Practical early warnings

The early warning process has been described as the 'jewel in the crown' of NEC Contracts. But over-complicating the process, being fearful of the consequences of not notifying, and playing contractual games can undermine its effectiveness. These seven practical tips should help to ensure that both parties receive the full benefit of early warnings.

Practical Tip #1 :  Delegate the power to notify down to the site team. Under the ECC, TSC and PSC, only the Project or Service Manager (from now on, just the ‘PM’) can notify, but he or she is often remote from the day-to-day goings on in a design office or on-Site, but can delegate their powers.

So if only the PM can notify, there are likely to be delays in notification and hence resolution – by which I mean agreed actions - to the detriment of progress. So, delegate the power to notify down to the relevant people at the coal face of where work the work is being done. And if you are doing that, it follows that they should also be delegated the power to agree ‘minor’ actions at the resulting ad-hoc early warning meetings held at this level (with ‘minor’ being defined based on experience, seniority etc.). And if they can do this, then it also makes sense that they can do the relevant actions under the contract to put what is agreed into effect. For example, instruct ‘minor’ changes to the Scope.

Practical Tip #2 : Agree practical common-sense guidelines for notifying early warnings. If clause 15.1 is taken literally, both the Project Manager and Contractor should notify early warnings for absolutely any possible event, howsoever unlikely and howsoever small in potential impact. Further, if the Contractor does not do this, and the early warning turns into a compensation event, then the assessment could be reduced, so there is a big financial incentive for the Contractor to notify everything. But, if this is the case, then the system is flooded and the team will not be able to ‘see the wood from the trees’.

So here are my suggested three common sense guidelines :

1. If the Contractor (or PM) thinks it can deal with the matter and it is unlikely there will be no effect on the Prices, Completion or performance of the works in use, just do the actions.
2. The opposite of the above is that as soon as the party thinks that it is more than likely to have an impact – even though initially it thought it could deal with it – it does notify.
3. If one party thinks the other can help it deal with the matter, then it notifies.

Exercise common sense when it comes to low probability, high impact risks. It might be a 5% probability risk, but if it is a £1 million risk on a £10 million contract, the other party will want to know !

Lastly, as a PM, be forgiving on the Contractor if a matter moves from the first bullet to the second and becomes a compensation event i.e. if the Contractor is doing what is agreed, don’t use the sanction as the Contractor will revert to notifying everything.

Practical Tip #3 : Phrase early warnings notifications nicely and constructively. As one commercial director said to me “they need to pass the wince test” by which he meant when you review them at the weekly meeting, you don’t want to be wincing at the language used. Aggressive or blaming language puts the receiving parties back up, which is not conducive to good project management

In a similar vein, psychologically, people are much more receptive to there being a problem if it comes with a solution, even if that is not the one that is ultimately implemented. Even though the contract does not require this, I know numerous Contractors who, as a matter of policy, do this because of the positive tone it sets.

The pro-formas used, including those on cloud-based systems, should reflect this.

Practical Tip #4 : Encourage and have ad-hoc early warning meetings at Site level. When a matter emerges, you want it to be resolved efficiently and quickly with minimal disruption to progress. That means small prompt ad-hoc meetings with the relevant people there and empowered to make decisions (see Tip #1). If resolution is held over to the regular meeting, then not only will the work be disrupted, it will also probably take longer as all the people at the meeting will want to have their say. A 5-minute discussion may turn into a half hour one. Multiply this by ten early warnings and a whole day can be used up. That is IF the matters are dealt with at this meeting !

Indeed, the more actions that are made outside of the regular meeting, the more the regular meeting becomes a review meeting to :

• monitor whether actions have been done and been effective and
• close out early warning matters which are no longer relevant.

It therefore becomes shorter.

Practical Tip #5 : Categorise and allocate resolution of early warnings on urgency and impact. Under NEC3, the word ‘risk’ was frequently used within the early warning clauses which caused confusion. For example, PMs wrongly ‘rejected’ early warnings on the basis that they were happening i.e. issues. It is also led to early warnings being prioritised on probability and impact, whether using Excel spreadsheets or cloud-based systems.

I think it is more useful to categorise early warnings as per the table below – based on Stephen Covey’s ‘Seven Habits of Highly Effective People’ - and, having done this, allocate responsibility for their resolution accordingly (with my generic suggestions shown).

 

This may involve some work outside of the meeting to allocate the early warnings to the correct group. And for the ones to be resolved I the meeting, prioritisation so the most impactful ones are resolved.

Practical Tip #6 : For certain contracts, the Contractor leads the early warning process. Let’s take an extreme example to illustrate why : let’s say the Client has clearly articulated what it wants as a performance or functional specification to a level of detail where it knows it will get what it wants and the nature of the project means there is little outside influence to change things i.e. few compensation events are expected. Consequently, it has been let it under an option A : priced contract with activity schedule. It is the Contractor who has to do most of the ‘management’, namely of its supply chain of designers and specialist Subcontractors. Consequently, a significant majority of the early warnings will come up from the supply chain to be dealt with between them and the Contractor.

Does it make sense for the Contractor to ‘cut & paste’ from its subcontract administration systems all these early warnings into the main contract system when it has both the motivation and power to deal with them ? Obviously, the Client via the Project Manager should know about the major ones, but it does not make sense for the Project Manager to be administrating the process when he or she is not involved in the management of the majority of them.

Consequently, it makes sense for the Contractor to lead, and hence administrate, the early warning procedure. Two comments though :

• this should not be seen as absolving the Project Manager of taking actions where he or she can help resolve a matter and
• this cannot be done without the Contractor’s permission as the administration of early warning process by the Project Manager is expressed at condition of contract level, not in the Scope.

Practical Tip #7 : Use risk management techniques and technology to pro-actively feed the early warning process and the early warning process to update the risk profile of the contract.

A common complaint about the early warning process is that many early warnings aren’t really that early or even a warning ! Rather, matters are early warned too close in time to the problem because people aren’t looking far enough ahead. So rather than just letting risk registers sit there unused, regularly draw down vaguely expressed risks and turn them into early warnings with the vague generic responses made specific.

For example, let us say the traditional risk register says that unexpected ground conditions are a risk. On entering the contract, the team are asked where specifically they have concerns about ground conditions. Let us say it is the North-East corner of the Site where access to do site investigations was restricted. So, the team turn the rather vague response of ‘do further site investigations’ into : doing further trial pits at specific locations with the back actor that is on Site; by the end of the week; with the structural and geo-technical engineer present; who will then report back at the next regular early warning meeting on what they found and the implications.

And let us say, nothing unexpected is found. This can then be used to modify the probability of finding the risk in the traditional risk register, thus potentially freeing up funds to be used elsewhere, whether on this contract or another.

Having said this, traditional risk management techniques are increasingly looking out-dated, with a combination of big data and AI processing power being able to give far better predictions of where risk and uncertainty lie and their effect. This is beyond the scope of this article, but a video discussing the interplay between these new approaches and the early warning process can be found here .

Conclusion : when doing my research many years ago, the early warning process was described as the ‘jewel in the crown’ of NEC. Over-complicating it, being fearful of the consequences of not early warning and playing contractual games can undermine its effectiveness. Using these 7 practical tips should help restore it to its former glory !

An abbreviated version of this article published in the NEC Newsletter can be found here.