BIM and NEC3 - a pragmatic contractual perspective.

BIM stands for ‘Building Information Modelling’. This white paper considers the use of members of the NEC3 family at BIM levels 2 and 3, exploring needed and desirable amendments and contract strategies.

Background

As someone who is fairly knowledgeable on the NEC and contracts & procurement generally, I was asked by MPS how NEC is affected by BIM (Building Information Modelling), which I knew very little about. This was because they in turn were being asked by their clients how BIM affected the operation of the NEC3 family of contracts and the use of their system. To answer this, I had to do some reading and thinking, which have led me to some conclusions and recommendations which go against conventional wisdom.

An outsider’s view on BIM

There are various levels of BIM.

BIM Level 2 (BIM2) is where design information on a potential building or asset is shared through a common file format, which enables any contributing organisation to combine that data with their own to develop a 3 dimensional model (a federated BIM model) which avoids clashes with other services, structures etc.. However, in the meantime, another organisation might have used that space, so when these federated models are dropped into the central model at the end of a ‘Stage’, the IT system identifies any clashes and they are resolved by the participants. The next Stage then goes down a level of detail and the process is repeated.

It should therefore result in a physical asset being able to be built without these clashes being reactively resolved as the asset is being constructed. This should lead to better solutions, less change and hence fewer delays and additional costs, as well as a better all-round asset due to the ability to visualise prior to construction.

Achieving BIM Level 2 has been set as a minimum target by the UK government for all public-sector work, by 2016.

BIM Level 3 is where the same IT system is used by all participants at the same time, so the resolution of any clashes is done in ‘real time’. This compares with BIM Level 2, where clashes are identified when the federated models are brought together. The current UK government’s target date for public-sector working at BIM Level 3 is 2019.

BIM Level 4 or BIM 4D is where BIM data is used to analyse time; after this comes ‘5D’ which includes cost management, and ‘6D’ for facilities management (FM) purposes. It almost goes without saying that, a bit like the NEC3, BIM requires collaboration to work effectively, but also pushes to people to work collaboratively.

This article only considers the contractual impact of BIM Level’s 2 and 3.

For a general understanding of BIM, go to : https://www.youtube.com/watch?v=MMMbPpCHfhI 

For a more detailed understanding of the different levels go to : http://www.thenbs.com/topics/bim/articles/bim-levels-explained.asp

Issues at BIM Level 2 (BIM2)

Having got an initial understanding of what BIM is, I started thinking about the contractual issues - only to find that most are encapsulated in the ‘BIM Protocol’ [1], which can easily be found by searching on-line . When analysing this, I was also thinking about how it interacted with the existing NEC3 contract documents.

The way the authors of the BIM Protocol describe it, it is effectively a set of add-on contract clauses – or option Z : additional conditions of contract in NEC3 speak – to cover the requirements, which take precedence over other contract clauses. That includes those in the un-amended NEC3 contracts.

In essence, the BIM Protocol covers :

1. The Employer’s and Each Project Team Members contribution, including the level of detail required (think RIBA stages); when they are to provide it by and what electronic format they are to do it in. This is covered in detail in the ‘Information Requirements’ which sets “out the way in which Models shall be produced, delivered and used on the Project, including any processes, protocols and procedures referred to therein”.   In NEC speak, this is the Scope (in the professional services contracts) or Works Information (in the engineering and construction contracts), except it is not because the ‘Information Requirements’ would be an additional contract document ! The relationship between the Information Requirements documents and other contract documents, whether for NEC3 or JCT, is not described in the BIM Protocol.

