Successful businesses require good quality data to make better informed decisions. How can NEC contracts help to support a business in undertaking a construction contract with its day-to-day decision making? This article discusses how the key processes in the NEC4 Engineering and Construction Contract support good decision making.
Undertaking a contract is a challenging thing to do and the environment in which it is undertaken is subject to change, often at short notice or because of unexpected events. One only has to consider the current pandemic to highlight the dramatic changes that can impact a contract. In such situations being able to have data and information available to consider the risks and how to mitigate, avoid or reduce them is of critical importance. NEC contracts not only set out the obligations of the Parties to a contract, but are specifically designed to support and encourage better management, which in turn helps to support better decision making and increase the chance of a successful outcome.
Some of the key features of the NEC which support better decision making are:
Taking each of these in turn:
Communication: clause 13 of the NEC positively encourages both Parties to communicate. Communication is “key” in overcoming the day-to-day challenges that contracts pose and it helps to keep each Party informed. The requirement to communicate in a form which can be read, copied, and recorded is essential.
Early Warnings: clause 15 describes the obligation for the Project Manager and the Contractor to notify each other of anything which could affect time, cost or performance. This early identification of threats (and opportunities) alongside the early warning meetings held to discuss the issues, helps to mitigate, avoid, or reduce the impact of such matters.
Programme: section 3 of NEC contracts describe the requirement to submit and keep in place a regularly updated programme. It provides an objective test of the potential impact a compensation event or that possibly an early warning matter might have. It enables the Parties to fully understand the impact of change and risk.
Compensation Events: section 6 of the contract, which concerns the assessment of change events in a timely manner, provides clear rules on how compensation events are to be assessed. It means that the Parties have a far better understanding in relation to the certainly of outcome for change events. This supports and encourages better behaviours.
In many ways it feels almost unfair to highlight these key features when in fact every procedure in the NEC has been designed to contribute to the better management of contracts. For example, you can also think of the requirement for clear unambiguous scope, thorough site information and forecasting, as equally supporting better management and decision making that will lead to a greater likelihood of successful outcomes.
What does this mean for those involved in managing a contract?
Implementing the good management processes within the NEC contract provides invaluable information and data in real time. It enables those involved to make better informed decisions on the best available information at the time, which in turn provides greater certainty and the potential for more successful outcomes.
But we must remember that coupled with these good processes we need people who understand the contract and its principles. The ‘magic dust’ is what we simply term ‘working practices’, which some may describe as collaboration. Whatever term you use, the softer side of project management and appropriate behaviours are essential. Clause 10.2 highlights this need in the following words: “act in a spirit of mutual trust and co-operation”.
Great words but what does it mean? It means that those involved on a contract should engage with each other in simple, everyday interactions, such as having regular dialogue and discussion, consulting, working together, listening to different points of view, and ensuring everyone can express their views.
The excellent management procedures in NEC contracts are of no use unless they are properly implemented. A contract cannot guarantee successful outcomes if the parties do not operate the contract as written. NEC contracts offer the potential to significantly improve a business’s decision making if its key features are used with an understanding of how to make best use of the procedures to deliver improved outcomes.
Step-by-step guidance on managing reality
If you need an understanding of how to implement good management practice in one of the NEC contracts, namely the NEC4 Engineering and Construction Contract (ECC), try Managing Reality books one to five:
You can also order Managing Reality in a print book set.
For the latest information and real-life case studies from NEC projects, attend the NEC Users' Group Online Conference on the 21-23 June 2021.