Time and programming under NEC in Hong Kong SAR

Alongside the contract’s general provisions related to time, this article focuses on the submission and acceptance of the programme, the treatment of ‘float’ time in the contract, and acceleration of the works.

Start and completion

The employer sets out the starting date, access date and completion date for the works in the contract data. The starting date is an administrative trigger for contractual rights and does not require work to start, nor does it provide any right of access to the site. Access to the site is only provided on the first access date, and after this the contractor’s main obligation is to “do the work so that Completion is on or before the Completion Date” under clause 30.1.

The date of completion is determined by the project manager and should be certified within one week of the date, unless a different period is specified in the contract data.

The NEC does not contain some of the obligations that are ordinarily included in other standard forms of construction contracts when it comes to progressing the works. Although clause 30.1 imposes an obligation to progress works so the completion date is achievable, there is no express obligation on the contractor under the NEC to proceed with the works regularly and diligently or with due expedition, and nothing requires the contractor to endeavour to prevent or reduce delay, or start work as early as it can.

Submission of the programme

At the start of the contract, the contractor must submit a programme for acceptance by the project manager, unless a programme is included in the contract data. The first submission can be a priority because, until a submission is made, the project manager can withhold one quarter of the payment to be made to the contractor. Similarly, failure to submit a programme may justify the project manager making their own assessment of compensation events.

The programme must include the starting date, access dates, key dates, completion date, planned completion, the order and timing of the operations to be done to provide the works, as well as provisions for float and time risk allowance, among other things.

Unlike other standard forms of contract, the NEC does not require the use of programming software, require activities to be logically linked, show early or late start and finish dates or require that there be a critical path identified for the works in the programme. These matters are instead usually specified in the scope.

Acceptance of the programme 

The project manager has two weeks to accept or reject the submitted programme and can reject the programme because:

• the contractor’s plans shown in it are not practicable;
• it does not show the information which the contract requires;
• it does not represent the contractor’s plans realistically; or
• it does not comply with the scope of the works identified in the contract.

If the project manager refuses to accept a programme for other reasons, their refusal may be a compensation event.

What should a contractor do if the project manager fails to respond? 

If the project manager fails to respond within two weeks, the contractor can notify the failure.  If the failure continues for a further week, the contractor may treat the project manager as having accepted the programme. The project manager’s failure to respond in time may also constitute a compensation event.

What should a contractor do if the project manager improperly rejects the programme?

If the project manager rejects a programme for one of the reasons set out above, the contractor is required to re-submit a programme for acceptance within the period for reply provided in the contract data.

Whilst the project manager has a discretion to accept a programme, the employer may be in breach of contract if the project manager rejects a programme improperly, which would itself be a compensation event under clause 60.1(18).

If the contractor disagrees with the project manager’s decision and considers the programme is compliant – for example, if despite a rejection on grounds of impracticability, the contractor considers the programme is practicable – it may need to resolve this through the dispute resolution procedure in the contract. If the project manager is held to be wrong in their rejection, this may constitute a compensation event under clause 60.1(9).

Float & time risk allowances in the programme

The contractor’s programme must include provisions for float and time risk allowances. These have a direct effect on the assessment of delays and so need to be looked at carefully.

Float, or ‘total float’, in NEC refers to any spare time within the programme after time risk allowances have been included. Whether this spare time is available to the employer or contractor depends on the nature of the float.

• ‘Total float’ is the amount an activity can move without affecting the critical path. The total float is shared between the parties and is consumed by both compensation events and the contractor’s own delays.
• ‘Terminal float’ is the difference in time between planned completion of the works and the specified completion date. In accordance with clause 63.5, terminal float is owned by the contractor: it only absorbs the effects of the contractor’s own delays and not the effects of compensation events.
• ‘Time risk allowances’ are required under clause 31.2 and are periods included in the programme for matters which are at the contractor’s risk and have a significant chance of occurring. These are ‘owned’ by the contractor and are not available to absorb the effects of compensation events.

Given the drafting of the NEC, it is not surprising that contractors prefer to include time risk allowances and terminal float, whilst employers prefer to see total float in the programme. Float in the programme should therefore be considered carefully to prevent any unexpected effects.

Taking over 

The employer should take over the works within two weeks of completion, unless otherwise stated in the contract data. The project manager then certifies the date on which the employer takes over any part of the works, and its extent of that takeover, within one week of the date.

Acceleration

Under NEC, acceleration refers to bringing the completion date forward to achieve completion before the original completion date. Under clause 36 of NEC the project manager cannot instruct acceleration without the contractor’s agreement  – unlike some other standard form contracts.

Either the contractor or project manager may propose acceleration. If both are prepared to consider the proposal, the project manager may instruct the contractor to provide a quotation. The quotation should be provided within three weeks and the project manager should then reply within three weeks, however, there does not appear to be any sanction if the contractor does not submit a quotation or give reasons for its failure to do so, other than that it may be a breach of contract. Even then, it is unclear what loss or damage may flow.

Despite clause 36, the project manager may be able to instruct acceleration – including as one of the means for a contractor to deal with a compensation event under clause 62.1, or by instructing a change to a key date under clause 14.3, which is a compensation event under clause 60.1(4).

A central tool

Understanding how the programme is to be prepared, including how this has impacts on programme acceptance, is key to managing time effectively when using the NEC ECC (Hong Kong Edition) contract. Failing to have an accepted programme in place can have wide ranging consequences. Clear communication and strategic programming can help both employers and contractors complete projects successfully and on time.

Co-written by Ronald Fung of Pinsent Masons.

Read more on the use of NEC4 contracts in Hong Kong SAR:

• Navigating weather conditions in Hong Kong SAR NEC4 contracts
• Allocating the risk of physical conditions under NEC4 construction contracts
• Understanding Hong Kong SAR NEC compensation events ‘crucial’ to projects’ success
• Optional clauses in Hong Kong SAR NEC forms can boost construction project outcomes
• Hong Kong SAR NEC forms hold limits to instructing changes to construction works’ scope
• Hong Kong SAR NEC forms encourage proactive communication
• Impact of potential variations of scope in Hong Kong SAR NEC forms must be thoroughly assessed
• Clarity on compensation events in Hong Kong SAR NEC forms can help to avoid construction disputes
• Using the NEC4 standard form contract for construction projects in Hong Kong SAR