compensation event notice

NEC3 Expert View: Whats the difference between a compensation event notice and an early warning notice?

Our NEC3 expert Steven Evans looks into a subject that’s been well discussed by many NEC3 users, whats the difference between a compensation event notice and an early warning notice? Here Steve gives his experienced thoughts on the matter.

An early warning notice is a notice in respect of any event or risk which may happen, will happen or has happened and which could:

  • Increase the total of the Prices
  • Delay Completion
  • Delay meeting a Key Date
  • Impair the performance of the works in use or
  • Increase the Contractor’s total cost.

For the first four items, notification is mandatory (with sanctions if notification is not made) by either the Project Manager or the Contractor. The final item is optional and notification can only be made by the Contractor.

Once notified, the event is added to the Risk Register and can be discussed in a Risk Reduction Meeting or any other forum with the end objective to avoid or reduce the risk.

An event/risk identified in an early warning notice, or the action taken to avoid or reduce the risk, may be a compensation event.

A compensation event notice is a notice in respect of an event which will happen or has happened and is one of the events listed at clause 60.1.

Notification is mandatory (with sanctions if notification is not made) by either the Project Manager or the Contractor. The Project Manager is only able to notify those compensation events which arise from the Project Manager or the Supervisor giving an instruction, issuing a certificate, changing an earlier decision or correcting an assumption and should notify those in the first instance.

The Contractor can notify any compensation event including those that should have been notified by the Project Manager but were not. If the Contractor does not notify an event which is not one that the Project Manager can notify within 8 weeks of becoming aware of it, then he loses his right to a change in the Prices, the Completion Date and/or the Key Dates.


Our NEC3 Expert, Steve Evans, has helped us develop the most intuitive and comprehensive cloud based software package currently available on the market. If you’d like to find out more, please contact us.

bradford royal infirmary

NEC3 Contract Projects: Bradford Royal Infirmary

We recently wrote about the prolific NEC3 contract managed Great Ormond Street Hospital project as part of our NEC3 contract managed project series of articles. In this instalment of the series, we will be looking into another NEC / NHS project which posed an even more complex managerial process – The New Hospital Wing at Bradford Royal Infirmary.

Bradford Royal Infirmary: Timescale and Cost

The Bradford Royal Infirmary project was started in May 2015, with the main contract being awarded to BAM Construction at a value of £20.3m through the Procure21+ framework; the entire development estimated at £28m. The final touches were complete over the past few weeks, drawing a close to the 80 week construction programme. The new wing required 7500 tonnes of earth to be removed and utilised 250 construction workers over the course of 18 months.

Key Numbers

The new development has provided the hospital with a further 80 beds and 52 toilets, as well as 35 new disabled car parking spaces. There are 3 new lifts installed, 279 new rooms over a staggering 6580m2 of new floor space!

For the construction numbers fanatics: the project used 4500m2 of new roofing, 3000m3 of concrete and 725m2 of glass! Not a small project by any means, especially when you consider the following…

Significant Obstacles

Most NEC3 managed projects always present a number of hurdles to overcome when adhering to the requirements of the client, and this project in particular required an extremely precise style of NEC management.

During the course of the project, the construction was taking place alongside live care wards – an extremely high risk environment. The close proximity to these live care wards posed a potential threat to the running of the day-to-day operations. As the new wing links up directly to the existing hospital on levels two and three, the margin for error was minimal.

A quote from Matt Garnett, a BAM Construction manager about the Bradford Royal Infirmary project: “It is a challenge. The structure we are building is almost surrounded by live hospital. We can only access from one elevation and that impacts the work we are carrying out.”

The Contract

The NEC contract type assigned to the Bradford Royal Infirmary project was the Traditional NEC3 option B. The main contractor was BAM construction, the UK based construction and building design contractor. The client was Bradford Teaching Hospitals NHS foundation Trust as part of a £75m investment on improving patient care in their hospitals. With the contract value at £20m on an 18 month timeframe, the project was delivered on time and on budget, being complete early this year.


We are the experts in contract management software for NEC3 contracted projects such as this project. If you would like to find out more about how we can help you deliver your NEC contract managed project on time and on budget with our specialist software, please get in contact for a chat.

