NEC4 Engineering and construction contracts : Conflict avoidance clauses

Conflict in construction

In most construction projects, no matter how well run they are, disputes between one or more tiers of stakeholders are frequent. These often escalate and increase time and costs for the contractual parties and repeatedly lead to a breakdown in working relationships. Adjudication was once seen as a quick and cost effective way of resolving disputes, but has, since its inception in 1998, become more legalistic, protracted and expensive.

In a bid to better manage and avoid disputes and resolve some of these issues, the NEC has introduced recent guidance on conflict avoidance clauses for incorporation into the NEC4 main forms of contract or subcontract via the NEC4 Practice Note, March 2025 (“the Practice Note”).

The Practice Note firstly reiterates the Conflict Avoidance Pledge launched in 2018. On signing the pledge, industry bodies, infrastructure employers, contractors and consultants commit to working collaboratively, using early intervention techniques and working proactively to avoid conflict.

The Practice Note outlines that the conflict avoidance clauses for projects incorporating dispute resolution options W1 and W2 are optional. The Practice Note also refers to the existing Dispute Avoidance Board provisions available to contracting parties under option W3 and/or UK contracts subject to the Construction Act 1996. Under the NEC Practice Note 5 (2019), referral to a Dispute Avoidance Board is also available under option W2.

How the Conflict Avoidance Clauses work

The clauses envisage that the parties cooperate with each other proactively to identify, notify, avoid or resolve any disagreements. Where necessary, the clauses also envisage that:

• A panel of one to three professionals (the Conflict Avoidance Panel) will be appointed by the conflict avoidance nominating body to help parties resolve the issue(s) they are facing.
• A party who disagrees with a matter in relation to the contract must notify the other party of the dispute that it wishes to resolve, within two weeks of the dispute arising.
• If the parties agree, the disagreement is referred to a Conflict Avoidance Panel and within one week of this agreement, the parties must meet to decide 1) a clear definition of the disagreement 2) the outcome sought and 3) the member or members of the Conflict Avoidance Panel. There may be issues with the parties not agreeing, which may subvert the process.
• The Conflict Avoidance Panel will work with the parties to understand the issue(s) they are facing.
• The Conflict Avoidance Panel will, within a week of appointment, meet with the parties in a scoping meeting to establish and agree a process that suits both parties and is appropriate for the disagreement. If the parties cannot agree, the Conflict Avoidance Panel decides the process.
• The process, unless agreed otherwise, will contain the following measures:
• The referring party submits a referral to the Conflict Avoidance Panel and the responding party within a week of the scoping meeting;
• The responding party submits a response within one week of receipt of the referral; and
• The Conflict Avoidance Panel may request further submissions from either party.

In some instances, one week may not be sufficient for a responding party to properly deal with the issues in the disagreement, particularly as there do not appear to be any measures restricting the length or volume of submissions.

 The Conflict Avoidance Panel then provides a recommendation containing:

• A summary of its findings
• Reasons for its recommendation
• How that recommendation should be implemented.

If there is then a dispute over the recommendation, it is referred to the senior representatives (as defined in the Contract Data) of the parties.

Unlike adjudication, the costs of the Conflict Avoidance Panel are met equally by the parties. The costs of the process itself and any preparation associated with it are defined as disallowed costs, and so, are not claimable under an NEC contract.

RICS have already put measures in place to nominate Conflict Avoidance Panels and it is thought that they are likely to be the conflict avoidance nominating body most used.

Key expected benefits of using the new clauses are:

• If followed in the spirit of NEC, it is expected to be quicker, less legalistic and cheaper than other dispute resolution procedures.
• It aims to help maintain good working relations between the parties.
• The parties retain control over the outcome of their dispute as the Panel’s recommendations are not binding.
• It gives parties a preview on the potential outcome of the dispute if they were to go to adjudication, arbitration, or litigation.

Comment

The new clauses contained in the guidance note are aimed at offering a quicker and better value alternative to other forms of dispute resolution. It will be interesting to see stakeholders’ reaction to the introduction of these clauses in the coming months.