On an NEC4 project, people often recognise a risk before they know its full effect. Early warning gives them a way to bring it to the other party’s attention while there is still time to consider a response.
What an early warning does
An early warning brings a matter to the other person’s attention while there is still an opportunity to avoid or reduce its effects. Under the NEC4 Engineering and Construction Contract (ECC), the Contractor and Project Manager use the process to identify problems, consider possible responses and agree who will take action.
The notice does not decide who is liable or establish a right to additional payment. It gives the team an opportunity to deal with the matter before its consequences become more difficult or expensive to manage.
Who must notify, and when?
Under clause 15.1, the Contractor and Project Manager must notify each other as soon as they become aware of a matter that could:
- Increase the total of the Prices.
- Delay Completion.
- Delay meeting a Key Date.
- Impair the performance of the works in use.
The Contractor may also notify a matter that could increase its total cost. Selected secondary options can add further early warning requirements.
The obligation is not confined to the Contractor. A Project Manager who becomes aware that the Client may be unable to provide access or information when required also needs to consider the consequences and give early warning.
Do not wait until the cost or delay can be calculated. A credible concern that the matter could have one of the stated effects is enough to require attention. The team can investigate the detail after notification.
Clause 15.1 does not require an early warning for a matter already notified as a compensation event. That does not remove the need to manage its effects.
What should the notice say?
A useful notice identifies the matter, explains its possible effect and gives the recipient enough information to act. Keep it specific. “Procurement risk” says little; identifying the item, the delivery problem and the work affected gives the team something to investigate.
For example, a notice might say:
The pump supplier has advised that delivery may be three weeks later than planned. The pumps are needed before commissioning can start, and the delay could affect Completion. The supplier is checking whether partial delivery is possible. An early warning meeting is requested to consider alternative supply and changes to the installation sequence.
There is no need to turn that notice into a detailed claim. Include a proposed response if one is available, but do not hold back the warning while searching for a solution.
Send the notification separately from other communications, using the contractual communication arrangements. A conversation on site may help resolve the problem, but it does not replace the required notification.
What happens after notification?
The Project Manager records the matter in the Early Warning Register. The Contractor and Project Manager use the early warning meeting process to consider responses and agree action. Urgent action should not wait for the next scheduled meeting.
If the response requires a change to the Scope, the appropriate instruction is still needed. Recording an action does not replace it. How the project coordinates these decisions with its other risk registers and specialist teams is addressed in NEC4: Integrating Early Warning with Project Risk Management.
Is an early warning a compensation event?
No. The early warning process deals with managing the matter. The compensation event process determines whether an event changes the Prices, Completion Date or Key Dates.
A supplier’s delivery problem may need an early warning even though it remains the Contractor’s risk. Conversely, a Client instruction changing the Scope may require a compensation event notification. Giving an early warning does not satisfy the separate requirements for notifying a compensation event.
The team does not need to agree liability before considering how to reduce the effects. Giving a warning is not an admission of responsibility, and discussing a solution does not by itself settle entitlement.
What if a warning is not given?
The immediate loss is the opportunity to act. Alternative supply may no longer be available, another sequence may no longer be practicable, or work may have to stop.
There can also be a contractual consequence. Where the Contractor fails to give an early warning that an experienced contractor could have given, and the Project Manager states this when instructing quotations, the compensation event is assessed as though the warning had been given. That can reduce the assessment to reflect effects that timely action could have avoided.
This is not an automatic rejection of the compensation event or a standard deduction for a missing notice.
Before issuing the notice
Before issuing a warning, check that it identifies the matter, its possible effect and the attention needed. Notify through the contractual arrangements without waiting for a complete solution or a calculated claim.
Once the warning has been issued, assign responsibility for the response. The project risk management article addresses the organisation of registers, meetings and follow-up actions.
