Jacob Austin 00:00:00 Hi, All! Jacob Austin here from QS.Zone. And welcome to episode 120 of the Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. And today, we're continuing our series on NEC four subcontracts. So far, we've started with an overview, and then we've dived into some specific clauses which covered the general requirements of the subcontract, the obligations of you as the subcontractor and also the quality regime, including defects. And this week we're going to follow on from that with probably the biggest and most important part in the next to their contract. And you can see that in the billing that they've given it. It's not item number one on the list, but once you've covered what you actually need to deliver as a subcontractor, it's very much up at the top. If you said the introduction was item number one, what you're doing is item number two, then this is item number three in the list. So there's a lot to discuss on program. It's one of the biggest clauses in the NEC and because of the importance of it, I want to give it the attention it deserves.
Jacob Austin 00:01:07 So it may well spill into next week's episode as well. So I'll start with today's agenda and we'll see how far we can get through it in about 25 minutes. Half an hour. So without further ado, let's dig in. So again, let's start from the top of the 30 series. Section three of the NEC ECS subcontract. This deals with time, including the preparation, submission and management of programs, and a well-managed program, and an accepted program is absolutely central to administering the subcontract. It sets out how and when the work will be done. It provides a baseline for assessing changes and delays, and it can protect you as a subcontractor and your entitlements for time and money when events occur. So in today's deep dive, we'll be exploring key program related clauses in the subcontract, explaining the requirements, the process for submission and acceptance, including updates to the program and what makes a program compliant or non-compliant. Then how the roles of things like time risk allowances, float, free float, terminal float all factor in to your program.
Jacob Austin 00:02:37 We'll also highlight how a robust accepted program can be a powerful tool for you as the subcontractor in protecting your own position and generating entitlement to changes under the subcontract when it comes to time. So we will try and get through as much of that as we can today. But there's a hell of a lot to say, so we'll move on to the actual requirements of your program under NEC4 and clause. 31.2 specifies in detail what information each program submitted for acceptance should include. And as you can imagine, because of the importance placed upon the program, NEC4 is more prescriptive about program details than most other contracts. The program needs to show a comprehensive plan of how you, as the subcontractor, is going to execute your works and coordinate with others. So key requirements under the program clauses include stating milestones and key dates. That includes the subcontract starting date, any of your access dates to various sections, and key dates that are identified in the subcontract data. The subcontract completion date must be shown. In addition, the program shows the planned completion date.
Jacob Austin 00:03:53 These two things are different and it's an important distinction to make. The completion date is the date stated in the contract. The planned completion date shows when you reasonably plan to finish based on including all the logical activities in a sensible sequence and making adequate allowances for things like risk. If there's a difference between the two, then assuming planned completion is before the contract completion date, then you've got terminal float, and that terminal float acts as your safety buffer, so hopefully you're planning to finish before the completion date. There are several reasons why you might be finishing later than the completion date, but we're not going to dwell on that just now whilst we cover the explanation. Next, we need to see the sequence of work. This is the order and the timing of operations that you, as the subcontractor, plan to carry out to achieve completion of the work. It needs to be logically laid out. That's often shown as a linked bar chart or a network program demonstrating how the works are going to be phased. It should also include the work and the timing of that work by the client, the contractor and any others that are going to interface with your work, and these should be stated in your scope.
Jacob Austin 00:05:11 For example, if the client or contractor has got to perform some preparatory works or provide you some design information to tie in with your own, then the date that you need that information or the date the preparatory work should be finished should be shown on your program. You then have to show key date conditions. So the key date itself will show as a milestone. And you've got to identify the work that you need to achieve to get to the condition stated by that key date. And again, any interfaces by others have got to be laid out logically within that in NEC4. Key dates impose a requirement that if the subcontractor fails to meet a specified condition by the date, then you'll be liable for resulting costs, either from the contractor or from the client. And it differs from sectional completion, which is a different concept. So because of the importance of these key dates, you've got to show them on your program and how you're going to get there. You're expected to show inclusions for float and time risk allowances, or Tra, as the commonly known float is the spare time available within the schedule.
