In Part 2 of our series covering communications in NEC Contracts, John Elven, Senior Consultant at Arbicon, discusses the importance of maintaining good communications under the requirements of NEC Contracts as a means of promoting dispute avoidance, focussing on NEC 4 clause 13
This article continues to consider the importance of maintaining good communications in accordance with the requirements of NEC Contracts to promote dispute avoidance.
Having reviewed NEC 4 clauses 13.1 to 13.3 in Part 1, we have already considered (amongst other things):
• The requirement for all communications to be in writing.
• The need to use the communication system specified in the Scope.
• The need to provide prompt replies to a communication.
What can be expected concerning the reply to communication?
NEC 4 clause 13.4 then proceeds to explain what can be expected concerning the reply to communication. It states: “The Project Manager replies to a communication submitted or resubmitted by the Contractor for acceptance.
“If the reply is not acceptance, the Project Manager states the reasons in sufficient detail to enable the Contractor to correct the matter. The Contractor resubmits the communication within the period for reply taking account of these reasons. A reason for withholding acceptance is that more information is needed in order to assess the Contractor’s submission fully.”
In NEC 3, this clause required that “If his reply is not acceptance, the Project Manager states his reasons…”. Unfortunately, NEC 3 did not specify the extent to which the Project Manager should explain his reasons for rejection.
However, NEC 4 has rectified this by requiring the Project Manager to state its “reasons in sufficient detail to enable the Contractor to correct the matter.”
Reasons for withholding acceptance
Of course, the interpretation of ‘sufficient detail’ is likely to be subjective in practice, but it is hoped that in the NEC’s ‘spirit of mutual trust and co-operation,’ the Project Manager will provide enough information to enable the Contractor to ‘resubmit the communication’ (‘within the period for reply’) and to take into consideration the Project Manager’s reasons for rejection.
Equally, noting that clause 13.4 also states that a ‘reason for withholding acceptance’ could be because the Project Manager needs more information, it makes sense that the Contractor should be expected to provide enough information so that the Project Manager can accept its submission.
An example of this is concerning the provision of a quotation by the Contractor for a compensation event. If that compensation event is likely to impact upon the ‘programme for remaining work,’ NEC 4 clause 62.2 requires that the Contractor ‘includes the alterations to the Accepted Programme in the quotation.’
If the Contractor has neglected to provide any evidence to support its claim for additional time, or to substantiate its actual/anticipated losses (ref. Defined Cost), it makes sense that the Project Manager could reject the quotation and request further information.
The consequent delay in accepting the quotation will likely affect the Contractor’s cash flow and could have implications concerning future programmes being offered for acceptance. However, if the Contractor provides the information the contract requires, this should enable the Project Manager to accept the ‘communication’ promptly and thereby alleviate the Contractor’s concerns ref. cash flow, etc.
In respect of the ‘timing’ for ‘replies to a communication,’ and further to my comments in Part 1 of this article (which considered the ‘period for reply’ referred to in NEC 4 clause 13.3), clause 13.5 goes on to state:
“The Project Manager may extend the period of reply to a communication if the Project Manager and the Contractor agree to the extension before the reply is due. The Project Manager informs the Contractor of the extension which has been agreed.”
This would appear to be reasonable where, for example, additional time may be required to fully understand and incorporate numerous changes to the scope.
Examples of the required certification related to payment
NEC 4 clause 13.6 deals with issuing certificates by the Project Manager and the Supervisor and specifies to whom these should be issued – examples of the required certification related to payment (clause 51.1), and Defects (clause 44.3).
Another example relates to the Project Manager having 1-week within which to certify Completion after the ‘date of Completion’ (clause 30.2; noting that this also applies to Sectional Completions – see clause X5.1). In this case, the Project Manager issues the certificate ‘to the Client and the Contractor.’
Another important requirement in respect of communications is provided at NEC 4 clause 13.7, where it states:
“A notification or certificate which the contract requires is communicated separately from other communications.”
In a previous article, NEC Contracts – Getting it Right from the Start, I noted the importance of acting ‘as stated in the contract.’ As such, it is imperative that NEC users provide all notifications and certificates that the contract requires. For example, a notification for an early warning matter is clearly different to the notification needed for a compensation event and hence these should be communicated separately (NEC 4 clauses 15.1, 61.1 & 61.3 refer).
This article would not be complete without mentioning NEC 4 clause 13.8 which states that:
“The Project Manager may withhold acceptance of a submission by the Contractor. Withholding acceptance for a reason stated in these conditions of contract is not a compensation event.”
Having already considered a basis for withholding acceptance (see clause 13.4 above), this clause makes it clear that the withholding of acceptance for a reason stated in the contract is not a compensation event.
However, NEC 4 clause 60.1(9) does include a compensation event where, ‘The Project Manager withholds an acceptance… for a reason not stated in the contract.’ [Emphasis added.] It is incumbent upon the Project Manager to ensure that there is a sound contractual basis for rejecting any of the Contractor’s submissions.
I hope that you have enjoyed my brief overview of NEC 4 clause 13, and that you have gained a greater appreciation of the importance of maintaining good and timely communications to ensure that you protect your position and avoid disputes.
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