NEC contracts have a reputation for building a culture of transparency and collaboration between the parties involved in the project. There is a huge emphasis on communication, problem-solving and the clear allocation of risk.
One advantage of using NEC contracts, including both NEC3 and NEC4, is their versatility and tailoring to a range of project types and complexities.
Change is an inherent part of construction projects and, therefore, an integral part of NEC contracts. The way it is approached within them is structured, collaborative and solution-focused.
In this article, we will discuss what the core principles of change management in NEC are, what systems are built into NEC contracts to help you manage change and the best practices for using them.
Core Principles of Change Management in NEC Contracts
Instead of trying to avoid inevitable change, NEC anticipates it. This anticipation is built into the structured processes within NEC contracts, through the Early Warning system, Compensation Events and the Project Manager role.
How The Early Warning System Identifies Potential Change Early
NEC contracts feature an Early Warning system that encourages parties to identify and notify potential issues as early as possible. It then requires a discussion of the issues and the identification of potential solutions. This system supports proactive, joint problem-solving, fostering a collaborative approach to managing change.
It works where either the Contractor or the Project Manager notifies the other as soon as they spot a potential problem that may affect time, cost, quality or performance. This prompts an Early Warning meeting to identify and consider solutions, and to record actions to be taken in the Early Warning Register.
Compensation Events: Managing Time, Cost and Scope Changes
Compensation Events are listed in the contract as events that are clearly identified as being the client’s risks if they occur. For example, there are 21 reasons listed in Clause 60.1, and then further valid reasons listed in the main and secondary options. If they occur, and the Contractor is not at fault, it entitles the Contractor to an assessment for time and/or cost adjustments.
This provides a structured, timely and fair way to handle inevitable changes and unforeseen risks, preventing disputes by clearly defining who bears the cost and time impact of specific events.
The Role of The Project Manager in Change Management
Under an NEC contract, the client appoints a Project Manager to administer the contract on their behalf. They have a responsibility to act impartially and in accordance with the contract. They play a crucial role in managing change throughout a project. The Project Manager assesses Compensation Event notifications, issues instructions and is responsible for assessing Compensation Event quotations and agreeing to any change to the programme and overall cost.
This role’s impartiality ensures fair treatment for both the Client and the Contractor, fostering trust and collaboration.
Best Practices for Effective Change Management
- Communication: All parties must be open and honest, and actively engage in discussions with one another.
- Early Identification: Everyone involved should be prompt in notifying Early Warnings and Compensation Events.
- Documentation: Maintain accurate records of all communications, instructions and decisions related to changes in our project.
- Regular Reviews: Proactive, regular review of the Early Warning Register supports proactive risk management and mitigation of potential issues.
- Collaboration: Prioritise the project’s outcomes over confrontation or winning a dispute.
- Training and Education: Ensure teams understand how NEC contract processes work, and their responsibilities for change management.
- Software Support: Digital contract management software can streamline change management and make the administrative side more efficient.
Simplify NEC Change Management with Contract Bee
NEC contracts contribute to project success by fostering open communication, early identification and fair compensation for changes. Managing all of this with manual processes, however, could be a significant burden.
Contract Bee digitises and automates NEC contract management, whether that’s the process of identifying, evaluating, approving, documenting or tracking contract processes. Get in touch today to find out more about how Contract Bee can streamline your NEC contract management.