2. What has to be done and when is summarised in the ‘Model Production and Delivery Table’ which specifies the subject matter of each Model, who is to produce and deliver each part of a Model at each Stage and the Level of Detail for each Model at each Stage. This originates from the Employer and, like the Information Requirement, it is unstated how it relates to not just the Scope or Works Information documents, but also any entries in the Contract Data i.e. Key Dates or sectional Completion Dates.
3. It has an ‘Information Manager’ who performs the ‘Information Management Role’ whose role “includes, inter alia, the establishment and management of the processes, protocols and procedures set out in the Information Requirements” [2]. While this is a ‘role’ as opposed to a full time job, how this role is related to that of the Project Manager in the ECC, the Contractor under a Design and Build arrangement, the Employer’s Agent in the Professional Services Contract or, for that matter, Architect under JCT is not defined but, for me, there is a very real danger of there being two or even three masters.
4. Both existing background Intellectual Property (IP) and that created for the project (foreground IP) remains with the ‘Project Team Member’ who created it, but they grant the Employer and other Project Team Members a licence to use their material for the ‘Permitted Purpose’. The Permitted Purpose is essentially the design, construction and maintenance of the asset, but not any extension or addition to it. For design and build contracts, this provides clarity as, in my opinion, the words used in the Engineering and Construction Contract – and subcontract – are deficient in this respect. However, ignoring legal nuances, it is essentially the same position as set out in both the Professional Services Contract and Professional Services Short Contract.
5. Lastly liability is covered. This breaks down into two aspects

This contrasts with – and conflicts with -  the indemnity clauses in both the engineering and construction contracts and the professional services contracts where a Parties liability is limited in proportion to their responsibility for the loss.

 There are also (at least) two other very significant omissions from the BIM Protocol :

• what happens if there is clash between two Federated Models when they are brought together and it is not due to either party’s fault i.e. there is overlap in the parties contribution ? One or both parties will then need to do remedial work and it is not covered how this is paid for;
• how change is dealt with ? While it is an obligation of the Employer to “review and update” the Information Requirements and the Model Production and Delivery Table at each Stage, this falls a long way short of being able to “change” it as, for example, the Project Manager can do with the Works Information.

And for both these points, there are no mechanisms for evaluating and adjusting the Contract Prices or Completion Dates as a result. So there is a very real possibility that time could become at large [3], with additional costs being paid on a quantum meruit basis [4] .

Standing back from the BIM 2 & the BIM Protocol.

In order not to have lots of clashes when the federated models are combined, you need to do a good Work Breakdown Structure which is reflected in the scope of each participant’s contract : nothing different from traditional practice.

And you could argue that what BIM2 does is automate the traditional checking process, but does it faster and far more thoroughly [5].

While this is very worthwhile, I have to ask, why do you need special contract conditions to put BIM2 into practice ?

And given my comments above, if you were add on these specialist terms – the BIM Protocol - to an existing NEC3 contract as option Z : additional conditions of contract, you would, at best, create confusion and at worst, contractual dispute. Others seem to agree :

• In the document titled ‘How to use BIM with NEC3’ [6], NEC3’s publisher indicate in a very toned down way their agreement by stating “care needs to be taken that the terms used in the protocol are compatible with the terms in the NEC3 contract being used. Examples of this include ‘Project Team member’, who would be the ‘Contractor’ or ‘Consultant’.” Despite this, they then give specific contractual words incorporating the BIM Protocol into the contract ‘option Z : additional conditions of contract’ and ‘Works Information’ clauses, whilst not changing the terminology !
• Koko Udom, NBS Contracts & Law Manager, wrote an article titled ‘BIM: mapping out the legal issues’ [7] and stated “in practice the legal terms of the BIM protocol may conflict with the clauses of the principal contract” going on to give an example under JCT.
• Two lawyers, Green [8] and Winfield [9], go further with the latter stating that the NEC3 Guidelines have “very limited amendments to the NEC3 contracts themselves. It has not addressed the consequential impact of these limited amendments”.

I will be much more blunt in my advice : do not, whatever you do, use the BIM Protocol as written ! Because at worst, it will create contractual ambiguity and uncertainty and hence dispute, with time being at large and the Parties being paid on a quantum meruit basis.

