Everyone understands the reasons risk management is important – both within construction and elsewhere – but at a time of great pressure to ‘build back better’ and rebuild the economy, it’s more vital than ever to manage risk smoothly and efficiently. Here, Dr Stuart Kings, director at Sypro and NEC4 co-author, examines how the introduction of the Early Warning Register within NEC4 works closely with cloud-based contract management systems to communicate and effectively manage potential risks, while minimising further impact elsewhere. The construction industry is currently facing a whole host of challenges that present risk to ongoing and upcoming projects, with the risks primarily being driven by a shortage of both materials and labour within construction – all set against the background of post-pandemic recovery. Earlier this year, the Construction Leadership Council (CLC) warned that a fair approach was needed towards supply of materials, going as far as suggesting rationing to make sure smaller firms get their fair share of dwindling supplies. Several months later, the demand for supplies both in the UK and globally continues to dramatically outstrip supply. Record sales of building materials are putting enormous pressure on supply chains, which are still in the process of recovery from the pandemic – and there is no indication of shortages improving over the coming months. This of course presents construction schemes with the risk of not being able to acquire supplies critical to their completion, paying much higher prices that squeeze budgets further, or having to alter designs and source alternative products. Indeed, surge in demand will impact smaller companies in greater ways, with SMEs unable to purchase key materials off the shelves, or even afford them. Some may be forced to delay starting schemes on site altogether until they have certainty on product availability in order to keep risks as low as possible – but all of this ramps up the financial pressure, especially on smaller businesses. Another big issue causing potential risk to construction schemes is a shortage of hauliers to get supplies to where they are needed. Brexit has led to the loss of some 15,000 European drivers this year, and the remaining drivers are having to undertake COVID tests and self-isolate where necessary, further exacerbating the shortage. The global shipping industry is also struggling in its post-pandemic recovery, facing congested shipping routes, container cancellations and higher costs, which continue to impact global supply chains – including construction materials. It is crucial that builders and contractors maintain open communications with their customers regarding lead times, possible product substitutions and early notice of price increases – which is where excellent project and contract management systems will become incredibly important. But, how best to manage this risk assessment and communication? NEC contracts have a clear and simple, yet centrally important process for early warnings, whereby the Contractor and Project Manager must notify each other of any matter that could affect the cost, completion, progress or quality of the project. The move from NEC3 to NEC4 was labelled as an ‘evolution, not a revolution’, building on and improving what we were already working with. The updates were about the key principles of being risk-focussed, planned and transparent. As well as mitigating any impairment on a project, the focus is to safeguard timelines, objectives and change the procedure of risk reporting, and therefore mirror the principles of good project management. With regards to early warnings, in NEC4 the ‘Risk Register’ was renamed to the ‘Early Warning Register’ to help separate it from the project risk register, which is often used as a wider project management tool. Default periods for early warning meetings have been set to allow the Project Manager and project team to mitigate any risks quickly and efficiently. There were shortcomings in the previous iteration, including the fact that the Project Manager did not convene meetings and did not put together a first Risk Register. Additionally, early warning meetings were held sporadically and not always with the involvement of the supply chain. Following the changes, there is a clear mandate that the Project Manager issues an Early Warning Register to the Contractor within one week of the starting date. Secondly, the Project Manger convenes a first early warning meeting within two weeks of the starting date and thereafter imposes regular meetings – at the interval states in the Contract Data – to initiate a better ethos and culture of risk under the Engineering and Construction Contract. These key changes appear under clause 15.2 to promote a better management of risk, and so the role of the Project Manager becomes much clearer and proactive in managing the process. The early warning process is simple in principle and critical to the success of NEC contracts and facilitating the spirit of mutual trust and cooperation required by clause 10.1 of the contract. The contract administrator must give the process, and the associated risk, the attention it deserves and develop and use their soft skills to get the best out of risk reduction meetings. Any software system for contract management should facilitate this using a cloud-based – and therefore paperless – process. This is easy to implement under NEC4, which states that ‘if the Scope specifies the use of a communication system, a communication has effect when it is communicated through that system specified in the Scope’ – meaning that the communication has effect only when it takes place through the system. With a cloud-based system, the Project Manager and Contractor can seamlessly manage risk ‘on the go’ from any handheld device – with the digital approach creating one central point of truth, minimising the risks of miscommunication that could exacerbate any issues further. Considering the pressures facing the industry at the moment presenting more risk than ever, the implementation of systems that improve transparency, efficiency, information exchange and the all-important element of risk management will ensure that we keep projects on track, building back better and delivering the high-quality schemes the construction industry is known for. For more information, please