NEC3 Expert

NEC3 Expert View: Under NEC3 ECC, is the Project Manager obliged to issue a certificate if the payment is zero?

Each month, we’ll be asking our NEC3 expert, Steven Evans, to tackle a specific problem put forward by one of our clients. This month he looks at an issue on the NEC3 ECC contract, is the Project Manager obliged to issue a certificate if the payment is zero?

At each assessment date, the Project Manager assesses the amount due (clause 50.1), which is the gross amount of the work done (the Price for Work Done to Date), along with other amounts to be retained from or paid to the Contractor (clause 50.1). There is no obligation under those clauses to communicate the PM’s assessment to the Contractor or the Employer.

Clause 50.4 requires the PM to take account of any application for payment made by the Contractor; the remainder of that clause requires the Project Manager to communicate the details of his assessment to the Contractor. It is unclear whether that obligation applies only in circumstances where the Contractor has made an application, but even if it applies in all circumstances, there is no obligation to inform the Employer of the amount assessed.

Within one week of the assessment date, the PM certifies a payment (clause 51.1). As ‘payment’ suggests a sum of money is to be transferred from one party to another, the obligation appears to not apply to zero amounts.

But is that the case?

Firstly, the next part of clause 51.1 effectively defines what a payment is; the first payment is the amount due and later payments are the change in the amount due since the last certificate. Setting aside the first payment, we can replace the first part of clause 51.1 with: the Project Manager certifies the change in the amount due since the last certificate. Now it seems clearer; the PM certifies whether the payment is positive, zero or negative, as he is required to certify the change.

Secondly, no-where in section 50 is the PM required to inform the Employer of the amount due. For that, we must turn to clause 13.6 which requires the PM to issue any certificate to the Contractor and the Employer. Accordingly, it is only by way of the certificate that the Employer is informed of the outcome of the PM’s assessments. On that basis, the certificate must be issued for every assessment.

Thirdly, the remainder of clause 51.1 also assists wherein it refers to a payment being made by the Contractor to the Employer if the change reduces the amount due and vice versa for ‘other payments’. If ‘other payments’ was limited only to increases in the amount due, then presumably the Contract would say that. By its reference to ‘other payments’ suggests there is more than one, i.e. a payment of zero or an increase in the amount due.

Finally, clause 51.3 provides for interest payment if an amount due is corrected in a later certificate. In those circumstances, the interest period runs from the date of the incorrect certificate to the date of the certificate making the correction. On that basis, if a previously assessed payment of zero was later found to be incorrect, then the Contractor would be deprived of his claim of interest if a zero certificate had not been issued.

So, to answer the question, the PM is obliged to issue a certificate, even if the payment is zero.

A footnote, in countries where payments are regulated by statute (such as the UK by way of the Housing Grants, Construction and Regeneration Act 1996, as amended), the PM may well be compelled to issue a certificate in any event.


Our NEC3 Expert, Steve Evans, has helped us develop the most intuitive and comprehensive cloud based software package currently available on the market. If you’d like to find out more, please contact us.

Great Ormond Street Hospital

NEC3 Contract Projects: NHS – Great Ormond Street Hospital

In a recent article in this series, we looked into the Thames Tideway Tunnel – one of the biggest construction projects in Europe managed with an NEC3 contract. In this article we will be looking at one of the most prominent and talked about NEC3 contract managed redevelopment construction projects currently in the NHS; The Great Ormond Street Hospital.

The History

The Great Ormond Street Hospital is quite possibly one of the most prolific hospitals in the world. It specialises in children’s health, opened on 14th February 1852 with only 10 beds, and perhaps most famously received the copyright to Peter Pan in 1929 which has provided a significant amount of funding for the hospital over the years.

Back in 2002, a significant redevelopment of the hospital started, with a total estimated budget of £343m. The purpose of the redevelopment is to aid in delivering treatment in a more comfortable and modern manner, increase the bed capacity, and reduce any potentially unnecessary inpatient admissions.

The Redevelopment

The redevelopment of the hospital is split into four phases, carried out over a 20 year period. At the end of 2016, halfway through this redevelopment, phase 2B, The Premier Inn Clinical Building has been completed, allowing parents to stay close to their children during trying times.

