Originally drafted for the UK, but increasingly recognised worldwide, the NEC 3 form of contract is set up in a way which is, on first application, alien to the traditional construction establishment. Instead of the usual list of clauses and sub-(sub)-clauses setting out what each party should and should not do, the NEC sets out to act as a tool for managing the construction process itself. Steve Davis argues that it is a contract which is supposed to be read – understood – and followed – by the people who do the building.

The NEC contract encourages the parties to think ahead and anticipate problems, and most importantly, find solutions before the problems happen. There is no final account and no opportunity to wait until the end to wrap everything up.

One of the primary tools to manage any construction process, and of paramount importance to the NEC, is the construction programme. The contract requires the Contractor to produce and maintain, and the Project Manager to accept, a programme for the works (‘the Accepted Programme’). But the Accepted Programme is not simply a bar chart filling the gap between ‘starting date’ and ‘completion date’.

The NEC is quite explicit in what it expects to be shown on the programme. In the writer’s view this is where the wheels start to fall off on many projects, as the contract contains extensive provisions which go far beyond the requirements of more traditional forms. Whilst these might be seen as ‘best practice’ in any event, the latest NEC difference is that ‘best practice’ is now mandatory.

The Programme sets the dates for access to and use of the site. It affects amounts due for payment if no programme is submitted by the Contractor. It is also used to determine the Contractor’s entitlement to, and assessment of, certain compensation events.

The Programme may be the Contractor’s tender programme, if this is incorporated into the contract data. Employers beware, however, as there are risks in this approach, because the Contractor may be able to claim reimbursement for required changes to the programme – see, for example, Yorkshire Water Authority v Sir Alfred McAlpine Ltd 32 BLR 114 (1985). Contractors also beware; if the programme results in a compensation event to resolve ambiguity or inconsistency, Clause 63.8 will require the event to be assessed on the interpretation most favourable to the Employer. The list of information to be shown on the Programme is stated at Clause 31.2, and includes the starting date, access dates and the Completion Date, all defined in the contract data. Also required is the order and timing of operations.

Beyond this, a series of defined information is also required:

• Key Dates. These are not sectional completion dates, but dates by which the whole or parts of the works must achieve a defined condition or state of completion.
• Planned Completion. This may be earlier than the Completion Date. The contract usefully apportions ownership of any float between planned completion and the Completion Date, to the Contractor.
• Order and timing of work of the Employer or Others, and dates when the Contractor plans to complete any preceding work.
• Provisions for float, which does not mean the foundation can be shown floating out towards the projects’s Completion Date!
• Provision for time risk allowances, being the duration allowed by the Contractor against each activity, to allow for the risks inherent in the work.
• Health & safety requirements.
• Any procedures specifically set out in the contract.
• Dates for acceptances, plant and materials and other things to be provided by the Employer, and information from others.
• A statement of how the Contractor intends to carry out each operation, including planned equipment and resources. In other words, a method statement. Using this as a baseline, compensation events are more easily valued.
• Any other matters which the ‘Works Information’ requires the Contractor to show on the programme. 

Some commentators suggest that this is no more than what a competent Contractor would put on his programme in any event. In an ideal world, perhaps this is true, but how often does it happen? Also we should be aware that, in the absence of a programme identified in the contract data, a quarter of amounts due under interim payments is withheld until the first programme is submitted for acceptance.

Hence, under NEC, the programme is prepared, submitted, becomes the Accepted Programme. The Contractor’s planner can go back to the office and visit once a month to make sure all is going to plan? Well, not really. Once the programme is submitted and accepted, the Contractor’s work does not stop there. The programme has to be updated, normally monthly. On each revised programme, according to Clause 32, the Contractor must show:

• Actual progress achieved on each operation and its effect on the timing of the remaining work.
• Effects of implemented compensation events, and of notified early warning matters (the latter requirement has been omitted by the June 2006 amendment to NEC 3).
• The Contractor’s proposals to deal with delays and to correct notified Defects.
• Any other changes the Contractor proposes to make to the Accepted Programme.

When the revised programme is submitted and accepted, it supersedes any previous revisions of the programme.

The benefits of this are clear. If all of this information is shown on the revised programme, delay is dealt with as it arises, the parties know precisely where the job stands, can contemporaneously address and mitigate delays where possible, and the programme remains a valid tool for measuring progress, delays and the status of the work.

However, there are pitfalls to avoid in the process. The sheer volume of compensation events can be overwhelming, and there may be a failure to implement the process at all.

It is not uncommon to find that the Employer’s PM or his equivalent has not approved or accepted the Contractor’s programme; often just saying nothing at all. This undermines the intent of the NEC, which allows the PM specified reasons for refusing to accept the programme. These are:

• That the plans it shows are not practical.
• Information required by the contract is not shown.
• The Contractor’s plans are not realistically represented.
• It does not comply with the Works Information.

Unfortunately for the Contractor, these reasons can have a wide interpretation. Both parties should appreciate the benefits of cooperating on programming matters.

Late response to the programme by the PM is a compensation event in itself, entitling the Contractor to payment for any cost incurred. The Contractors must keep the programme updated for progress. This is an action often insufficiently presented, with no indication of detailed percentage figures for each activity. Also, when the programme is revised, there can be difficulties in relating between programmes because their structure is changed.

In practice, many NEC contracts are administered as though they were governed by a traditional JCT form. The work is carried out, a deal is done at the end of the day, and all concerned move on to the next job. But what if there’s no deal? Arguments about failure to follow procedures might arise and, as the Contractor has an 8 week window of ‘becoming aware’ to notify certain compensation events, he should take note of the potential effects.For example, the case City Inn Ltd v Shepherd Construction Ltd, Court of Session 17 July 2001, confirmed that condition precedent clauses might be enforced despite a course of action suggesting a waiver of contractual obligations. Clause 12.3 of NEC 3 most likely closes this argument against the Contractor in any event. So if the NEC is the contract, apply its provisions properly.

Under NEC the programme is in place for the benefit of the project members, and should be viewed as a tool for the project as a whole – not just the person using the computer. Note however, that the NEC procedures take time and resources; also, given the added complexity which the NEC brings to the construction programming process, experienced and able resources are needed. NEC is a high maintenance contract, requiring the commitment of both Employer and Contractor and their teams.

In summary under the NEC form of contract, the programme plays a significant and defined role in the management of the works, setting out the work to be carried out, requirements to undertake that work, and the periods and dates in which to achieve it. Where the programme is timeously and accurately updated the effects of delaying events, both in terms of time and money, should be dealt with as they arise. The Employer will have the optimum opportunity to minimise the effects of delays to his project whilst maintaining cost certainty, and the Contractor will have a tool by which to manage his entire construction process.

Steve Davis is based at Trett Consulting’s Coventry office