The latest edition of the New Engineering Contract has come under fire from employers and contractors, but it is the project manager that ought to worry
Project Managers Beware! There has been lots of comment about the New Engineering Contract's new edition. It has usually been from the employer's point of view. Occasionally the contractor manages to get a word in. Nobody seems to worry about the project manager, but the project manager has plenty to worry about.
It has become a mantra that the New Engineering Contract is different. It is not so much about defining responsibilities so that everyone knows which party gets the blame when things go wrong. Instead, it provides a framework for efficient management.
There is a real concentration on anticipation and problem-solving before a difficulty occurs. When it does happen, the problem is sorted immediately and not left to be taken into consideration in the final account.
That sounds good, but it is not easy to achieve. Everyone involved has to play a part in thinking ahead, communicating, replanning and reprogramming. It is difficult enough for the contractor that has to get on with the job today and look hard at what might happen next month. What's more, if it wants to be paid for the little problem last week, which of course wasn't its fault, it has to work out the full cost (time and money) now because otherwise it might not get paid at all.
But it is the project manager that has to be the real superstar. Nearly all the machinery of this management-focused contract involves it. The project manager has been retained by the employer, which has agreed (in clause 10.1) that it will act as stated in the contract. If the project manager does not act as stated – and exactly as stated – the employer will be in breach of contract, and will probably have to pay something extra to the contractor. Some employers may give the project manager a pat on the back and say something like "Never mind, lad, you did your best", but others may send a bill.
If the project manager does not act exactly as stated in the contract, the employer will be in breach of contract
Mr Justice Jackson had a quick look at all this in the CTRL case last May. Costain and its fellow consortium members thought Bechtel, which was acting as project manager, was being particularly mean in working out how much it should be paid, and sought an injunction. This was an urgent injunction hearing so nothing final was decided, but the judge clearly thought the project manager should be impartial, and that if the project manager was unduly pro-employer, the employer might be in breach. Instead of protecting the employer, the project manager might be stacking up a substantial claim to be made by the contractor.
The third edition of the NEC has introduced some more things for the project manager to worry about. In particular, if the project manager fails to respond to a contractor's quotation for a compensation event, the employer may find itself paying whatever the contractor claimed. These are some of the ways that the project manager can set itself up for a claim from the employer:
- Accepting a contractor's programme that doesn't meet the employer's requirements
- Failing to give early warning to the contractor of a potential problem
- Allowing the contractor to use an unsuitable form of subcontract, resulting in the insolvency of the subcontractor and long delays
- Wrongly assessing the sum due to the contractor so that huge legal fees are spent in adjudication
- Failing to notify the contractor of a compensation event involving a change so that it was able to claim long after the end of the job.
- Failing to reply to a contractor's quotation for a compensation event so that the employer had to pay way over the proper value or give an unrealistic extension of time
John Redmond is head of construction at solicitor Osborne Clarke in Bristol