Phase 3A has now started with the construction company Skanska securing a £60m NEC3 contract with the hospital to build the Zayed Centre which will specialise in research into rare diseases in children. Skanska will be responsible for the design, construction and the electrical and mechanical layout of the facility, to be completed in late 2018.

Great Ormond Street Hospital Masterplan

Being only half way through the 20 year redevelopment agenda, the future innovation in the further construction projects for the hospital will become more exciting and intricate. NEC3 contract tenders like the recent one lost by Bouygues after a disagreement with budget and costings, won by Skanska will be very prominent in the construction industry.

The plans for phase 4 of ‘the masterplan’ have already started being discussed, with a total budget of £190m for the final stage a redevelopment. The hospital trust has already published a contract notice in the EU Official Journal for a multi-disciplinary design team and prime contractor for the final stage; a new entrance building of 23,000m2, offering a more friendly and inviting environment for new arrivees.


Keep an eye out for the next in our series of current and prominent NEC3 contracted projects, and if you would like to read more about one, please let us know! If you would like to know more about how we can help with your NEC3 contracted project, please feel free to get in contact for a chat.

If you would like to learn more about the fantastic work at the Great Ormond Street Hospital, or would like to make a donation, you can do so here.

z-clauses-nec3-nec4

NEC3 Z Clauses: What, Why and When?

What is a Z Clause?

NEC contracts are a collection of construction contracts which are designed to actively promote collaboration and partnership between each key stakeholder in a construction project.  As part of the NEC3 contracts, Z clauses were introduced as a form of adding to or amending the standard clauses to make the contract more ‘fit for purpose’. They can be easily incorporated into the NEC3 contract to amend wording and/ or the conditions of the contract to increase the contract’s relevance to the specific project.

Why are Z Clauses Necessary?

As the NEC3 contract is a standardised format, some deem it necessary to make amendments to bring the contract more in line with the specific project the contract is being applied to.

Parties therefore may make the decision to use a Z clause to change a standard clause, adding particular requirements in writing to ensure the requirements of the project are fully and accurately reflected in the contractual agreement.

When Should Z Clauses be Used?

A frequent example of when the Z clause is used would be in the instance of the Employer holding the Contractor responsible for following project-specific codes of practice, regulations, statutes, etc. as these are not included in the standard clauses of an NEC3 contract.

All parties to the NEC3 contract should have a clear understanding of all Z clauses included. Having a transparent understanding of how a Z clause may affect their responsibilities, expectations and how it may change process or procedure throughout the supply chain.

Potential Z Clause Problems

Even when deemed entirely necessary, Z clauses can, in some instances, add an air of legal ambiguity to NEC3 contract management. Modifying standard clauses of the contract offers up an increased amount of risk as the Z clauses are not always thoroughly checked to ensure they do not completely contradict the contract’s fundamental purpose.

One addition or amendment to a clause may have significant impact on another clause elsewhere in the NEC3 contract. The clauses are designed such that they have an intricate interaction with each other, creating a complex and effective contract to work from. It can be an easy mistake to amend or delete a standard clause which has significant impact elsewhere in the same contract.

NEC4

Looking forward to the impending issue of NEC4, the drafters of the contract have recognised that some Z clauses are used over and over again and, on that basis, have included them as additional standard secondary options. Hopefully this will go some way to avoiding the problems with ambiguity created by poorly drafted Z clauses, however, it is unlikely to greatly impact upon an industry that habitually and regularly amends standard forms of contract to shift risk onto the other party.


Our software is specifically designed to help you make the most of your NEC3 contract, offering insight, guidance and assistance where you need it most. If you would like more information about how we can help, please get in contact today.

NEC3 Contract Projects: The Thames Tideway Tunnel

One of the biggest construction projects in progress currently in London is the Thames Tideway Tunnel. In fact, it is one of the largest construction projects of its type in Europe – a real feat of ingenuity and engineering in UK construction managed under the NEC3 contract.

