• NEC3
07 Nov 2016

Still struggling with NEC3 after all these years?

by Simon Chew, Commercial Director - UK

Even though the first NEC contract was introduced some 23 years ago, as an industry we still seem to be struggling with the way it is set up. The process of agreeing the impact of events as they happen still seems alien to us and all too often we revert to the tried and trusted method of ‘sorting it all out at the end’. It’s time to buy-in to NEC.

The lynchpin in this process is the accepted programme, the contract is clear in what it should include and how it should be structured. Although this may seem draconian when compared to the traditional forms of contract most planners would state that this is merely ‘best practice’.
Clause 31.2 details what needs to be included and also which provisions should be allowed for; of particular note there is float and time risk allowance.

Float – To properly demonstrate float (total float in this case) a fully logic linked programme needs to be in place. This also means no mandatory constraints skewing the logic and therefore none of the dreaded negative float! The programme should show a clearly defined end to end critical path. If this isn’t visible then something is amiss.

Time Risk Allowance (TRA) – TRA purely demonstrates that the contractor has included risk into the programme at the tender stage. An example would be laying a pipe across a field. The contractor has allowed 15 days for the activity, the activity takes 12.6 days but 15 are allowed for the inclusion of risk. What used to be called cream or fat in the programme is now calculated. This should be shown clearly as a column on the programme submission. There is an argument that TRA is the first thing to go in a competitive tendering situation but nonetheless, it is a requirement of the contract.

Another term that often causes much confusion is Terminal Float; put simply it is the duration between Planned Completion (when you plan to finish) and Contract Completion (when the contract states you must finish). So if you plan to finish three months earlier than the date for completion stated in your contract you have three months’ Terminal Float. This is entirely contractor owned.

Once a contract compliant programme is ready then clause 31.1 states this must be submitted within the period stated in the Contract Data (usually four weeks). If this is not done then a quarter of the price of the work done to date is retained until a first programme is in place showing the information which the contract requires. (See clause 50.3)

With the programme submitted the Project Manager (PM) must either accept or reject the programme within two weeks (Clause 31.3). The ONLY reasons for rejection are as follows;
– The Contractor’s plans which it shows are not practicable
– It does not show the information which this contract requires
– It does not represent the Contractor’s plans realistically
– It does not comply with the Works Information
Note – Not liking the end date is not a reason for rejection!
If the PM rejects the programme on any other grounds than the four stated in Clause 31.3 then an NCE should be raised by the contractor under Clause 60.1 (9).

Once the programme is accepted, the contractor’s work is not over. It must be updated as per the interval period stated in the contract data (normally monthly) showing progress and its effect on the remaining work and the effects of compensation events. Additionally each quotation for a Compensation Event (CE) will require a programme demonstrating the impact of the CE on the last accepted programme (Clause 62.2). Although onerous this is a requirement of the contract and is well worth doing as once agreed by the PM it cements the CE within the revised accepted programme.

Once subsequent submissions are accepted then they become the new baseline moving forward and the previous programmes are discarded. However, the programme will quickly become obsolete if the CE’s are not agreed as they happen and the process becomes drawn out. This is why it is so important for contractor and PM alike to embrace the spirit of the contract and agree events as they happen.

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