I receive regular feedback from construction firms regarding the operation of NEC early warning notices. They normally comprise one or more of the following comments:
- "I always issue early warning notices, whatever the problem, to ensure I get a compensation event."
- "The other side issues early warning notices to establish it is my fault and I have to fix it immediately."
- "I am wary of issuing early warning notices because the other side uses them against me in the event of a dispute."
- "Everyone on the project ignores early warning notices."
It is clear that there are still some misconceptions about NEC early warning notices.
Risk management tool
Early warning notices have been a feature of NEC from the start – their inclusion separated NEC from the rest of the contractual pack.
They were introduced as a risk management tool because it is common sense that dealing with risk – wherever it comes from – as soon as it becomes apparent is far cheaper than trying to manage the risk and/or its consequences much later on.
Clause 16 of most NEC contracts makes clear the circumstances in which either party would be expected to issue an early warning notice.
An early warning notice must be issued as soon as a party becomes aware of 'any matter' which could affect the total of the prices, could delay completion or a key date, or impair the performance of the works in use.
Also, the contractor may give an early warning notice relating to any matter which could increase its total cost. Early warning matters should be entered on the risk register.
Mutual benefit to parties
Early warning notices should not be issued for the purpose of allocating responsibility or liability. A party attempting to do this could be failing to act in the NEC clause 10, 'spirit of mutual trust and co-operation'. When dealing with matters which are the subject of an early warning notice, the emphasis should be on agreeing the steps required to address the matter rather than allocating blame.
Certainly ignoring early warning notices is a dangerous game. Apart from a possible breach of clause 10, any compensation event that may follow is likely to be costlier to the client than if the matter had been dealt with at the outset.
But remember there is no direct link between early warning notices and compensation events. An early warning notice might not lead to a compensation event and a compensation event might occur without an early warning notice.
Some of the confusion around early warning notices can be accounted for by people having grown up within an adversarial contracting culture. Such culture should be discarded when using NEC.