Due to the vast increase in population in London, the current sewage system is not suitable to handle the significant expansion of the capital city. The sewer system in London is a combined system which combines storm run off water and wastewater all run through the same route. Normally this is fine, but during heavy rain the sewer fills up rapidly, overflowing and spilling out into The Thames river. Not ideal!

Unfit for Purpose

There are a total of 57 combined sewer overflow sites on the Thames which were originally designed to overflow roughly 12 times per year in the 19th Century. Now these ‘CSO’s’ overflow around 60 times per year, polluting the river Thames and resulting of the system being in breach of the EU Urban Waste Water Directive.

The sewers in central London do not serve the entirety of the population within the M25. Many new independent sewers have been built to help manage the population increase. One of the biggest factors in the increase of water flowing through the main sewer is due to the increase of storm water which is a result of the immense increase of paving over of London.

Current & Future Project Plans

The Thames Tideway Tunnel project was started in 2016 and will take approximately seven to eight years until completion. The tunnel will run for over sixteen miles and have a diameter of twenty-four foot. It will run from Acton at below 98ft through to Abbey Mills at 230ft. The sheer scale of the size and depth makes this one of the most ambitious projects in Europe.

The tunnel will intercept the water heading for 34 of the CSOs before it overflows into the river. Instead of flowing straight into the river, it will be stored in ‘The Super Sewer’ to the be pumped into Beckton Sewerage Treatment Works. Here it will be turned into clean water and then released into the river when it is safe for the environment.

The total cost of the the Thames Tideway Tunnel project is estimated to be around £4.2Bn. Thames water customers will be footing the bill for the sewer improvements with an expected rise in their yearly bills of up to £80 per year by 2020. The government has provided a financial guarantee in the event of significant unseen costs, but the tunnel will be owned privately by the new company Bazalgette Tunnel Ltd, trading as Thames Tideway Tunnel Ltd.

This is the first article of a series in which we will be looking into the most prominent NEC contract managed projects around the world. If you would like to know how we can help with your NEC3 managed project, please don’t hesitate to get in touch.

The Evolution of NEC3 Contracts: NEC4 is almost here!

Not long ago we wrote about digital transformation in the construction industry on LinkedIn, anticipating the imminent arrival of the next stage in the evolution in the NEC contract suite was about to be announced: NEC4.

NEC4 is designed to be an upgrade on NEC3, using the feedback of NEC3 contracted projects, learning from the best practice of the industry, and designed to specifically aid and support the digital advancements of global communication through all stages of the supply chain.

Here’s our brief overview of what the NEC4 contract suite will look like:

The main improvements are as follows:

  • Improved delivery, better value and greater certainty.
  • An increased amount of flexibility.
  • Based on user experience and industry best practice.

The new NEC4 suite of contracts will be officially launched on 22nd June 2017 at the NEC Users Group Annual Seminar in London. The event will collate all of the contract designers to be able to deliver a comprehensive view on the main benefits and changes.

The main benefits of NEC4 will be:

  • Improved Risk Opportunity and Risk Management.
  • Provision for BIM and earlier contractor involvement.
  • Reduced potential for problems.
  • Better contract administration – cutting administrative costs.
  • More streamlined processes and updated definitions.

There will be two new contracts joining the NEC family suite:

  1. Design, Build and Operate (DBO) : This will allow the design, construction/ maintenance to be included to traditional design and build.
  2. Alliance Contract (ALC) : This is a multi-party contract which will allow for an integrated delivery team within one contract in which all parties will share client objectives as well as sharing risk and reward.

A Few More Updates:

  1. “Risk Register” will be changed to “Early Warning Register” – great news!! This not only changes the improve the positive connotations of the language used, but also to actively encourage positive events and opportunities to be included in this section.
  2. A new compensation event has been added for the cost of preparing a quote which does not come to fruition.
  3. Additional compensation events will be able to be included without having the need for adding Z Clauses into the contract – more great news! This will minimise the potential ambiguity and miscommunication of additional Z clauses.
  4. “Deemed Acceptance” of the programme if the Project Manager fails to respond, as well as a subsequent reminder.
  5. The requirement to show “implemented compensation events” has been removed from revised programmes, avoiding the previous confusion as to whether non-implemented compensation events should be shown.

