Early warnings are not - 

  • compensation events –
    • The contract is quite clear not to conflate the two processes.  Early warnings, the Risk Register and risk reduction meetings are about proactive, collaborative mitigation and avoidance of risk.  Compensation events are the mechanism to compensate the Contractor for matters that are not his risk.  So the scope of early warnings is much broader than compensation events.
    • You don’t need an early warning to prequalify a compensation event.  However the sanction under clause 61.5/63.5 reinforces the obligation to be forthcoming with early warning notifications.
    • Project Managers should be notifying early warnings too!
  • Commercial pre-positioning, typical examples that I’ve witnessed –
    • Early warning notifications (EWN’s) sent quoting clauses relating to compensation events – as my colleague says’ “…they are 44 clauses away in the contract for a reason!”.
    • EWN’s stating that cost and time implications will be advised at a later date inferring that they are inevitable.  Including any estimate of cost and time in an EWN is potentially “inflammatory” and in my experience clouds judgement and inhibits the risk reduction process designed to avoid these outcomes.
    • EWN’s which arbitrarily and unilaterally allocate commercial risk regardless of the event and how it might already be catered for in the contract either through core clause 6 (compensation events), 8 (risks and insurance) or Z-clauses.  The Risk Register is a management tool, NOT a contract document.  It does not and cannot allocate risks or price them.
    • These actions breed counter-intuitive behaviours – we’ve probably all seen Project Manager’s and Employer’s wince at early warnings from the Contractor, when in fact they should be inviting and embracing them.  Other strange behaviours include the receiving party’s ‘acceptance’ or ‘rejection’ – which is a nonsense.
  • A war of attrition! – “I saw the Contractor sent over 5 EWN’s this morning, make sure you fire back a dozen this afternoon!” – this is an actual quote directed at me as Project Manager and from experience is often the perception of early warnings – whoever has raised the most is winning the game! 

So now we’ve established what early warnings are not let’s look at what they actually are and how best to manage them in a way the contract envisages and also with some good project management diligence.

Without quoting clause 16, in summary, an early warning is a warning that you are aware of something that may become a detriment to the project in some capacity.  There is a contractual obligation to raise such matters with the other party.  In practice we should be seeing just as many EWN’s from the Project Manager to Contractor - often the Project Manager will be in a much better position to foresee certain matters and promote mitigation of the same.

Assuming EWN’s are being raised by both the Project Manager and the Contractor in a timely manner you’ll end up with a healthy list (Risk Register) within a few weeks of starting a contract – in fact you may immediately start managing risks entered into the Risk Register from the Contract Data parts 1 & 2.  REMEMBER, such entries into Contract Data in no way allocate risk, this would be a potentially dangerous misunderstanding for any procurement team to make!

Let’s look at what we can see and what we can’t:

  • We have an automated reference, title, description, notification date, proposal/solutions, actions.
  • They aren’t priced or allocated – this is compensation event territory, although they are scored and the register can be exported to Excel for pricing ‘off-contract’.
  • Early warnings can be associated to compensation events or other matters for administrative convenience.
  • Risk reduction meeting minutes are held locally to the early warning.
  • Risk matters that have been avoided or passed are not removed from the Risk Register, but can be set and un-set to flag them as current.

This should instigate a process for risk reduction operated with the full cooperation of both parties regardless of the matter in discussion and whether or not it may become a compensation event.

Some matters will need immediate attention however for the most part it’s common for EWN’s to be reviewed and matters progressed through regular risk reduction meetings.  Some Employer’s add a z-clause to introduce a ‘risk reduction meeting interval’ which ensures the Risk Register is reviewed no less frequently than the same.

From experience the quality of risk reduction meetings varies considerably – what measures can we take to get the best results from those in attendance?

  • Prior to contract award identify specific people who will attend and how often the regular meeting will occur.
  • Put the meetings in the diary – and have them regardless of whether new matters have arisen or actions have been completed, get in the habit.  Better still – put them in an agenda item on the weekly progress meetings so they form an integral part of the project management activities.
  • Have the right people in the room with the right attitude – knowledge of the matter requiring action is more important than knowledge of the contract clauses – commercial managers are welcome in this meeting but this is not the place to debate whether a matter was/is/should be a compensation event and whose “fault” it is – have a separate commercial meeting to tidy up those administration actions – the risk reduction meeting is about what can be done to address and manage the risk in the first instance.
  • Create a shared register – no more confusion about what number each EWN is, when the communication was served, who has a copy, what the agreed actions are, what risks have been avoided or passed.  A single version of the truth.
  • Update the register, distribute and make people accountable – this should be a project management tool – not just an ever increasing list of stuff that might go wrong!!
  • Project the Risk Register onto a whiteboard and update in real time – a simple but effective and powerful way of making progress.

So in summary, a combination of recognising what EWN’s and the Risk Register really are, and establishing an effective, practical means for administrating the matters in the spirit intended, will go a long way to bringing better results on your project and more importantly creating a culture which the contract has been designed for and works best within.

You may want to use a collaborative management tool for this process and CEMAR provides a fully compliant and flexible shared Risk Register, automatically populated with early warnings as they are notified – you can see how it works here:

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