Even before the pandemic, every business needed to take a strategic approach to communications, and the Engineering and Construction Contract (ECC) has always promoted clear and concise communication. With many disputes that arise within the construction industry being due to poor or ambiguous communication, director at Sypro and NEC4 co-author, Dr Stuart Kings, examines why the cloud-based leap is central to better contract communication. Despite construction projects being valued in the millions, many project managers and construction teams still rely on managing contracts in the old-fashioned way – i.e. complicated spreadsheets, lots of paper, unrecorded phone calls, and large email chains. With poor contract management being a major source of disputes between a client and contractor, the value of clear communication is evident. The move from NEC3 to NEC4 was labelled as an ‘evolution, not a revolution’, meaning that it built on and improved what we already had in place. The NEC3 Engineering and Construction Contract (ECC3) required all communication to be in a form that could be read, copied and recorded, and notified matters communicated separately. This means those using a paper-based system find themselves inundated with intensive admin – plus will have faced the associated problems of managing physical paperwork caused by a sudden move to homeworking during the pandemic.  This approach to communication is a key difference in Version 4, which states that ‘If the Scope specifies the use of a communication system, a communication has effect when it is communicated through that system specified in the Scope’[i]. In contract speak, this means that communication only has effect when it takes place within the specified system – no other communications would have effect. This essentially advocates a cloud-based operation, with no need for paper-based registers or huge logs of communications – and this is the direction the industry needs to go towards and is why systems like Sypro’s Contract ManagerTM not only exist, but also thrive. The last thing any business has needed during the past year is to deal with a dispute that was ultimately avoidable. The whole premise of systems like Contract Manager is to run projects more efficiently, with everything you need in one place, thereby allowing teams to move to working remotely quickly and simply, with no loss of information or the all-important project communications. Due to the long-term nature of construction projects, we must also keep in mind that every file, piece of data, and communication will need to be accessible for years to come. This is another benefit to cloud-based systems, as this information will be stored in a compliant manner and will accommodate for any future circumstances like office moves or staff changes. This, in itself, can help prevent any issues from escalating into full disputes, allowing information to be gathered clearly and quickly to evidence the situation. Throughout the pandemic – with staff on furlough and unable to meet physically – information could easily be forgotten, lost, or miscommunicated, and so the benefits of cloud-based systems have become even more apparent.  The industry was certainly working towards better use of technology for our everyday processes, but the pandemic has accelerated this further and systems like Contract ManagerTM don’t simply streamline communications but cover all facets of the contract from the Early Warning Register, management of Defects, and payments. It’s easy to see where cloud-based management systems benefit project managers when we examine the number of communications that go through Sypro’s Contact Manager, which is used on some of the biggest construction projects across the country. For example, in the first quarter of 2021, more than 15,000 communications of various types took place via the tool across live projects. This is more than 15,000 opportunities for miscommunication, which would be at much higher risk of happening if these communications were not streamlined through a central system. A final obvious benefit to a cloud-based system is just that – it is cloud-based. This means that information is stored digitally, and we are able to save physical storage space in our offices and reduce the amount of paper we use within our businesses. Many companies are working to reduce their carbon footprint and work in a digital first manner – and cloud-based systems will help any construction company (or client) to reduce physical paperwork. Our overall move towards digitisation in the industry will be crucial in the coming years. It will improve transparency, information exchange, payment performance, and contract management across the sector for all parties – and will ultimately help us collectively deliver on several of the key principles outlined in The Construction Playbook, which makes it clear that government strives to see this transformational change in the sector. For more information, please visit https://www.sypro.co.uk/