Jacob Austin 00:06:20 We'll speak about different types of float later, and time risk allowances are additional durations that are added to activities to cover your own risks as the subcontractor. This might be the weather risk that you carry or the risk of general productivity issues. Those kinds of allowances indicate that your plan is realistic and that you've considered unexpected eventualities. The SEC for contract explicitly requires showing float and tray as separate provisions, which underscores their importance in a realistic program. You also need to show inputs and access that you require, and that means access to parts of the site. It means acceptances, such as design approval as required by the contractor. It means delivery of plant materials or other items that either the client or the contractor are going to give to you. It means information from others that you need to carry out the work. These are really important that you document them in as much detail as you can. By including these dates, you are creating hooks within your program that the contractor or whoever else is going to snag on if they miss those dates.
Jacob Austin 00:07:34 And that then gives rise to compensation events. So it's really important that you capture them on the program. Otherwise you miss out on those hooks. You miss out on the opportunities. And technically your program is not compliant, so it might get rejected. The program also needs to make logical sense, giving a sensible way for you to complete the work. If it doesn't look feasible, it can be rejected by the contractor. That might be if you haven't considered a particular constraint, or if it genuinely doesn't make logical sense, like you've got the scheme happening before you've boarded all the walls. An absolutely ridiculous example, but hopefully it underscores the point. The program has got to also show any additional information required by the scope. So usually this is something that's cascaded down from the client's requirements. And it's something they need to show. So they ask you to show it for them on your program. So it might need a particular format for the program. It might need a particular level of detail, maybe that the program's resourced or cost loaded or it includes specific data.
Jacob Austin 00:08:46 If that kind of requirement is stated in the scope, then you have to include it because again, the contractor can reject your program if it doesn't meet those requirements. The goal here is to create a program that's got clear and common reference points for both parties. It allows the contractor to verify the feasibility of your program and to see your needs and your constraints when things are required, so that they can act on that. And as we mentioned before, items that you need like access to particular parts of the building or information and when it should be provided, is vital to you to communicate on your program because it's there to establish your contractual entitlements. It's there to give the contractor something to work to, to give them notice of when you need these things. Once your program is accepted, then they accept that they're going to provide whatever it is by the dates that are shown on the program. You can change those dates by proposing new ones on your accepted program. And if the contractor accepts them, then those are the dates they've got to complete that action by.
Jacob Austin 00:09:54 And presenting a programme for acceptance is a way of accepting and agreeing the true state of play that the job is at at a point in time, and it gives that baseline for managing change throughout the course of your work. Now, the ECS anticipates that either a first programme is incorporated into the sign subcontract, or that one is submitted shortly after you sign. So clause 31.1 states that if no programme is identified, then you've got to submit it within the period stated in the subcontract data. That period is usually a few weeks after the starting date, maybe two weeks. That's pretty common, and that should be specified in contract data part one. The intention is to have an initial accepted programme in place very early, so that both parties have got a clear plan to work to. It's critical for you, as the subcontractor to meet this first program submission timing because failure to get that in. Has financial consequences for you because clause 50.5 says that if no program was identified in the contract data, a quarter 25% of the price of work done to date is retained from payments until you've got a first program showing the required information submitted for acceptance.
Jacob Austin 00:11:17 So, in other words, the contractor is going to keep 25% of your money as a stick to beat you over the head with until you submit a valid program. That again underscores how important the people writing the neck contracts think the program is. It's the only situation in the standard form where money can be withheld for noncompliance, and it's quite a significant amount of money, 25%. And it only applies to that first program. So here's a top tip where you can get a program included in the contract data, because it does away with this opportunity for the contractor to hold money. It does away with that stick because it's there in the words if there's no program identified, then a quarter is retained until the valid program is submitted. So get that enshrined in your contract and you've got no risk of deduction. Even if that initial program isn't compliant with the annex requirements. You would get away with that first one because nobody approves it. It's accepted by default. So that avoids that cash flow issue. Now obviously there are situations where you can't do that.