The initial changes / improvements seem to be addressing some of the core issues with the NEC3 contract suite to date, and the focus on improved communication especially with the digitisation of global construction businesses can only be a good thing. We’re eagerly anticipating the release of NEC4 and we’re excited to see it in action! We’re working closely with our NEC expert, Steven Evans, to update our specialist NEC contract management software to help make best use of the advancements in the NEC4 contract suite.

If you would like any further advice or help with managing your NEC managed construction projects, please get in contact for a chat about how we can help improve your projects efficiency.

Project Manager Strategies

Successful Project Manager Strategies in Construction

The fundamental attitudes and behaviours of project manager strategies can be transferred to most industries to perform successfully, delivering a project on time and on budget. The difference in construction project management begins with having an in depth and constantly developing knowledge of this unique and complicated sector.

Successful project managers in construction recognise all tools which are available to help them achieve their targets. Whether this be people, strategies or software, identifying the correct tool to aid with each potential issue, and applying the tool is half the battle won.

Below we look into some of these tools, which are a step further than the fundamental project management basics:

1. Strategic Communication

Any reputable list of project manager strategies will agree that communication is key when dealing with all levels of suppliers, subcontractors and anyone else who plays a key part in delivering the project. Establishing the process of types of communication at the very beginning of the project must happen, especially when it comes to NEC contracted projects.

Good news and bad news are just as important as each other, and streamlining the process, making all communication transparent will minimise the amount of information to sift through, making the project run as smooth as possible.

2. Stop, Listen and Ask

When was the last time you saw a successful project manager sat behind their desk? Hopefully, the answer would be never. Even given all of the tools available to help manage projects, the fundamental practice of walking and talking will always be one of the foundations of being able to look at the project objectively.

Being able to physically see problems can help in successfully working to provide the best solutions. Having the opportunity to talk with people about their specific area of skill can also provide new and innovative solutions to problems in the ever-evolving construction industry. Continual education and analysis with the professionals in each field will ensure the best possible outcome for the project.

3. Continually Plan

Planning as a construction project manager should begin well before the project starts, and should continue right through until the very end of the project. Anyone deemed successful will tell you the best way of achieving results is through forming good habits, and making a habit of continually planning is no exception to this rule. As construction projects unfold, many unexpected occurrences will take place which requires continual planning to be a fundamental of construction project management.

4. Automate Reporting

Admin can be the bane of any manager’s working day, and identifying ways of minimising the amount of time your head is stuck in spreadsheets and documents is a must. Every project manager will have to report on progress of the project at regular intervals, meaning a certain degree of admin is necessary.

Being able to use various tools which can collate and present data in clear and concise ways will save a project manager a lot of time when it comes to reporting. Having the ability to access real-time reporting will also allow the project manager to give updates on progress at any time, as well as offering the ability to constantly analyse the progress of the project, making the continual planning behaviour possible.

5. Use Software Management Tools

With the digital evolution well under way, the use of software to help manage process, procedure and almost anything management related is becoming the norm. Part of the problem this can create is identifying the correct software package to best suit your project’s needs. Taking into consideration the vast number of tasks and issues a project manager can face daily can pose the problem of prioritising what can be handled by a program, and what needs hands on attention.

Our specialist NEC3 contract management software is specifically designed to help you with these project manager strategies and to get the best out of your NEC contract managed project, assisting with important aspect of the contract such as early warning management, contract compliance, payment management and a variety of other tasks. To find out how we can help, feel free to get in touch.

construction law expert

Spotlight On: NEC3 & Construction Law Expert – Steven C. Evans

Through the inception, creation and ongoing development of our NEC3 contract management software, we have had the privilege of building a fantastic working relationship with NEC3 & construction law expert, Steven Evans.

Steven has almost 30 years experience in the construction industry, working initially as a quantity surveyor for a multinational contractor, to then progress into a senior quantity surveyor role and work in a number of commercial management positions, giving him, as a construction law expert, an in depth insight into NEC3 contract managed projects.

Practical Experience

Combining his years of practical construction experience with a specialist understanding and qualifications in contract law, Steven moved on to offering consultation and training services in dispute resolution and commercial management to a number of clients throughout the whole of the construction supply chain, especially related to national and international to NEC3 contracts.

