Why Programme is King

04/11/24

Newsletter #31:

Welcome to this weeks Instruct newsletter, like a warm bobble hat one a cold day. Fun and practical!

We’ve had lots of debate recently about programmes and how they can help or hinder you based upon your approach and transparency.

This week we are going to look at the reasons why a programme is critical to managing an NEC contract well, but also delve into some of the issues that could arise.

Why have a programme?

NEC is based upon the principles of good project management. So how do you manage a project? Firstly you need to know how long it should take, and how well you are doing against the expected timescales.

You can then track the likelihood of delivering the project within the timescales required, and make adjustments as you go to keep it on track.

Unlike other contracts (e.g. JCT) NEC has a heavy focus on programme. It is at the very core of the contract. Why?

Because it will be used to determine the impacts of change and risk occurrences, i.e. compensation event. It will be used to assess delay damages, bonuses for early Completion, etc.

If you don’t have a good programme, how can you agree who should pay for time impacts? The Client or Contractor?

What needs to be included in an NEC programme?

The contract is clear, clause 31 sets out the requirements for every programme that is submitted, as well as the criteria for acceptance.

In summary, NEC requires (shortened version):

• All the dates required by the contract (Key Dates, Completion Date etc)

• How the work will be delivered (order and timing)

• Provisions for float, as well as any specific procedures set out in the contract

• Dates when the Contractor needs things

• Anything which the Scope requires.

This gives a robust set of provisions for the Contractor to demonstrate how they will deliver the project, but also a means for the Client to understand how the work will develop and progress towards Completion.

Don’t forget clause 32.

As revised programmes are submitted the Contractor is also required to show on revised programmes:

• Actual progress

• Dealing with delays and the correction of notified Defects

• Any changes the Contractor proposes.

A great set of guiderails to ensure that progress is not lost and the programme always represents reality at the time of submission.

How a contract can be manipulated!?

Because the programme is used to assess the impacts of events. It’s common for the programme to be created and managed in such a way to give flexibility and control without it being obvious to the other party.

Here are some things which we see with programmes:

• Time risk allowances being included in activities but not shown as such (hidden float)

• Terminal Float being maximised so that any CE’s which affect critical path have a greater chance of moving the Completion Date. (Contractor Benefit)

• Progress being shown as per programme, rather than reality. Disparity between theory and reality.

• Optimistic durations to keep the programme short as a compensation event is expected

• Inclusion of tight timescales for provision of information from the Client, leaving the Client at risk.

• Using short durations for third party works as any delay to these works are generally a Client risk.

• Etc!

• Why Programme is King!

  The programme gives on version of the truth! NEC is clear that the programme is the last accepted programme, and therefore any changes are baselined against that programme.

  This is important because of the dividing date and its importance for compensation events. The dividing date is defined by the date of the communication which created the compensation event.

  Referring to clause 63.5, the assessment of a compensation event takes into account (bullet point 2); events which have happened between the date of the Accepted Programme and the dividing date.

  This means that if the Accepted Programme is 3 weeks old, the compensation event assessment must include an update of the Accepted Programme to take into account what has actually happened over the 3 weeks.

  This is a change from NEC3, and it give the programme even more power!

  If the programme was accepted with a few areas which maybe weren’t very clear but didn’t trigger a reason to not accepted the programme. The Project Manager is able to use the compensation event process to ensure that the Accepted Programme is suitably updated to reflect reality before the impacts of the CE are assessed.

  This creates equilibrium:

  • The Contractor can’t benefit by hiding their own delays. They will be uncovered when reality is applied.

  • The Client can’t benefit from the Contractor delivering faster than the programme. Again, reality is applied, and the Contractor gets the benefit.

  All parties are therefore equal and transparent in this situation. Reality is applied and a true assessment of the delay can be undertaken.

  How would you do this without an agreed programme?

  It’s almost impossible to calculate with accuracy and would likely result in negotiations to reach agreement.

  Because of this point alone, Programme is King!