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NEC3 contracts: the importance of proactive communication


JONATHAN BROOKS OSBORNE CLARKE


The procedures set out in the NEC3 suite of contracts are the cornerstone for proactive management of communications in using the contract. However the provisions can represent the starting point for good communication and the use of foresight. NEC users should not assume, if the


contractual provisions have been followed but there is still genuine disagreement about an assessment, that the next step is dispute resolution. As the phrase goes, ‘it’s good to talk’. The vision that underscores the spirit of


mutual trust and co-operation in clause 10.1 of the NEC3 Engineering and Construction Contract (ECC) is to encourage parties to communicate effectively and avoid the polarisation of opinions that lead to disputes by openly discussing differences.


Inaccurate works information Take inaccuracies with the works infor-


mation as an example. Preparation of the works information is a highly skilled and extremely important task which should only be under- taken by someone with a full understanding of how the NEC contracts work and how the various constituent parts of the documentation fit together. Even with detailed planning, errors sometimes occur. ECC clause 60.1 sets out the compensation events under the contract. The first relates to changes in the works information:


‘60.1 The following are compensation events: (1) The project manager gives an instruction changing the Works Information except… a change to the Works Information provided by the contractor for his design which is made either at his request or to comply with other Works Information provided by the Employer.’


The works information may contain inaccurate


information as a consequence of particulars included by the employer before tender stage or by the contractor during the tender stage. Clause 60.1 (1) allows the project manager to change the works information in this instance unless the change is following a request from the contractor or to comply with other works information provided by the employer. Differences sometimes arise because the contractor states that the change is needed because the employer’s information was wrong.


Communication essential ECC requires the project manager and


contractor to communicate at a number of levels, for example as follows.


■ Clause 16 provides for an early warning notice for qualifying events which is to be entered onto the risk register. Clause 16.2 then provides that either the project


4 NEC USERS’ GROUP NEWSLETTER•No.54•APRIL 2011


manager or the contractor may instruct the other to attend a risk reduction meeting and clause 16.3 describes how attendees will co-operate to seek solutions and decide upon actions.


■ Clause 17 requires the project manager or the contractor to notify the other as soon as either party becomes aware of an ambiguity or inconsistency in or between the documents which are part of the contract. The project manager then gives an instruction resolving the ambiguity or inconsistency.


■ Following the project manager’s notification pursuant to clause 60.1 (1), the contractor must then submit quotations and programmes identifying the impact of the event.


■ The project manager then either requests alternative quotations and programmes or assesses.


Avoiding adjudication The importance of following the contractual


provisions cannot be underestimated. However, it is wise to consider the provisions a minimum requirement rather than a maximum requirement. Speaking at last year’s NEC Users’ Group annual conference I was struck by the inference from some Users’ Group members that, if the contract clauses had been followed, and a contractor was still not satisfied with the outcome of an assessment of a compen- sation event, then the only option was to adjudicate. Of course, adjudication is an option but it


is, hopefully, a last resort. A sensibly resourced change control team will be constituted in two parts


●■ the commercial team that reviews and manages commercial issues such as payment, planning, design change and change management.


■ the quality team that reviews and manages quality assurance issues such as health and safety and record keeping.


Properly resourcing the teams will ensure


that the project manager is creating and controlling the information in respect of the activity schedule (ECC option A), risk registers, attending risk reduction meetings, reviewing early warning notices and programmes. These are all roles anticipated by the contract. However, the properly resourced control team will also be preparing additional information that will be used to understand the risk to the programme and to budget. These additional documents will include record keeping information, such as site diaries, and daily programming information, such as photographs and work surveys.


Keeping and sharing good records Companies involved in the construction


industry sometimes believe that there is a tactical or strategic commercial advantage in keeping records confidential, keeping their powder dry in case differing views polarise into a dispute. I do not believe that this is sensible or the


intention of the NEC3 contracts. There is no reason, contractually or commercially, why these documents cannot be used to explain a project manager’s position. In my experience the more often communication occurs the more likely a dispute will be avoided, especially if the communication is based on good records. The Society of Construction Law’s Delay


and Disruption Protocol recommends that assessment of entitlement to an extension of time should always be made contemporaneously upon the basis of the likely effect upon the completion date at the time that the relevant event occurred. This is consistent with the NEC3 approach and underlines the need for good communication and comprehensive records. A consideration of the role of the project


manager in the contract underlines the importance of communication. An effective project manager needs to have visible management skills; set up procedures and systems well in advance of the project commencing; set up a clearly defined team structure with clear lines of communication and delegation of powers; assess the amount due; and act fairly and reasonably at all times. Only some of these roles are expressly dentified in the ECC but all are implicitly required.


No limit on meetings There is no limit on the number of risk


reduction meetings that the parties can have to assess the potential impact of a notified matter. Similarly the parties can have numerous meetings to assess the impact on time and money and the technical issues associated with a potential change event. If a meeting makes some progress but fails


to resolve all thorny issues is the next step adjudication? I hope not. The contract may not explicitly state when a meeting or meetings might be appropriate in the compensation event process, but it seems obvious that the NEC3 objective of a ‘spirit of mutual trust and co-operation’ would be best served by keeping open the lines of communication and being proactive about calling meetings where appropriate. Adjudication should be a last resort.●


For further information please contact the author on +44 117 917 3462 or email jonathan.brooks@ osborneclarke.com.


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