Partner Article

NEC3 and the Olympics

With Watson Burton LLP Law Firm

The Beijing Olympics have now taken place and, before we know it, the London 2012 Olympics will be looming. Work is already underway in order for everything to be ready on time and Olympic sites are beginning to take shape. However, delays are inevitable. In fact (with 4 years to go) we are already hearing that building is not going according to plan; the Olympic Stadium is now due to be finished in April 2011 (2 months late) and the Aquatic Centre is now due for completion in August 2011 (4 months later than planned). Should any further delays be encountered it could prove disastrous.

Apparently, plans are already in place to fit out the venues whilst construction work is being finished. It is therefore vital that contractors have workable contracts in place and a mechanism for resolving any disputes as soon as they arise.

The UK Olympic Delivery Committee has the NEC3 suite of contracts as its preferred contract for the construction of the Olympic facilities, which are estimated to cost £2.4 billion to construct.

The NEC3 contract was introduced in July 2005. However, many contractors involved in this project will be facing it for the first time. If firms are not familiar with the NEC3 terms, they face losing vital contracts and, even worse, substantial losses if problems later arise.

Early Warnings

The Contractor and the Project Manager have to give early warnings as soon as they become aware of anything which may give rise to a delay, price increase etc. By its very nature, an ‘early warning’ is not necessarily a clear indicator that a delay or increase in price will follow. Therefore, the number of early warnings could soon reach double (even triple) figures once work begins. Each early warning has to be reviewed by the Project Manager and this can place a lot of pressure on the Project Manager to deal with each as efficiently as possible.

Compensation Events

NEC3 contains some specific requirements regarding compensation events, which are worth paying attention to, in order to avoid forfeiting the right to make a claim (with eight weeks being the ultimate cut off point to notify an event after you become aware of it).

As a result of the eight week time limit, the Contractor will be under pressure to notify all potential compensation events regardless of his own opinion on whether the Project Manager needs to be made aware or not.

The Project Manager will have to respond to each potential compensation event and this could lead to a revised programme being put in place (and further possible delays).

The process of notifying and subsequently dealing with a compensation event is complex and things can quickly get on top of a Contractor unless he has a substantial team to support him. It is crucial that the Contractor seeks advice on the NEC3 contract, so he is clear on his obligations from the outset.

Acceleration Procedures

To add to the problems, it is likely that accelerated programmes will be used more than is usual in relation to Olympic contracts as there is an immovable deadline, in that 2012 has to be met. There is no alternative. Contractors will have very little flexibility when it comes to completion dates. As such, a large team (who are fully versed in NEC3) will be needed to deal with any issues and resolve them before 2012.

The consequences of poor programming and delayed responses could be very serious. Unless everyone, from the Contractor to the Project Manager, is up to speed on NEC3 it may not only be those fitting out the venues who have to share space with the Contractors but spectators could see more than they bargained for when they turn up to take their seats in 2012.

If you have any queries relating to this article, or any other construction or engineering matter, please contact Claire Pringle on 0191 244 4316 or email claire.pringle@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .