ResoLex Roundtable Round-up: The impact of NEC4 for collaboration on projects

ResoLex Roundtable Round-up: The impact of NEC4 for collaboration on projects

Barry TrebesFRICS, FAPM, FInstCES

Barry is a Chartered Surveyor, initiator of the first web-based NEC management system in 1990. He co-authored NEC Manuals; “Managing Reality”, NEC3 Role of the Supervisor and NEC3 Role of Project Manager and the BSi published document, Project Management in the construction industry.

This month’s round table was designed to encourage an exploration of the use of the NEC4 contract as a tool for collaboration. Any summary of any discussion on construction contracts is fraught with danger in that the commentator can either over-elaborate or alternatively completely miss a critical point. We offer the following as an attempt to find the right balance of the evening’s discourse.

The aim of the NEC suite is that of taking a contract off the shelf and add the detail. Within the off the shelf contract, the promotion of collaborative behaviour is a given. The overriding message from NEC4 is that contracts work when people understand the risk within the contract. Drafted for use anytime and anywhere with a mix of options designed to be project-specific NEC4 is evolution not revolution. The overriding principle is one of agreeing change as the project proceeds to a timescale to give certainty of outcome. The contract form is demanding in terms of “doing things”, particularly in the following areas:

• Better management practice
• Good risk management processes
• Collaboration
• Alliancing
• Good communications
• Change management

Of key importance are the ‘early warnings’ for risk management and change management with a contract expectation that to get the best out of its use there will be an investment in supporting resources both in terms of people and systems. Early warnings are important in focussing on communications so that early warnings are “scouting ahead looking for risks”. The expectation is that the early warnings register will interface as an EWS tool for the early warning of risks to be fed into the risk register. The prevailing ethos of NEC4 is one of looking ahead and forecasting rather than forensic analysis. This is relevant in the areas of BIM and ECI with options reflecting specific project circumstances.

The overriding operating principle of the use of Z clauses is “What is the mischief you are trying to deal with?” There is an attempt to pre-empt the misuse of Z clauses where project specific “boilerplate” drafting attempts to change the contract into something it is not.

There is a refinement of processes with the intention of interfacing with project management systems particularly around early warnings systems (EWS), programming, contractor’s proposals, and proposed instructions.

Encouraging collaborative behaviour

NEC4 Alliance Contract, intended to unite teams, launches at the NEC Conference on 20th June. Again, the key question is “Can any contract force you to collaborate?” While the contract is important, collaboration comes back to better management.

There are also improvements around the status and use of contractor’s proposals and throughout the contract clarifications and simplifications around the schedule of cost components.

NEC4 also introduces the consequence of inaction through sanctions, be they from the project manager or the contractor. Changing circumstances need supporting by risk EWS, programme forecasting and continuous final assessments.

Risk allocation is vitally important in drafting contracts. There needs to be a better fundamental alignment of risk allocation under all contract forms. In putting together and delivering contracts use of better risk identification is needed with more open allocation of risk between client risk and contractor risk. In NEC4 project specific attention needs to focus around clauses 80.1 client liabilities and 81.1 contractor liabilities. Early warnings should find opportunities to mitigate risk, particularly relating to supporting BIM, dispute negotiation and dispute avoidance which all impact on financial agreement.

There is a view in some quarters that without the right working processes and systems, too much collaboration activity exhausts employees and saps cooperation. Questions are now asked around whether there is collaboration overload. The distribution of collaborative work is often lopsided. Effective collaboration needs rewarding. One solution is to develop a series of KPIs that will stimulate collaborative behaviours on a group basis.

So, whilst NEC is good on processes, there is a question as to whether any form of contract can shape human behaviour other than to put constraints that lead to transactional project culture. Questions posed in the room included:

•How this might change?
•What is there that is complimentary to risk and collaboration?
•What is the wisdom to get collaboration to work?

The emerging theme was that investment is key both in terms of resources in the form of systems to support the contract and coaching and mentoring to encourage parties to work together. Collaborative intelligence presupposes a willingness to collaborate and share and knowing how to share. This means understanding team dynamics and using the right tools and the right technology to support aspirations. This in turn means proper communication and using the right supporting processes.

People tend to use the contract form they know. Organisations have invested a great deal in their preferred contract forms and this gives familiarity. NEC4 is gaining influence and take up. However the move from NEC3

will take time because of the previous worthwhile investment in the NEC3 form. There are no concerns as to take up and it is envisaged over time that evolution will move from NEC4 to NEC5. Ultimately theclient decides on the form of contract. Any effective collaborative contract needs an investment in people and systems to support its use.

The bottom line was that irrespective of the form of contract chosen, sharing information and communicating give better outcomes.

Tony Llewellyn, April 2018

ResoLex Roundtable Round-up: Tackling the barriers to collaboration

ResoLex Roundtable Round-up: Tackling the barriers to collaboration

How do we (finally) turn words into action?

Don Ward, Chief Executive of Constructing Excellence

Don began the session with a statement that the mission, not just of CE but also the people in the room should be to “positively disrupt the industry delivery process to transform performance.” He pointed to the accumulating evidence gathered over the past 20 years of projects where a collaborative approach between the client contractor and supply chain have produced more successful outcome than would have been achieved through a typical transactional approach.

Apart from the high profile ‘mega projects’ such as BP Andrew, Heathrow T5, London 2012, Crossrail and Thames Tideway, Constructing Excellence have collected data from over 500 projects from all sectors, regions and sizes. This data shows that projects can be delivered 10 –20% cheaper and produce better client outcomes using some form of collaborative arrangements such as partnering, alliances or other mechanisms, where the client and supply chain team work as an integrated unit.

So if the evidence there to prove that a collaborative approach works, the obvious question is “why don’t we do it?”

Don showed a slide setting and some of the barriers which included:

• Lack of crisis to stimulate change at an industry-wide level.

• Low awareness of the potential benefits, particularly in key advisors such as quantity surveyors and project managers.

• Lack of a standardized approach by clients.

• No continuity of pipeline.

• Poor leadership and lack of understanding of collaborative team coaching.

• Poor training and development.

• Focus on initial cost rather than whole life value.

• Obsession with the lowest price tendering.

•Failure to keep project teams together.

• Strong vested interests in the status quo

There was a lively debate in the room as different members of the audience voiced their own views on the factors which discouraged collaborative engagement.

Projects are complex

An interesting point was made that the true design process was rarely achieved solely by the architect or engineer. On complex projects, the evolution of the final design also involves the contractor, the specialist sub-contractors and others. Lowest price tendering tends to ignore this important reality.

Another guest commented that simply changing the focus within a client organization from outputs to outcomes nudged their project teams to stop looking solely at their own workload and instead think about their contribution to the whole.

Don identified six critical success factors for collaborative working:

• Early supply chain involvement

• Selection by value, not lowest tender

• Common processes and tools

• Measurement of performance

• Long-term relationships

• Aligned commercial arrangements

These factors provide any practitioner with a framework to build a collaborative relationship.

The session closed with a three-stage formula for transformation:

1. Change the Delivery model

2. Change the Procurement model

3. Change the business model

I would highly recommend that you have a look at the slide deck Don used, as there is some very useful information. Don is an accomplished presenter and he kept us all fully engaged for 90 minutes. Reflecting on the session, I have a clearer perspective on the progress made by the ‘collaboration’ movement and am looking to incorporate some of Don’s thoughts and ideas into ResoLex’s working practices.

Tony Llewellyn, March 2018