Jacob Austin 00:00:00 Hi all, Jacob Austin here from QS.Zone. And welcome to episode 99 of The Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. Today's episode, number 99 is all about program management in the neck four world. And if you're new to the show, then please do subscribe for more user friendly advice on all things subcontracting. So let's set the scene with a quick intro to neck four subcontracts. Neck four stands for New Engineering Contract and it's the fourth edition. It is widely used and modern set of standard contracts used in the UK construction industry and beyond. The key philosophy of it is collaboration. Clear communication and proactive project management. All NEC contracts and subcontracts require the parties to act in a spirit of mutual trust and cooperation. To give early warnings of anything that could affect time, cost or quality. So in plain terms, everybody should play nice together. Flag problems early so that they can hopefully be solved before they turn into big issues. You might see out there the engineering and construction subcontract known as NCS and the engineering and construction short subcontract.
Jacob Austin 00:01:42 Tongue twister alert as known as NCSS, the NCS is the full fat version for more complex or larger jobs, and the NCSS is slimmed down for more straightforward work with lower risk. Both of them are set up to mirror the neck for main contract to give that back to back protection and consistent approach throughout the whole supply chain, front and center of the neck for contracts are the management processes, including early warnings, a clear process for changes called compensation events and very relevant for today's topic. A continually updated and jointly agreed program that ensures there are no surprises at completion. The program in NEC four isn't just a schedule, it's effectively a living part of the contract. And that brings us to the meat of today's episode. Program management what it is, why it's so important, and why you need to ace it as a subcontractor. So why is program management so integral? The NEC philosophy thinks of the program as a central nervous system. It's tying together time, scope and risk. For example, if something unexpected happens and let's face it, in construction, Something always does.
Jacob Austin 00:03:02 The neck contract uses the program to figure out the impact delay design. Delay your work. The effect of that delay is measured against the timings on the accepted program to determine if you get more time and possibly more money. Did the main contractor or the client fail to give you access by the date shown on the program? That is actually a defined compensation event, meaning you're entitled to relief, but only if that date is an agreed milestone on the program. So in short, the program is the yardstick for keeping the project on track and for adjusting the course when things change, it's how you prove entitlement to more time, how you coordinate work with other parties, and how you avoid nasty surprises like unexpected delays or cost overruns. As a subcontractor, if you manage your program well, you're essentially holding one of the biggest keys to delivering your work profitably and avoiding disputes. And if you ignore the program. Well, the NEC four has some sticks and some carrots to poke you with, which we'll talk about next.
Jacob Austin 00:04:09 The biggest carrot when you maintain an up to date and realistic program and it gets accepted, it actually protects you because any changes compensation events will be assessed. Using your program as a baseline is something outside of your control. Causes delay. The accepted program is used to calculate your extension of time fairly and NEC for terminal float, which is the buffer of time at the end of your schedule, belongs to you, not your client. That means if there's a delay and your client is responsible for that, then that delay won't eat into your buffer. You can get an extension of time to completion. There is no oh dear. Your float is run down. So the program when you manage it properly ensures you keep hold of your time, contingencies and entitlements. And when the program is well managed, You can impact the program with compensation events so that you can likely get paid for the time impact of changes as well. And that's a pretty big incentive for you to maintain your program. The big stick, on the other hand, is if you fail to produce or update your program, the contractor, your client has some powers to make your life really uncomfortable.
Jacob Austin 00:05:22 For one, the contractor can withhold a quarter of your payment until you submit a first program that complies with the contract. So if you're down to program your works and you mess around with it, you might only get 75% of your money until you fix it. And secondly, if you don't submit updates to the program as required, you can lose control over the management of change. The contractor can step in and manage your program for you. Then they can assess compensation events using their own assumptions of your program and deciding how to apportion float. That's been earned. And you might then see magical changes appearing on the program with no program delays. It's like giving up your steering wheel and then still hoping you'll get to your destination in one piece. Not a position you want to be in as a subcontractor. So you want to comply with the contract. You want to submit a good program, get it accepted, and maintain it throughout the job. So what makes that first program a good program in the first place? The great thing about the NEC is that the contract tells you.
Jacob Austin 00:06:27 And unlike JCT, you don't have to refer to 20 different pages of the subcontract to be able to find out the answer. So the contract tells you you need to include key dates and durations. This means things like the start date of your work, access dates to certain areas, any key milestones that you need to meet, and the completion date of your subcontract work. You then also need to show planned completion. That's when you currently plan to finish, which should ideally be before the completion date. The difference between the two is your float. Assuming you're finishing early, you need to show task sequence and timing, and it needs to be logical. You don't show skimming walls before you've plasterboard it. It should show any work required by others, and that might mean the main contractor. That might mean other subcontractors that feed in. So if the main contractor has to have something installed before you can start, then that needs to be clearly shown and shown when you expect it to be done, so that if there's a shift in that date, you can measure it.
