Cl. 10.1NEC actively encourages good project managementUnlike 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 decision-making functionsIf 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 workParties 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 EmployerInadequate 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 roll-upThe 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 instructionPMs 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 CEsCl. 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 soClause 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 transparencyIt 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, andother 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 disallowedContractors 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 disputeIn large projects the PM may be required to maintain a team including cost managers to monitor and report on costsDifficulties in dealing with the cost relating to Defects

Often a reluctance to utilise the formal dispute resolution mechanismMay 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 correctlyThey 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 tasksVerification 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 If it takes more time to get it right –– give give instruction and give more time instruction and give more time …… it builds trustit builds trust

The CHALLENGING one …

Because it all looks a bit different,

PM waiting to see 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 doUse 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 …