Jacob Austin 00:12:33 You might need to liaise with the contractor and agree some parameters before you submit a program. And so the option is there for you to do it later. Just make sure that you do it within the window. Otherwise the contract is not just entitled, but required to withhold 25% of your money. Now let's move on from there to acceptance of the program. When a program is submitted, clause 31.3 governs how acceptance works. The contractor in their role, similar to the project manager under the main contract, must respond within a specified period with either an acceptance or a refusal of your program, and the contractor under the standard form has three weeks to do that. The reply has got to be given as a separate notification, so they can't reply to an email with 5 or 6 things on there, because the contract says that the program is important and it doesn't want communications about something that is that important to be lost in a mix of a load of other things. So even if the program's discussed at a meeting and it's on the agenda, then acceptance or rejection of the program can't just be in the meeting minutes.
Jacob Austin 00:13:46 It's got to be a separate written communication. That notification has got to say which contractual reasons apply. If they don't accept your program, that's show that you, the subcontractor, can act on those comments and correct it. And there are four reasons under the contract that the contractor can reject your program without triggering a compensation event. And those are that your plans are not practicable. So in other words, if your schedule or your methodology isn't workable or it isn't realistic, for example, the program might show multiple trades working in the same day, in the same space, at the same time, and it might rely on an impossible sequence, such as an activity starting before a prerequisite activity finishes. Like the skimming thing I mentioned earlier. It might be that durations are too short to be properly achievable. The contractor can reject it in those cases if they don't think it's a feasible plan. Next is it doesn't show the information that the contract requires. So that ties back to the list that we mentioned earlier under 31.2.
Jacob Austin 00:14:56 If the program omits any of the required information, such as failing to show float or time risk allowances, or missing key dates or access dates or other items that the scope required, the contractor has grounds not to accept it. And a really common pitfall is that the program is missing float or time risk allowances, since those are expressly called out in writing in your contract, a program that doesn't show them is easily deemed non-compliant. So the refusal notice should specify what is missing so that you, again, as the subcontractor, can correct that and add it. The next item is that the program doesn't show your plans. Realistically, this reason addresses having honesty and accuracy in your program, saying that it should reflect actual progress and your true intentions for the remaining work. So if your program is outdated or portrays some kind of fiction that maybe some works are showing us done that we know are still pending on site, or maybe it shows something like a piece of plant landing on Friday, and the contractor knows that it's not going to be available for 2 to 3 weeks.
Jacob Austin 00:16:11 If that's the case, then the program isn't showing a realistic portrayal. So essentially it needs to be an accurate snapshot of where we are and where we're going to with how we're going to get there. If it doesn't show that, then the contractor can reject it. The final point is it doesn't comply with the contract scope. So this means that item that we spoke about before, if there's a particular constraint or if there's a particular way the program's got to be laid out in a certain format, perhaps the scope required that fully resourced program or a certain software or coding system to be used. Whatever the case, non-compliance with the scope items around the program is a valid grounds for non acceptance. Now the contractor can withhold acceptance for any reason, but if it's not one of those for reasons, it's a compensation event. This is safeguarding you as the subcontractor to say the contractor can't arbitrarily refuse to accept your program. Not without consequences anyway, but it also gives the contractor means to request amendments that they need if they need you to make them.
Jacob Austin 00:17:24 So they might do this because you've submitted a program and they know they've got their own delay, and it's going to change the access date on a particular area. They can reject your program and say, we need you to factor this date in. And because that rejection is a different event to the for that the contract says they can reject your program, for it means it's a compensation event. It gives you entitlement to charge money and time for changing your program. Now, from time to time, the contractor might just reject your program because it doesn't make sense to them. If you think it makes sense to you, then this is the time when it's worth getting around the table and discussing the issues. They might not like your logic, but you might think it's perfectly valid, whatever it is, rather than steaming a compensation event. Talking about it first is going to smooth the waters. You still might be entitled to a compensation event at the end of the day, but have the conversation first. Now what if the contractor is late accepting your program well under NAC for what you can do with that.
