Cl. 10.1
NEC actively encourages good project
management
Unlike other standard form contracts the
PM is not identified as part of the design
team (contrast the ‘Architect/CA’ under
JCT SBC or the ‘Engineer’ under FIDIC)
Avoids conflict of interest
The PM must act impartially and ‘hold
the ring’ in relation to certain decisionmaking functions
If he fails to act in this way this could be
a breach by the Employer
The ‘toolkit’ at the PM’s disposal includes:
› The Accepted Programme and the requirement
to keep it updated to allow joint decision
making between the PM and the Contractor
› The fact that the Contractor is required to prove
Defined Cost in relation to the cost reimbursable
and target price options (and CEs in relation to
options A and B)
› The parties’ requirement to give early warnings
and call early warning meetings and the Risk
Register
› The compensation event procedure which
requires CEs to be assessed at the working level
with a time bar for late notification in certain
circumstances
› The dispute resolution procedure
All of these mechanisms demand a
thorough knowledge and understanding
of the contract and active involvement
and participation by the PM, the
Contractor and the Employer
The Guidance Notes describe the
stimulus to good management as “the
most important characteristic of the
ECC”
Every procedure has been designed so
that its implementation should contribute
to, rather than detract from, the
effectiveness of management of the
work
Parties are motivated to “collaboratively
manage” projects
Constraints on the PM’s authority – e.g. if
the Employer requires that any instruction
by the PM which has a monetary effect
should be approved in writing in
advance by the Employer
Inadequate resources: The NEC is
‘resource hungry’ in terms of contract
administration
› The PM becomes overburdened with NCEs
which are not resolved and a backlog starts
to build up;
› The early warning mechanisms are not used
effectively because of inadequate or
improperly trained resource;
› The matters for the PM’s acceptance (e.g.
programme, activity schedule and design)
are delayed or not properly addressed
The NEC envisages that Contractor’s
claims are actively managed in a
collaborative manner through early
warnings, the CE procedure and time
bars and the Contractor’s preparation of
quotations for CEs
Project management teams may be
reluctant to make ‘hard’ decisions which
may bring disputes to a head at an early
stage rather than allowing them to rollup
The time bars for the Contractor and the
PM may not be enforced, thereby
reducing the incentive for timely
resolution of claims
The Contractor may seek to ‘deluge’ the
PM with notified claims without
consideration as to where the risk
actually lies
Cl. 61.1 and 61.3: require the PM to notify
the Contractor of a CE at the time of
giving an instruction
PMs may fail to notify and thereby
expose the Employer to additional costs
that might not have been incurred had
appropriate action been taken
The NEC’s “three-part attack against the
indolent Project Manager”: deemed
acceptance if the PM fails to respond to
a notification (cl. 61.4); reply to a
quotation (cl. 62.6) or assess a CE (cl.
64.4)
A common failure is that the parties may
fail to agree an Accepted Programme,
with the result that there is no clear
measure for assessing CEs
Cl. 64.2: The PM may assess using his own
assessment of the programme for the
remaining work if there is no accepted
Programme
Guidance Notes: “If the Accepted
Programme is non-existent or has not been
revised as required in clause 32, the Project
manager is required to carry out his own
assessment of the programme for the
remaining work. This is a major incentive on
the Contractor to keep his programme up
to date.
The Project Manager will be motivated to
make a fair and reasonable assessment in
the knowledge that the Contractor may
refer the matter to the Adjudicator, who
may change the assessment.”
