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1.1 Introduction
Early warnings are covered within the Engineering and Construction Short Contract (ECSC) by Clauses 16.1 and 16.2.
Early warnings are an essential and valuable risk management tool within the NEC3 contracts. The ECSC obliges the Contractor and the Employer to notify each other as soon as either becomes aware of any matter which could affect the project in terms of time, cost or quality, bringing into the open as early as possible any matter which could adversely affect the outcome of the contract.
Under Clause 16.1 the Contractor and the Employer give an early warning by notifying the other as soon as either becomes aware of any matter which could:
ā¢ increase the total of the Prices.
ā¢ Increase the Price of the works.
ā¢ ā¢ delay Completion.
ā¢ Delay Completion of the whole of the works.
ā¢ ā¢ impair the performance of the works in use.
ā¢ Have a qualitative effect on the finished project.
This sometimes causes confusion, but let us look at an example. On an Employer-designed project, the Contractor is instructed to install a particular type of pump. If the Contractor knows from experience that that pump would probably not be sufficient to meet the Employerās requirements once the works are taken over, then the Contractor should give an early warning stating his concern.
The Contractor may also give an early warning by notifying the Employer of any other matter which could increase his total cost.
One could query whether a matter which could increase the Contractorās cost, but not affect the Price, should be an early warning matter, or for that matter, whether it should be anything to do with the Employer, particularly if the Contractor is not looking to recover this additional cost through the contract, but the words are āthe Contractor may give an early warningā, so he is not obliged to do so.
Under Clause 16.2, after an early warning has been given, the Parties have an obligation to discuss the problem and decide how best to resolve, avoid or reduce it.
The Parties are expressly not required to give an early warning for which a compensation event has previously been notified.
The early warning procedure obliges people to be āproactiveā, dealing with risks as soon as the Parties become aware of them, rather than āreactiveā, waiting to see what effect they have, then trying to deal with them when it is often too late. Encouraging the early identification of problems by both Parties puts the emphasis on joint solution finding rather than blame assignment and contractual entitlement.
It is one of the most important and valuable aspects of the contract and it is perhaps surprising that, whilst some other contracts refer to an early warning process, only the NEC contracts set out in clear detail what the parties are obliged to do, with appropriate sanctions should the parties not comply (Clauses 61.3 and 63.5).
1.2 Notifying early warnings
The contract requires (Clause 13.1) that all communications under the contract must be in writing, so early warnings should not be a verbal communication such as a telephone conversation. If the first notification is a telephone conversation, or a comment in a site meeting, it should be immediately confirmed in writing to give it contractual significance (Figure 1.1).
There are some key words within the obligation to notify:
ā¢ āThe Contractor and the Employerā ā no one else has the authority or obligation to give an early warning. The Employer is therefore notifying on behalf of himself, and anyone who represents him within the contract, e.g. Designers. The Contractor is notifying on behalf of himself, his Subcontractors, his Designers (if appropriate), and again many possible others whom he represents under the contract. Early warnings should be notified by the key people acting for the Parties.
Employers are often criticised for seeing early warnings as something the Contractor has to do, and in fact most early warnings are actually issued by the Contractor. However, the Contractor and the Employer are obliged to give early warnings each to the other, so it is critical that Employers play their part in the process.
As an example, if the Employer becomes aware that he will be late in delivering some design information to the Contractor, he should issue the early warning as soon as he becomes aware that the information will not be delivered to the Contractor, not wait and subsequently blame the Contractor for not giving an early warning stating that he has not received the information!
Figure 1.1 A typical example of an early warning notice template.
ā¢ āAs soon asā ā means immediately. There are a number of clauses within the contract that deal with the situation where the Contractor did not give an early warning. Whilst the party who gives the early warning must do so as soon as he becomes aware of the potential risk, the other party should respond as soon as possible and in all cases within the period for reply in Contract Data Part 1.
ā¢ āCouldā ā not āmustā, āwillā or āshallā. Clearly there is an obligation to notify even if it is only felt something may affect the contract, but there is no clear evidence that it will.
The Employer enters early warning matters in the Risk Register. As stated previously, early warning of a matter for which a compensation event has previously been notified is not required.
It must be emphasised that early warnings are not the first step towards a compensation event, as is often believed. Early warnings feature in a completely separate section of the contract and, in fact, the early warning provision is intended to prevent a compensation event occurring or at least to lessen its effect. It can also be used to notify a problem which is totally the risk of the notifier. It is also worth mentioning that early warnings are a notice of a future risk, not a past one.
The Parties are not required, nor is it of any value, to notify a risk that has already happened.
Box 1.1 Example
One week before the Completion Date on a small refurbishment project, the Contractor is informed by his electrical Subcontractor that they have insuf...