Jacob Austin 00:18:32 If they miss their three week turnaround on accepting your program, then you send them a notice from the date that you send that notice the contractor has then two weeks to respond to it to either accept the program or reject it. If they fail to do that within the two week time frame, then your program is treated as accepted by default. That means deemed acceptance, and it's a strong incentive for the contractor to act in a timely fashion as the contract tells them to, which means either accept or reject your program for valid reasons. That deemed acceptance applies as if the contractor accepted it fully. So if they've been holding 25% of your payment, then that 25% will be due. If they're using it as a basis to measure changes from, then the newly deemed accepted program will be the new baseline against which changes are measured. The accepted program is the primary reference for the subcontract for time. It's important to note that acceptance of a program doesn't stop you from having to achieve any of your obligations, and it doesn't transfer any risk of those to the contractor.
Jacob Austin 00:19:45 You've still got to deliver the work. You've still got to achieve your completion date and any other dates. What acceptance does is it says at the time of acceptance, both parties agree that this is a realistic, practicable and compliant way to achieve completion. It also gives a healthy snapshot against which progress and changes can be measured. Having an accepted program is crucial for evaluating delays and compensation events which will discuss in another episode. But what we will mention now is if there is no accepted program, then the contractor is given certain rights to assess time when it comes to changes that could potentially lead to you recovering less money and to gaining less time out of your compensation events. So that accepted program is important for that reason, if a program is not accepted, the two most common issues are that the contractor is not responding or they're unreasonably withholding acceptance, or more commonly, the subcontractors submission is lacking the required detail. In either case, with the project left without an accepted program, the next approach is that work should still proceed, but administering some of the contract requirements is more difficult without the accepted baseline.
Jacob Austin 00:21:10 That deemed acceptance that we just mentioned kind of tackles the contractor not responding. It doesn't deal with unreasonably withholding acceptance, but then that is a compensation event. But for the other issue, the lack of detail, then the onus is on you as the subcontractor to provide that compliant program because the contractor is justified to reject a program if information is missing. Again, for your first submission, that 25% Percent nonpayment. That's really important, and it's a real big incentive for you to submit a program and get it accepted. But as I said, beyond that, the more regular consequence relates to compensation events. If there's no current accepted program, the assessment of those events may be taken out of your hands under clause 64.1, if the subcontractor has not got a program accepted in time or as required for a compensation event, then the contractor or their manager can make their own assessment of the event. That will use the contractor's view of the program for the remaining work, rather than yours. They could downplay the issues of delays or the impacts of changes, potentially, as we mentioned earlier, leading to smaller time and cost compensation in your compensation events.
Jacob Austin 00:22:32 So by failing to get your program accepted, you're losing control of that assessment process, and that's a big handicap and it could really hurt you now. Looking at my notes and how much I've got left to say, I'm probably going to cover revising and updating the program today and then park things like the float and the time risk allowances and other items for next week to give them enough justice. So we'll move on to revising and updating the program, which is in line with clause 32 of your subcontract. And that says that just having an initial accepted program is not enough. This clause sets out how and when you should revise the program. These mean regular updates to record actual progress and to show the plan going forwards, incorporating effects of changes and capturing progress and even non progress on certain items. To give you a revised way forward and a realistic way to finish the job. So what should your revised program show? Firstly, it needs to identify clearly changes from the previous plan. So if you've revised the period for an activity, then you show it and you describe it clearly.
Jacob Austin 00:23:46 Be open about it. You show your actual progress achieved on each operation or activity. That means updating the program with what's been completed to date and the actual dates achieved, so that it can be seen whether you've got any delays or gains against the last plan. If you've gained the time, you bank it in your terminal float. If you've lost the time, you hopefully will be able to take some from your terminal float to balance the books. Obviously, if you don't have a terminal float, you're showing a delay. You need to show the effects of progress on the remaining works. If some activities are late, or if activities are early, then show the knock on effects. The program logic needs to show how delays consume your float or they push out completion. It needs to show how you, as the subcontractor, plan to deal with any delays and to correct any notified defects. Essentially, this is a forward looking adjustment. It's saying right to avoid missing a key date. I might re sequence a couple of items, I might accelerate another item, I might increase resources, and so on to mitigate delays and to overcome problems.