The PM may be reluctant to substitute the Contractor’s
quotation with his own assessment in circumstances,
where it is appropriate and correct for him to do so
Clause 65.2 provides that the assessment of a CE is not
re-opened if a forecast on which it is based is shown by
later recorded information to be wrong (although the
PM can state assumptions in his instruction to submit a
quotation and the correction of such an assumption
may trigger a CE under cl. 60.1(17))
Contractors may try to submit ‘inflated’ quotations for
CEs or the PM’s assessments might be unduly
conservative
An Option C (target price) contract is still
essentially a cost reimbursable contract,
and should be properly managed as
such with regard to cost and so as to
ensure proper transparency
It is essential that the Contractor keeps
proper ‘accounts and records’
Cl. 52.2:
“The Contractor keeps these records:
accounts of payments of Defined Cost,
proof that the payments have been
made,
communications about and assessments
of compensation events for
Subcontractors, and
other records as stated in the Works
Information”
Under cl. 52.3 the PM is entitled to inspect
the accounts and records “at any time
within working hours”
Cl. 11.2(25): cost which the PM decides “is
not justified by the Contractor’s accounts
and records” may be disallowed
Contractors using option C or the cost
reimbursable options would be well advised
to maintain accurate records and have an
efficient cost recording system
Defined Cost can degenerate into a
‘battlefield’ and Disallowed Cost is one
of the most common areas of dispute
In large projects the PM may be required
to maintain a team including cost
managers to monitor and report on costs
Difficulties in dealing with the cost
relating to Defects
Often a reluctance to utilise the formal
dispute resolution mechanism
May be seen incorrectly as sign of project
management failure
On a long term project, it is often preferable
for the parties to have recourse to
adjudication rather than allowing Disputes
to ‘fester’, undermining the parties ability to
work together in the longer term
HHJ Humphrey Lloyd:
“Whoever decides disputes arising under any
construction contract must have the ability to
stand in the shoes, as it were, of those who were
there at the time and see things as they were then
perceived. Applied to the NEC, this means not only
having a good knowledge of ordinary construction
industry practice, but also a good knowledge of
how a project using the NEC will have been
assembled and run. A person who might approach
an NEC dispute as if it were just another dispute
should not be appointed as an adjudicator…”
Many of these issues arise from ignorance of
the contract terms or failure to follow and
apply the NEC correctly
They underline the importance of
adequate training to contractors and
project management teams on the use of
NEC
All of these issues and pitfalls can be
avoided if the parties understand and
apply the contract and work together
collaboratively
The EASY one …
Because it all looks good
on paper,
It is essential to getting
paid,
Deadlines for information and
approvals
Apparent float between the
project stages
Sound logical progression
between measurable tasks
Verification of the critical path
activities
Enough detail for
Compensation Events to be
assessed …..
Design process
› clarity on who is managing the time
allowed for coordination of design
› Who has risk …?
› Clear deadlines for decisions /
approval to be made
› He who asserts delay must prove …
If it takes more time to get it right – give
instruction and give more time … it builds trust
The CHALLENGING one …
Because it all looks a bit
different,
PM waiting to see how the
“issues” are affecting the
remaining planned work
Clarity of contractual risks in
relation to the design process –
burden of proof to show delay …
Overstatement of delay
pending agreement of CE
forecast impact
The ones that are complex and no-one rushes
to bite the bullet and sort out until it becomes
critical …
Issues which are a result of difficult
coordination or lack of expertise or poorly
drafted subcontract scope …
These are early warning issues, ‘not yet
defined’ or implemented compensation
events
But WILL have an effect on the remaining
work which is UNCERTAIN – no one is rushing in
to manage the programme risk …
Non agreement, resulting in entrenched
positions, and possible adjudication …
PM assessments of CE’s under clause 64 should
be carried out as if the assessment was being
made at time of quotation request
Where does the “forecast” and use of actual
events legitimately meet ?
it may seem to be in the interests of the project
to park agreement of a prospective
assessment but PM must make assessment,
if the dispute results in Adjudication, actual
events post instruction should be ignored
Methodology for assessing
time effects of compensation
events on remaining work
…Shortening the task duration for
remaining work once CE programme
has been accepted …. Then
reporting other critical delays in the
next period … (gasp!)
Do what you say you’re going to do
Use the facts, write the letters
….. lead conversations about
change, understand how the other
party intend to programme the work
before they do
…. straight feedback and detailed
reasons with submissions &
rejections
…buy the drinks …