Broome's Blog

Should we kill the use of the NEC3 Professional Services Contract ?

In this short article, Jon questions whether NEC3 Professional Services Contract should be used as extensively as it is and whether the NEC3 Professional Services Short Contract should be used more.

The NEC3 Professional Service Contract (PSC) is now the contract of choice for professional services of many clients, both public and private, especially in the construction sector. This is partly because they are using other members of the NEC3 family for their construction contracts, but also because of the general advantages common to all members of the NEC3 family, namely greater flexibility, clarity and simplicity and the stimulus to good project management.

The last of these means that there are extensive requirements to communicate generally, but in particular :

• early warn for any matters which could affect the time, cost or quality outcomes of the contract;
• maintain and up to date active Risk Register;
• extensive programming provisions, both in what a programme has to show and the frequency of updating it; and
• the notification and assessment of compensation events within strict time limits as the contract progresses.

It’s own worst enemy ?

Yet these features mean that for many smaller less complex assignments, the PSC is simply an overkill : the client is either paying for this project management which is not needed or, more likely, both parties are not doing what the contract says they should be doing and so are in breach of contract.

It reminds me of the Dilbert cartoon where the pointy headed boss wants an extensive progress reports on the hour every hour for a mission critical urgent project. Each hour Dilbert reports that he has updated the progress report, but made no progress on the actual project.

Or as one client managing director said to me half joking (something like): “If I was to use the PSC to employ my Project Manager under the Engineering and Construction Contract, I would need to employ another project manager under the PSC to manage them … and another to manage them and so on.”

Introducing the NEC3 Professional Services Short Contract (PSSC) :

For these reasons, the publishers of the NEC3 brought out the PSSC in April 2013. As well as generally being simpler to understand and operate, it :

• still contains the requirement to early warn, but not to maintain a risk register;
• no programming requirements, except any that the Client writes into the Scope document;
• a simplified compensation event process.

And, while it has no main payment and secondary options, it does allow for appointments on a fixed price, time charge or call-off basis.

However, many clients still use the full PSC for appointments when the PSSC would be far more suitable e.g. where there are one to a small group of consultants working on a relatively low risk, low complexity assignment where there are not too many deliverables and not too much interdependency between the activities. I have a number of clients who have expressed relief at not having to use the full PSC on such contracts.

When should we use the NEC3 Professional Services Contract then ?

The PSC comes into its own, both compared with the PSSC and professional services contracts from other bodies, when there is a complex project involving multiple deliverables and/or interdependencies between activities. For instance, as the main contract between a Contractor and Consultant on a medium value design and build project, where the Consultant is doing all the design with its delivery having to join up with the construction programme.

So should we kill the use of the PSC ?

No, but we should probably be using it a lot less than it is being used and the PSSC much more.

Jon led the development and drafting of PSSC with other members of the APM's Contracts & Procurement SIG.