and develop strategies to mitigate risks. The NEC4 ECC is centered around good faith, transparency, and fairness. It encourages all parties involved in a construction project to uphold collaboration and partnership through several provisions, such as establishing a collaborative project team and holding regular meetings to monitor progress.
On the other hand, the GCC needs specific provisions to address the partnership culture issue. Nonetheless, some of its provisions apply to construction projects. For instance, the contract requires the contractor to collaborate with all project stakeholders, including the client, and take proactive measures to resolve issues that are likely to arise during a project. This requirement is essential because it promotes a culture of partnership and collaboration on civil construction projects. The GCC requires contractors to develop and maintain good working relationships with project stakeholders and clients. Contractors must also maintain transparency
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Evaluation of the NEC3 ECC and the GCC 40
and act with integrity in all project aspects. This could promote a culture of mutual respect and trust between different parties involved in a construction project (Hughes & Waterhouse, 2018).
Summary
This chapter has summarized the implementation of the methodology employed in this study, describes data that has been gathered and offers room for analyzing and discussing the significant findings. The NEC4 ECC is better than the GCC in different ways. It is also evident that the recent adoption of the contract form in Hong Kong resulted from past success in using NEC3 ECC and other NEC versions in the region. The section has also offered a detailed analysis of the superiority of the NEC4 ECC over the GCC in terms of cost control mechanisms, time control system, dispute resolution process, variation works system, and partnership culture.
Chapter 5: Conclusions and Recommendations
Introduction
This chapter summarizes the significant inferences that the researcher has made from this
study. It sheds light on critical points based on the evidence gathered from the interview sessions
and case studies. The section also clarifies the researcher's position regarding the research topic. The topic is essential because it lays the groundwork for future research on related topics. Recommendations captured in this chapter can provide researchers, policymakers, and other stakeholders in Hong Kong's construction industry with an enhanced capability of making informed decisions about the overall state of the civil market in the region and related research.
Conclusions and Recommendations
Evidently, cost overruns, delays, and conflicts between different parties involved in a project are some of the issues associated with traditional contract forms like the GCC. In response, the government of Hong Kong has been promoting the mass adoption and use of the
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Evaluation of the NEC3 ECC and the GCC 41
New Engineering Contract (NEC) in its public construction projects. This study has proved that it will not be a surprise if the NEC4 ECC continues to dominate Hong Kong’s construction industry in the future. As shown in this study, traditional contract systems like GCC aim to enable project partners such as contractors and organizations to collaborate towards completing construction projects based on particular obligations and rules. The problem is that blurred lines between change management and risk allocation in those traditional contracts can trigger fierce competition between the parties involved as they try to protect their interests. This is usually at the expense of meeting project goals and objectives. Experts believe traditional contract systems are designed to follow specific structural steps that do not create sufficient flexibility for resolving potential disputes. Many construction industries worldwide operate based on those contracts, thereby triggering the need for further investigations and research about the whole notion of collaborative contracting (Hughes & Waterhouse, 2018).
Furthermore, it is evident from this research that the major problems that are associated with traditional contract systems relate to the adversarial working relationship between contractors and clients and cost overrun. Most of these contractual agreements emphasize the definitive and transparent allocation of risks between different parties involved in a project. However, not all project risks are quantifiable and known at the commencement of a project. That is bearing in mind that even the risks known at the start of the project could change in terms
of significance and impact other risks, requiring continuous subjective measurement and adjustment. In that regard, most conventional contractual agreements could be more flexible and suitable when addressing the dynamics of construction projects and the associated risks.
Since its first edition was publicized in 1993, NEC has become influential in the global engineering and construction industry (Stellakis, 2019). Following the arrival of the NEC3
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Evaluation of the NEC3 ECC and the GCC 42
version in 2005 and the changes made in the subsequent years, such as in 2013, NEC3 contracts have enhanced the effectiveness of delivering construction projects in different parts of the world. The recent release of the NEC4 version of the contract form has been cited as a fresh start in many countries, especially Hong Kong (Hughes & Waterhouse, 2018). The contract is well-
known for its use of clear and plain language and allocation of risks that promote effective management of the relationship between different parties involved in a construction project. The suite of documents promotes mutual trust and enhances cooperation and a collaborative approach
rather than an adversarial relationship between clients and contractors. The aftermath is cost and time savings and successful delivery of civil construction projects. NEC is a solid breakthrough that guides how projects are managed and delivered. It defines a more effective and fresh approach to raising the bar regarding project delivery and efficient procurement of supply, services, and works (Hughes & Waterhouse, 2018). Because of this, experts believe newer versions like the NEC4 version are highly likely to dominate Hong Kong’s construction industry in contrast to the conventional GCC contract form. The following recommendations should help guide the use of the NEC4 ECC in Hong Kong:
1.
Parties considering using NEC4 ECC should seek legal advice on specific jurisdictions and projects.
2.
The contract should be analyzed and adjusted accordingly to fit the project needs and that
of the parties involved.
3.
Regulatory requirements should also be considered to create flexibility for the contract approach.
4.
Parties involved in a contract should be able to compare and contrast traditional contracts'
requirements and provisions, such as the GCC and that of the NEC4 ECC.
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Evaluation of the NEC3 ECC and the GCC 43
Recommendations for Further Research
Future studies should focus on techniques for improving NEC4 ECC while paving the way for developing better contract forms. The studies should also provide governments with the basis for promoting changes in the construction industry and ensure that contract forms can help enhance project delivery effectiveness.
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Evaluation of the NEC3 ECC and the GCC 44
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