NEC3 and ICC (the replacement ICE contract) - Are You Up-To-Date?


The changes to the Construction Act come into force on 1 October 2011 in England and Wales and 1 November 2011 in Scotland. In advance of this, NEC, and ACE and CECA who publish the new ICC contract, have updated their payment provisions.


The changes have been made by amending option Y(UK) 2 and have been kept to a minimum. Under the main contract the position is as follows:

The certificate issued by the Project Manager is confirmed as the payment notice which must set out the sum due and the basis for the calculation.
NEC, unlike JCT, has not written into its contract what happens when no valid payment notice is issued. It doesn't need to. By operation of the new Act, in the absence of a valid payment notice the contractor can determine the sum due. This will either be done automatically through the contractor's application for payment or, where there is no valid application, by service by the contractor of what is known as a payee default notice. The sum in the application or payee default notice will be the sum due, subject to the employer's right to serve a pay less notice.
The withholding notice provision has been replaced with a new notice requirement in line with new Act. This is generally known as a pay less notice. The notice must state the amount due (as opposed to simply the amount being withheld) and the basis for that calculation.

Infrastructure Conditions of Contract (ICC)

There is a suite of new ICC contracts. The design and construct contract provisions may cause some problems because:

The old withholding terminology has been retained. The clause has not been updated to require the notice to state what is due (as well as what is being deducted) and the basis for that calculation. This could result in notices being issued which do not comply with the new Act.
Clause 60 (9) allows the contractor to issue what is effectively a payee default notice where there has been a failure to issue a payment notice by the Employer's Representative. This clause fails to appreciate that the new Act does not allow for such notices where there has already been a valid application for payment. This is because the application automatically kicks in as the payee default notice. Under this contract the contractor's application is called a “statement”. This will not stop it being treated as an application provided it sets out the sum due and the basis for the calculation.
The time period between the payment notice (25 days after the contractor's statement) and the final date for payment (28 days after the contractor's statement) is very tight. It leaves only 2 days (1 day before the final date for payment) for any pay less notice to be issued. It would be sensible to amend these provisions to avoid these issues.