What to do instead when using the NEC3

Instead, use the points covered in the BIM Protocol as a checklist, but alter terminology to match that in the relevant contract and:

• Put what would be in the Information Requirements in the Scope or Works Information documents;
• Likewise, develop a table summarising what has to be delivered by whom and by when in the Scope or Works Information docuements. You may also require the lead Consultant or Contractor (under a design & build arrangement) to update this as part of the programming submission.
• Do NOT have an Information Manager as a separate contractually defined person. If you are going to have someone dedicated to this role, have them as a delegate of the Employer’s Agent under the Professional Services Contract or, if it is the consultant, specify it in the Scope. Under a Design and Build arrangement, it will be the Contractor who will need to appoint someone to this role. I suggest using the words found in reference 2 are used as a starting point to define this role in the Scope or Works Information.
• Keep the Intellectual Property – or ‘Title’ clauses in NEC3 - as they are in the professional services contracts. On design and build contracts, import the professional service contract wording into the engineering and construction contracts, albeit with slight tweaking to defined terminology, as it is much more succinct and, fairly obviously, written in the same style as the ECC compared with the BIM Protocol’s wording.
• Think about liability :
  • are you happy that the Employer takes the risk of data corruption ?
  • do you want the very clear cut approach of the BIM Protocol which could lead to a ‘no responsibility’ culture or the fairer, albeit more subjective, approach of the NEC3 contracts which could lead to more legal dispute ?

To summarise, my view and that of others I have spoken to, is that BIM2 essentially automates the checking process for spatial clashes. So put simply, you need to set out the ground rules for this process, but the liabilities and risk allocation of the contract should essentially stay the same. Let’s not over-complicate it, either in practice or legally !

BIM 3 : BIM Nirvana or the BIM Reality ?

Under BIM Level 3 people do not work on separate parts of the overall Model before they are amalgamated; they work on one integrated model in ‘real time’. For this to work, people have to have a highly collaborative mind-set. Ignoring the contractual aspects for a moment, there is a danger that without good project management rigour, especially in defining the Work Breakdown Structure and subsequent change management, that collaboration becomes anarchy as frequent changes are instigated by technical specialists without full consideration of the impact on others and hence on time and cost.

If we follow this through to the contractual situation, there might well be :

• frequent refinements to one part of the design which, while worthwhile, might mean re-work for other parties’ work; and
• moving boundaries as the scope for each parties contribution flexes on the basis of ‘best person / organisation for the job’.

Both of these would be changes or compensation events under an NEC3 or variations under other forms. A few changes and a party might choose not to exercise their contractual rights, but after a while, they will ! In addition, at a big picture level, you want to align objectives so that all participants are working for the overall good of the project as opposed to fighting their individual contractual corners.

This has led a number of authors [10] [11] to postulate that BIM3 will not work in traditional contracting structures and that full-on alliancing commercial arrangements must be adopted. The fundamental characteristic of a contractual project alliance is that the individual commercial objectives of the key participants are aligned to the overall success of the project. I.e. there is an alliance target for the overall cost of the project which is only changed under exceptional circumstances and all of the alliance members get a share of any savings on this. Hence, they are motivated to work together for the best project outcomes which in turn is best for them.

Alliances are typically set up as either :

• individual contracts between the Employer and each participant, normally cost-based, and then another contract is added on top which all parties sign and join their fortunes together for the success of the Alliance. It also covers how they will work together, common systems, organisation etc.; or
• one contract is signed by all the key parties which covers both the deliverables of each Party and the commercial terms, how they will work together, common systems, organisation etc.. This is the approach taken by the PPC 2000 contract and some consultants have labelled such a model as the ‘pure alliance’ or ‘Australian model’.

As well as aligning commercial interests, because each parties contribution is on a cost plus / time charge basis and there is one target which rarely, if ever, changes, contractual change management procedures are not needed which take out a lot of contention (which is not to say that they are not needed for good project management). However, alliances typically take a considerable amount of time, effort and hence money to set up, so they are typically used for larger projects where there is scope for savings – managing out downside risk / threat and managing in opportunity - through collaborative working. They also demand dedicated resource.

So while costs of setting up alliances would come down with repetition and familiarity, I ask if this is appropriate for the majority of 'projects' in construction ? My answer would be “No”. If you re-ask the question as “if this is appropriate for the majority of 'contracts' involving an element of design e.g. specialist subcontracts and specialist equipment, in construction?” then the answer, in my opinion, is a very definitive “No”.

Going a stage further, literature from American authors [12] [13] encourages the use of ‘Integrated Project Teams’ to get the most from using BIM.  Integrated Project Teams, in an American context, are vertically integrated organisational and commercial structures similar to Special Purpose Vehicles used in PFI and PPP arrangements. Again, these have major costs in setting up.