Jacob Austin 00:07:31 It should show float and time risk allowances. These are gaps where activities can slip without delaying completion. Time risk allowances are extra bits of contingency time that you add to specific tasks, such as if you're building the external masonry shell. You might have time risk allowances for the amount of time you expect to lose for bad weather. The idea is to be open and transparent about these and then if you finish without needing to rely on them, you can pocket the bits of contingency time as your terminal float to show you finishing earlier. Then you've got requirements from others. If you need information, materials or access from the contractor or others on particular times and dates, you need to put it on the program. These can act as hooks for potential compensation events if those conditions aren't met. But crucially, if you don't tell the contractor about these conditions, what chance have they got of meeting them? This is forcing you to be collaborative about what you need and when, so that everybody can plan accordingly. Finally, you've got any other information required by either your scope or your contract data.
Jacob Austin 00:08:44 Sometimes the scope might specify additional details that you need to show on your program. Double check. You're not missing any. This could be anything, such as the time you'll be ready on a particular elevation of brickwork, or the time that you'd have a particular room furnished so that some incoming plant, like an MRI scanner, could be installed critically as well. When you submit a program, give an explanation of what your logic is. A good narrative is going to help your contractor to understand your program, and it means it's more likely the contract is going to accept it in a timely fashion. Remember that 25% of your payment, which might be upheld if your program isn't accepted. Help yourself here by explaining your approach assumptions, the gang sizes you're using. If there's any unusual shift patterns involved. It might sound like extra paperwork, but it's very useful and might just expedite your program. Getting accepted. Now the contractor has two weeks typically to accept your program, and they either have to accept it or reply with reasons for not accepting it.
Jacob Austin 00:09:51 And the need for contracts. Specifically, lay out only a few valid reasons not to accept the program in plain terms if it's not realistic, if it doesn't show the information required by the contract. So one of the items from that list we just discussed was missing. If it doesn't represent your intentions or isn't a true plan, for instance, if you submit something for approval but everyone knows you're working in a different fashion, then essentially it isn't an honest and realistic program. And finally, if it doesn't comply with the contract scope, perhaps you've planned something out of sequence compared to a contractual constraint, or simply you've missed something important. Those are the conditions that they can reject it. They can't just reject it because it shows a later completion date than they like, or because it highlights delays that aren't caused by you. Those aren't legitimate reasons. It's about it being complete and about it being realistic. So as a subcontractor, that very first program needs to be right. It sets your tone for the project, and it then becomes the yardstick to measure any changes against once it gets accepted.
Jacob Austin 00:10:59 Don't forget to actually use it. It needs to be a living guide, not just something that you drafted up, made to look nice and then hid in a drawer. And that leads us on to managing and updating the program as the project moves forward. So what goes into a program update? Well, a revised program should show actual progress to date, what's been completed and any delays incurred, and it should update how you plan to complete the remaining work. If a compensation event has occurred, then the impact of that event should be reflected on the program. Perhaps there's a new completion date to be agreed or certain activities need to be re sequenced. Essentially, you take the last accepted program, overlay some reality onto it, and adjust the future logic as you need to to get to the end answer. Good practice here is to include a note or a legend to highlight changes from the previous version. So let's say you gain some time from somewhere. Or maybe you slipped on an activity. Then make that clear.
Jacob Austin 00:12:02 Document the change. Explaining what has changed and why since the last program that not only aids the contractor in reviewing and accepting the update, but it also creates a useful history of the project's evolution. It's like having a project diary, but in pictorial format, and it's invaluable if there is a dispute like your original program, revisions to the program have to be submitted for acceptance as well. The same reasons stand as to why a program can't be accepted under older forms of the NEC contract. If the program wasn't accepted, then you could be in limbo. But the NEC for has fixed that. And now if the contractor is late, you can notify them of their failure to meet the deadline. If they don't respond within a further week, then the program is accepted anyway. But of course, you need to be absolutely sure before you do that reminder that your program is in order. One important mantra here is to keep it real. Update your program to reflect reality, even if that isn't pretty. Let's say you're running late due to your own issues.
