NEC 3 - Incentivised Key Dates

NEC3 and NEC4 Contracts
1

NEC3 - Option A (ECC):

Hello, we have a client that would like to use incentivised “Key Dates”, to ensure the Contractor delivers to a tight programme, they have suggested using Secondary Option X6. Reading X6 in detail this only relates to full “Completion” of the works (i.e. a one off performance bonus paid if Completion is achieved before the Completion Date), or a performance bonus linked to “Sectional Completion”. We do not want to include Sectional Completion in the contract.

Would X20 (KPI’s) be the best route to include “incentivised Key Dates” into the contract? Under X20 the incentive schedule is included in the contract. My plan would be to make the KPI’s dependent upon meeting the criteria listed in Contract Data Part one for the Key Dates. As the Contractor meets the KPI criteria they pick up the incentivised bonuses.
i,e, KPI N0.1 = The Contractor meeting the requirements of Key Date N0.1 on date xx/xx/2023, as detailed in Contract Data part One.

This approach (using X20) would allow for multiple incentivised Key Dates. It appears that X6 would not.

2

I would agree that X20 is the way to achieve what you are after. X6 is for overall completion and doesn’t lend itself to interim milestones as readily as X20 does.

Do be wary, though. If you are using Key Dates, one of their features is that damages for missing them are unascertained - i.e. you don’t have to work them out in advance, like you do for delay damages. By tying the incentive to Key Dates, could you inadvertently set a precedent for what the damages for a Key Date are? The actual answer is I don’t know, but I also don’t want to find out. One answer to that could be to not refer to the KPI targets as being Key Dates. Just call them something else.

3

X20 would be the appropriate Secondary Option, however, be mindful that every action has a reaction when it comes to incentivising under NEC contracts. therefore you could expect a change in contractor behaviour as a result of this approach.

I.e. more aggressive pursuit of CEs and ‘gaming’ in general or even loading more risk into the tender price upfront come to mind.