But let’s step back and re-visit what we are trying to achieve by using BIM on the majority of projects.

High certainty in what needs to be done and how it is to be done lends itself to priced contract strategies avoiding the need for costly to set-up and administrate open book arrangements. I.e. the antithesis of alliances !

Consequently, as a general statement, I would suggest that if BIM has been done well in the early stages of a project, then the need for an alliance type contractual arrangement disappears. Indeed, the management and administration of detailed design and construction contracts should become significantly easier as there should be much less change.

So what contractual arrangements would work for a BIM3 project ?

Under NEC3, I would suggest one of the professional services contracts for the design, with both the designers and contributing specialist contractors paid initially on a time charge basis. This avoids contractual arguments over changes to contract prices due to re-work, lack of definition etc. and allows participants to genuinely add-value without being restricted by what they are paid for. To re-iterate statements I made earlier, good project management should still be applied to control the design process.

The level of design done prior to entering into detailed design and construction contracts with a meaningful contract Price – whether a lump sum or a target - would depend on project complexity, timescales, uniqueness etc. To summarise it down to a single statement, it is the extent to which you can isolate the effect of evolving design on one contract package so as to not affect design on other packages and vice versa.

If the Employer wishes to add some positive motivation – which all the research indicates is far more effective than damages etc. for poor performance - each of these individual contracts could be supplemented by some clauses which motivate the contributing parties to work towards a common goal. As a simple example :

• Establish a pot of money or contingency sum based on an, if anything, generous estimate of likely changes due to clashes which should have been picked up by the collaborative use of BIM.
• This pot is drawn on during the project for any changes which are necessary due a lack of collaboration and effective use of BIM.
• Once all final accounts are agreed, the remaining money is split in pre-agreed proportions amongst participants who have made meaningful design contribution. This includes principal designers, the main Contractor and principal Subcontractors.

This differs from other alliance arrangements in that there is no contract signed by all the parties to the project, it is just additional clauses added on to each contract which have the effect of aligning objectives. On top of this, you may – or may not - have some contractual obligations to work together covering location, systems, organisational structure and communications, and governance.

Or put another way, something like option ‘X12 : Partnering’ of the NEC3 family !

This has Partnering Information which describes how the partners will work together, which could include use of a single BIM system; Key Performance Indicators against which incentives can be set for superior performance; a timetable for delivery by the Partners e.g. an equivalent to the ‘Model Production and Delivery Table’ from the BIM Protocol; and governance arrangements.

Some BIM3 contractual loose ends

When developing design in a highly collaborative environment – i.e. where people are working as if there are no contracts in place, but there are - there are dangers that :

• Arguments of who owns Foreground Intellectual Property develop as lines become blurred over who actually developed it. An approach likely to cause little dispute is that it is the Employer who owns the Foreground Intellectual Property (IP), who then grants a licence to those who contributed to its development. Those developing the Foreground IP have to positively identify what they contributed that is novel and if there are two or more claims on the same IP – which might be valid – then this is not a problem unless a parties’ contribution is disputed.
• An alternative approach suggested by Koko Udom ⁷ is to allocate areas of work to a ‘lead author’. Udom then goes on to state “the right of the original author to accept or reject any addition and be saved from any liability for errors where an addition is made without its consent. Where consent is obtained both joint authors would hold rights to the contribution as well as bear joint and separate liability for its errors.” In my opinion, this is more likely to discourage collaboration as participants will want exclusive rights to the Foreground IP they developed and be more wary of their liability if there are errors, which brings us onto the next point …

• Equally, liabilities for poor design could become blurred due to multiple contributors and frequent changes. The obvious answer here is project insurance whereby there is one insurer for the whole project, with the Employer picking up any excess. Parties would still have liability for outright negligence as you cannot legally be excused from this.

Having said this, the BIM IT system should provide a far more auditable trail of who did what and when, which should help resolve any arguments of IP and liability. 

Summary

I would argue that BIM Level 2 automates the checking process for identifying design clashes. I recognise that BIM enthusiasts may well decry this is as a gross simplification. However, given this, you do not need a fundamental shift in how contracts allocate risk or in the contract processes. While the BIM Protocol covers the key legal points that need to be addressed, it does it in a way that is incompatible with how other contracts, including NEC3, are drafted. I.e. Do not just ‘bolt-on’ the BIM Protocol to the standard conditions of contract, but do use it as a checklist of issues to address within the existing contract terminology and framework. If this is done intelligently, then it will not alter in any significant way how the contract is administrated.