Jacob Austin 00:13:08 It might be tempting to show a program that doesn't highlight that delay in some kind of hope of catching that up later. But hiding delays is a dangerous game. Neck four is about being open. So if you're slipping, show the slip. You might even be able to issue an early warning to discuss how to mitigate it. On the flip side of that, if a delay is due to a client driven event or another compensation event, then definitely show it and make sure you've notified the compensation event itself. The program and that compensation event go hand in hand, and the effects of that change should be what gets agreed within your compensation event. The contractor and their site team needs to know the latest plan. They need to know if there's any changes to dates that feed into other subcontract programs, or perhaps their own program upstream to the client. Also, if you've got a current accepted program that's up to date, it serves as a basis for assessing any new changes. That continuous navigation and realignment is exactly what the NEC envisages.
Jacob Austin 00:14:13 It's proper, proactive project management. Now we've mentioned compensation events CS a few times. So let's dig a bit deeper into how program management and compensation events interact with each other. A compensation event is any key speak for a change. That can be anything that has affected time, cost or quality. And it differs from an early warning event because the event has happened. There's a full list of compensation events laid out in the subcontract, which I'm not going to read out for you now, but essentially, if any of these are triggered, then a key entitles you to compensation for that event. And it deals with time and money at the same time. Common examples would be the scope changing what used to be called the works information, access to site being delayed, or a physical condition that wasn't outlined at the start. One of the great features of compensation events is that they're supposed to be assessed upfront, so you figure out the time and cost impact as soon as the event arises, not after the fact.
Jacob Austin 00:15:20 And how do we work out the impact of that? Well, it's with your accepted program. So when you price and submit a quotation for a compensation event, you also factor in any delay it will cause. The contract tells you this should be done using the accepted program at the dividing date, which is the moment that the event was either notified or an instruction given. So you take your latest accepted program. You tear it in two along that date. You add in the activities and see how long it pushes out the planned completion date. If the difference is caused by a genuine compensation event or the client's risk, then you're due additional time for that change. This method encourages everybody to resolve the time differences quickly and fairly, without waiting months or years for hindsight analysis. It completely does away with delay analysis and forces you to forecast. This is much cheaper, and it's less contentious than duelling with your pistols at dawn after the fact. As I mentioned earlier, if there is no accepted program, then the assessment of the compensation event becomes murkier because the project manager or the contractor might then use their own idea of the program to calculate the delay, and you may well not agree with that.
Jacob Austin 00:16:39 So this is one of the carrots for you to keep your program accepted and up to date. It ensures you're using your agreed plan as the basis for any changes. So for good practice. When a compensation event arises, you update your program as part of your quote, show the events impact, and describe the changes you're making so that it's clear to the contractor that can all then form part of your change quotation and inform discussions with the contractor. It gives a visual representation of the change and it makes the negotiation smoother. It's hard to argue with a well presented and well articulated program that shows a clear impact to an already agreed plan. If and when that compensation event is agreed, if it includes that time extension, then you update your next program to include it, and that then becomes the new yardstick, the new reality for you to measure against going forward. And this is why program management under any C4 is so vital. I know it's easy mid project when things are busy to let the program slip and perhaps forget to update it.
Jacob Austin 00:17:46 Maybe you think, well, we're in the thick of it. I'll catch up with the program later. But that is a trap not to fall into. Think of the impact that could have on your change. Quotations. If the contractor can suddenly rewrite the program how they see it. Because you've not submitted one of your own. So you need to stay committed to keeping that program as alive, living document and representative of the reality as you build on site. This isn't just a piece of paperwork. It's your lifeline for managing your time and money under your contract. It's critical for you to get the entitlements that you need if changes happen. It's not just a box ticking exercise. You will need it to get paid fully and paid on time. It's also what you need to protect your project from delays. The good thing is, is having a good program will build trust with your client, the contractor. It demonstrates your understanding of the job. It makes you more reliable. You can use it as a communication tool as well.
Jacob Austin 00:18:47 And it needs to be a little an often approach. It's much easier to top up the engine with oil and keep things lubricated than it is to wait until it comes grinding to a halt, Perhaps even breaking important parts of it before taking it to the garage. And that is why program management under an NEC contract is absolutely critical to your success. So I hope you've enjoyed today's digest. My mission with the show is to help the million SME contractors working out there in our industry. If you've taken some value away from today's episode, I'd love it if you'd share the show and pass that value on to someone else who'd benefit from hearing it. And of course, subscribe yourself if you haven't already. And thanks for tuning in. If you like what you've heard and you want to learn more, then please do find us at www.QS.Zone. Or check us out on all your favoruite socials. Again @QS.Zone thanks again. I've been Jacob Austin and you've been awesome.
