Resolving and Avoiding Disputes in NEC4 Contracts

The resolution and avoidance of disputes in NEC4 contracts is primarily governed by three Alternative Dispute Resolution (ADR) Options: W1, W2, and W3. Each option provides rules for resolving disputes tailored for different legal jurisdictions and project requirements. This article provides an overview of the three W options and the tribunal. A dispute resolution option, W4, was published for use in Hong Kong for payment disputes in 2024 but discussion on this is outside the scope of this article.

Senior Representatives

The Senior Representatives play a central role in the early stages of dispute resolution under Options W1 and W2. Their involvement serves as an intermediary step before escalation to adjudication or the tribunal.

Under Option W1, a dispute must be referred to Senior Representatives in accordance with the Dispute Reference Table. Under Option W2, involving Senior Representatives is optional. While the parties can agree to use the Senior Representatives, either may refer the matter directly to adjudication, in compliance with the Housing Grants, Construction and Regeneration Act 1996 (HGCRA).

Conflict Avoidance Panel

In March 2025, Z clauses were published to enable the incorporation of a Conflict Avoidance Panel into NEC4 contracts, with the purpose of resolving disagreements at an early stage. Recommendations made by the Conflict Avoidance Panel are non-binding and the parties may still refer a dispute to the Senior Representatives or the Adjudicator. The Z clauses, suitable for use with Option W1 and W2, are aligned with the Conflict Avoidance Pledge launched by the RICS and the Conflict Avoidance Coalition Steering Group.

Option W1

Option W1 is the dispute resolution mechanism using adjudication when the HGCRA does not apply to the contract. Disputes are first referred to the Senior Representatives and, if not resolved, are referred to the Adjudicator. The Adjudicator may be identified before the contract starts or selected during the dispute via a nominating body. The Adjudicator is appointed under the NEC4 Dispute Resolution Service Contract.

The Adjudicator’s role is limited to deciding the specific dispute referred. The Adjudicator’s powers include reviewing and revsiing the Project Manager’s or Supervisor’s actions. The Adjudicator’s decision is binding, but a dissatisfied party may refer the dispute to the tribunal, provided the intention to do so is notified to the other party within four weeks of the adjudicator’s decision.

Option W2

Option W2 aligns with legal requirements of the HGCRA, making it a compulsory choice for construction contracts where the site is in England, Wales or Scotland. It is similar to some aspects of W1 but includes key differences to ensure statutory compliance. Most notably, a dispute may be referred to the adjudicator at any time by either party, removing the necessity to first consult Senior Representatives. Whilst the Senior Representatives involvement is permitted, it is entirely voluntary.

The adjudicator’s decision is binding and becomes final if not contested within four weeks. If the initial Adjudicator cannot proceed, a replacement must be appointed within seven days, and the dispute referred anew.

W2 also allows related subcontract disputes to be adjudicated concurrently, provided the subcontractor consents. The Adjudicator must deliver a decision within 28 days but can be extended by agreement.

With the exception of the Supply Contract(SC) and Alliance Contract (AC), Options W1 and W2 are available for use with all of the long-form NEC4 contracts. The Supply Contract and the short form versions of the contracts include provisions for dispute resolution within the core clauses with an option in the short forms to incorporate the HGCRA where the Act applies. The Alliance Contract adopts a very different set of rules managed through the Alliance Board and involves the Senior Representatives, independent experts and mediation as necessary.

Option W3

Option W3 introduces an alternative to adjudication using a Dispute Avoidance Board (DAB) and is only available for use with the NEC4 Engineering and Construction Contract. A DAB is typically used in international or high value contracts, aiming to prevent disputes rather than react to them. Importantly, the DAB does not decide a dispute but acts to assist the parties to settle matters themselves. Use of Option W3 eliminates the roles of the Senior Representatives and the Adjudicator, relying instead on the continuous engagement of the DAB.

Option W3 is only available for use with the NEC4 Engineering and Construction Contract. The DAB is named in the Contract Data and comprises one or three members. The board visits the site periodically, facilitating early identification and informal resolution of potential disputes.

Should a potential dispute arise, the matter is referred to the DAB. The Board visits the site and reviews the dispute with the objective of helping the parties reach agreement avoiding the need for the dispute to be referred to the tribunal. If the parties have been unable to resolve the dispute the DAB provides its recommendations to the parties for resolution.

The Tribunal

Under the W1, W2 and W3 options, the tribunal serves as the final arbiter. The tribunal may be a court (litigation), arbitration, or other forum stated in the Contract Data.

For Options W1 and W2, referral to the tribunal is permitted only after adjudication and must be referred within four weeks following the adjudicator’s decision.

In W3, tribunal proceedings may begin only after a DAB recommendation has been made and one or both of the parties are dissatisfied with the recommendation. Referral to the tribunal must be made within four weeks following the DAB’s recommendation.

The tribunal has wide-ranging powers and is not limited by the Adjudicator’s decision. It may consider new evidence and arguments. Its decision is final and binding, subject only to any appeal rights available under the applicable law.

Summary

NEC4 contracts offer a tiered and flexible framework for dispute resolution, emphasizing early engagement and structured adjudication.

W1 mandates structured escalation through Senior Representatives and adjudication.

W2, applicable under UK law, ensures adjudication is available at any time, with optional early negotiation using the Senior Representatives

W3 focuses on dispute avoidance through the continuous involvement of a Dispute Avoidance Board.

All three options culminate in the tribunal as the ultimate authority, but only after defined procedural steps have been followed.

David Hunter
Daniel Contract Management Services Ltd

June 2025

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