Jacob Austin 00:25:03 You want to describe this in an accompanying narrative because the contractor might otherwise reject your program. Not appreciating that you're shortening periods for good reasons, but just seeing that in order to make the dates work, you've knocked a few percent off of this activity and that activity. If you're doing that, it looks like you're just fudging it. So this is where the description, the narrative is key to say I've reduced our item ten, I'm going to put an extra gang on site that are going to push progress and help me better the date, help me better the period, and help me either achieve a key date or achieve completion on time. You've got to show any other changes that you propose to make to the accepted program. That's a bit of a catch all statement, but it covers things like changing your methodology, your sequence, your timing, things that might not be driven by a delay, but you just choose to do something differently. Or maybe there's some external factors. Maybe you decide that you've completed a bit quicker than you thought, and for efficiency sake, you are diverting some of your resource to different tasks to capitalize on the time that you've gained.
Jacob Austin 00:26:12 Or it might be to do things like capture scope changes from compensation events. Any way you look at it, it's got to be a realistic current plan to take you from where you are to the end of the job, and it takes on board all known changes so that it becomes a reliable tool for managing the job. Next, there are several triggers for providing a revised program. The first one of those is when you are instructed. So this is because the contractor can instruct you as the subcontractor to provide a revised program. After that instruction, you've got two weeks, unless stated otherwise, to revise the program and submit it to the contractor. The contractor can effectively do that at any time, but they're probably not going to do it unless they feel like it's significantly out of step with reality, or if some major changes occurred that they think needs to be formally incorporated quickly. The other time is whenever you want to revise the program, so you're free to revise and submit it anytime you like. Good practice, again, is to update it monthly or when significant events have occurred.
Jacob Austin 00:27:23 Frequent updates can be in your interest if it captures delays and changes as things happen. If it captures time that you've gained and it banks float and it stores it at the end for terminal float. We'll discuss exactly what that means next week, but you're not likely to want to resubmit that program every week. But strike a reasonable balance so that you're doing it regularly enough so that you're capturing the data that you need to capturing the changes without overburdening your planner or whoever amends the program. The final fallback is that there is a maximum interval set out in your subcontract that says how often you've got to revise your program. Commonly that is around four weeks or a month, but it could be another period, depending on the project that is there to ensure that the program is periodically updated, that it's current, that it captures those recent goings on. Critically though, if you fail to meet it, then your program falls out of acceptance, and that triggers those project managers adjustments to changes and things like that that we mentioned earlier.
Jacob Austin 00:28:32 So you need to get on board with regularly updating it. And that falls in line with what the NEC thinks is best practice with treating that program as a management tool about keeping all the parties informed and keeping on the same page about the impact of delays and changes. And that nicely brings me to the end of my notes on revising the program, but it leaves me with too much detail to realistically cover in the next minute and keep the episode to around about the half an hour that I am for. So I am going to follow up with part two of programs next week, so make sure you come back for that. And we're going to talk about some of the technicalities around time risk allowances, the purpose of those and float, and how you can use your program submissions as a means to protect your entitlements as a subcontractor. So I hope you've enjoyed that today. That is essentially the contract requirements for NEC for programs, and it applies to both the main contract and the subcontractors programs. We know now what good looks like, why you're encouraged to submit programs, and the basis on which they can be accepted or rejected under the contract.
Jacob Austin 00:29:44 So I hope that's given you some good knowledge that you can put into action this week. If you like what you've heard and you want to learn more, then please do reach out or at www.QS.Zone Or also on all your favourite socials. Again, at @QS.Zone I want to ask a big favour and if you know somebody that would benefit from hearing today's message, I'd love it if you'd share the show and pass the message on. Help me reach as many people as possible. And thanks for tuning in. I've been Jacob Austin and you've been awesome.