For BIM Level 3, commentators have suggested that only ‘full on’ alliances or Integrated Project Teams are suitable. However, alliances are often used in circumstances of high uncertainty and change which is precisely what successful use of BIM 3 in the early stages of a project should avoid. There are other more conventional contractual arrangements available, supplemented by simpler incentive arrangements, which are quicker, easier and less costly to set up and run, yet stimulate collaboration whilst working at BIM Level 3.

About the Author

Dr Jon Broome is the Executive i/c Strategic Relationships for Built Intelligence Ltd as well as the managing consultant of his own company, leading edge projects consulting ltd and being chair of the Association for Project Management's Contracts & Procurement SIG. He is also experienced trainer, consultant, author and writer on the NEC3 form of contract and other commercial arrangements. He can be contacted on +44 (0) 7970 428 929 or jonbroome@builtintelligence.com.

Once again, thanks to MPS, owners of the CCM system for administrating NEC3 contracts for sponsoring this white paper.

References

[1] CIC / BIM Pro, Building Information Modelling (BIM) Protocol : Standard Protocol for use in projects using Building Information Models, first edition, 2013.

[2] For a more detailed description of this role, go to : http://www.bimtaskgroup.org/wp-content/uploads/2013/02/Outline-Scope-of-Services-for-the-Role-of-Information-Managment.pdf

[3] The phrase ‘time at large’ describes the situation where there is no date for contractual completion, or where the date for completion has become invalid. The contractor is then no longer bound by the obligation to complete the works by a certain date and would then only have to complete the works in a 'reasonable time’. The Employer is then only entitled to damages if they establish that it was not completed within this ‘reasonable time’. Source : http://www.designingbuildings.co.uk/.

[4] The literal translation is "as much as he deserved".  The google search definition defines it as “a reasonable sum of money to be paid for services rendered or work done when the amount due is not stipulated …”. The word ‘reasonable’ can have a multitude of interpretations !

[5] This has obvious advantages across designers and specialist contractors at the same Tier of the supply chain once contracts have been signed. Less obvious, but very significant are the advantages when inviting tenders under a Design and Build arrangement, whereby the system ensures the Contractor’s pre-contract proposals do not spatially clash with the Employer’s. They still need to be checked to ensure the Contractor is providing the Employer with stated functional and performance requirements though !

[6] Available at http://codebim.com/wp-content/uploads/2013/06/BIMwithNEC3guide.pdf

[7] Go to http://www.thenbs.com/topics/bim/articles/bimMappingOutTheLegalIssues.asp . It was posted in February 2012.

[8] Green R, BIM Update, available at http://www.wragge-law.com/insights/bim-update/ . Posted November 2013.

[9] Winfield M, Building Information Modelling : the legal frontier – overcoming legal and contractual obstacles, published April 2015 and available (for £3) from www.scl.org.uk .

[10] See, for example, the presentations from an afternoon conference by Beale & Partners titled “Collaborative Working : BIM and Alliancing Agreements”, at http://www.beale-law.com/uploads/files/beale_and_company/publications/imported/Collaborative-Working-seminar-presentation-materials-low-res-.pdf

[11] Also, go to an article by Chris Hallam, a partner in Pinsent Masons, at http://www.pinsentmasons.com/en/media/press-releases/2014/governments-bim-target-unachievable-says-pinsent-masons-survey/ where in which he states “Many believe that the 'Alliancing' model – a 'no-fault' based procurement route where parties share in the success or failure of a project - is where the industry should be heading” with respect to getting the best from BIM.

[12] Ashcraft H W (2008), Building Information Modelling : A Framework for Collaboration, A paper presented to the Society of Construction Law International Conference in London, 6^th – 7^th October 2009.

[13] Benedict D. Ilozor and David J. Kelly, Building Information Modeling and Integrated Project Delivery in the Commercial Construction Industry: A Conceptual Study, Journal of Engineering, Project, and Production Management 2012, 2(1), 23-36