Daniel Walker |

Z Clauses: The Good, the Bad and iPhone DIY

“Option Z: The additional conditions of contract” is almost a footnote in the NEC contracts at the back of the secondary option clauses.  So why does it often evolve into a document several times longer than the contract?

Are the authors of NEC culpable of omitting great swathes of important contractual process and obligations of the Parties? Having read many z-clause “novels” I would suggest not!

There are themes that appear time and again throughout these tomes and generally they can be classified as Good, Bad or just plain Ugly.

One thing is for sure, if you use too many ugly ones, the Price will go up as the industry struggles to assess the risk they present.  Each one written erodes the benefit of using a published form.

The Good
Or ‘the benign’ as far as NEC goes.  These are Z clauses of the boiler-plate variety and there’s nothing wrong with them.  They set out how the Parties behave in terms of freedom of information, TUPE, confidentiality, security, etc.

They make contracts compatible with the organisations they serve.  Importantly they coexist with NEC and do not conflict with its aims and characteristics.

Ideally they would be written in plain English, in less than forty words, use present tense, punctuation and bullet points and not reference other clauses.  Usually they aren’t, but one step at a time…

The Bad
Or more accurately ‘the unnecessarily restrictive’.  If you read z-clauses that start “The Contractor will not…” or anything similar then consider whether the clause aims to constrain the Contractor on how he Provides the Works.  If it does then consider putting it in the Works Information – see clause 11.2(19).

If such constraints later need to be changed or removed, then the Project Manager can do so under clause 14.3.  The compensation event process then provides a contemporary assessment of the impacts on time and money.

If the constraints are stated in the conditions of contract, the only way to change them is to use clause 12.3 and most likely a commercial negotiation.  (Unpredictable, lengthy, costly?)

Don’t unnecessarily tie your own hands.  Spot the constraints and put them in the Works Information.

The Ugly
The mobile phone analogy...

When delivering training I sometimes find it useful to explain the optional structure of an NEC contract by comparison with a mobile phone, bear with me...

  • Imagine the phone is the core clauses - we have to take them, or we don’t have a phone.
  • The main option for payment is the tariff – it only makes sense to choose one.
  • The secondary X and Y options are off the shelf accessories – we choose those that meet our needs and hone the contracts performance in specific conditions. We know they are compatible, tried and tested.

So where does the ugly Z clause fit into this analogy?

  • Drafting a Z clause can be like performing DIY on your iPhone – you might improve it!

This kind of Z clause is the Ugly (usually).  These are the attempts to ‘improve’ the contract because for one reason or another it doesn’t meet our requirements, or at least we think it doesn’t.

It is unfair to say all Z clauses of this kind are ugly.  Sometimes there is genuine need and with careful, informed drafting the contract can be adjusted to fit.

However, there is a lot of bad, destructive drafting that appears in the main to be born of a lack of understanding.  A handful of additional words in the wrong place, with the best intentions, can bring a multi-billion pound portfolio into a state of confusion.

Top tips:

  • Get a second opinion.  If the team has little or no experience of NEC then have the drafting checked.  Many changes are perceived as necessary due to a lack of understanding as to how NEC works.  Bits are deleted and replaced with traditional clauses, often completely unnecessarily.
  • Check you are using the most appropriate contract.  Some Z clauses are unnecessarily introduced to achieve a strategy better accommodated by starting with a different form in the NEC family.
  • Inappropriate risk allocation.  Remember when dealing with risk, off-loading it may achieve greater budget surety but usually at the expense of value for money. Consider keeping the risk and plan a contingency instead.  That way you only pay for the risk if it happens.
  • Write Z clauses in the same style as the rest of NEC.  NEC is foremost a manual for project management.  Keep the additional provisions accessible to all. Respect the characteristics and objects and use NEC language.  Strip out the Latin and legalese!

Ben Walker
Director: CEMAR, ICE Examiner, Tutor: NEC Contracts


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