Steven now runs his own construction law expert consultancy practice – Steven C Evans Ltd in the UK, and CMC Asia Pacific Pty Ltd in Australia; offering practical legal, contractual, commercial and problem resolution advice and training. With Steven’s unique experience and insight into the construction industry, he has fast become a thought leader and industry recognised authority which many multinational firms have consulted with on a number of construction related issues.

NEC3 Popularity

With the rise and popularity of the NEC3 contract managed projects being put out for tender, the education and awareness of the NEC contract processes, framework and legalities are fast becoming a skill which is vital for most, if not all project managers, contractors and subcontractors in construction to know. Steven believes this skill should be readily available to all project managers and offers affordable, straightforward and concise training to help upskill project managers in construction so they’re not left behind and can deliver their projects on time and within budget.

We have worked with Steven through the design and development of our specialist construction project management software. He has offered valuable insight and knowledge into our NEC3 contract management software, and the rest of our software products, ensuring the product and service we are offering is efficient, reliable and robustly compliant to the latest NEC construction contract legal standards.

This is what construction law expert, Steven had to say about the collaboration:

“I am passionate about efficient and dispute free construction to the benefit of all those involved. In my experience, this can only be achieved by appropriate knowledge, combined with effective management processes and procedures. Without doubt, the contract management software produced by OnDemand Projects makes compliance with the particular process and procedural requirements of the NEC3 suite of contracts simple, straightforward and practical.”

How can we help you?

Whether you’re an experienced or new project manager or contractor in construction, we would strongly advise you become familiar with Steven, and keep an eye out for his upcoming book! Our software is specifically designed to improve communication and keep you on track with time and cost implications with your NEC3 contracted projects. Feel free to get in contact for a chat about how we can help, and perhaps even introduce you to Steven.

contract communication

NEC3 Contract Communication: A Contracted Culture

It’s no secret for any construction manager that communication is one of the most important skills and abilities which you can posses and constantly develop. Successful contract communication in any given project will almost always result in delivering your project on time and on budget, given the right guidelines and procedures are followed.

The NEC3 contracts actively encourage a culture of transparent and effective communication through making clear and concise stipulations about how communication should take place with all key stakeholders involved with the contract.

The specific clauses related to communication contained within in the NEC3 contract are as follows:

Clause 13.1 – This clause requires each form of communication to be in a format which can be read, copied and recorded.

Clause 13.2 – This clause says that a communication will have effect when delivered to the address in the Contract Data or to any other address notified by one party to the other

Clause 13.7 – This clause requires notifications to be communicated separately from other types of communications to ensure no notifications are missed.

Clauses 13.1 and 13.2 are reasonably simple to understand, and straightforward to follow. However, this shouldn’t mean that no verbal communication can take place at all! As with all projects, a certain degree of initiative and common sense must take place to ensure that communications required by the contract are recorded as per clause 13.1, whilst any others can be verbal.

Clause 13.7 is important and shouldn’t be ignored. The NEC3 contracts consider that notifications are so important as to warrant separate communication. A failure to do so  would possibly make the proposed notification void. Defining what constitutes as a notification is therefore essential to adhere to this clause, and here the NEC3 contracts assist by being specific as to what is a notification and what is not.

For example, the contract states that a party may notify an early warning or may notify a compensation event; these are clearly notifications which must be communicated separately. In addition, they are also separate from each other….an early warning notice is not the same as a compensation event notice.

However, and for example,  matters raised in a risk reduction meeting may not need to be a notification, and can simply be recorded by the Project Manager in the Risk Register which is communicated to the Contractor under clauses 13.1 and 13.2 as a written and recorded communication required by the Contract.

Agreeing on the stipulations and processes of contract communication with all key partners involved in the project when starting out on any NEC3 project will always be the best course of action to ensure you maximise the opportunity of delivering a successful project on budget and on time.

Our NEC3 Contract Management software is specifically designed to help you best manage your NEC3 project, giving you the support and guidance you need to ensure all areas of your contract are adhered to; including offering innovative contract communication solutions for all key stakeholders included in your project.

If you would like to know more about how we can help, please get in contact for a chat today!