Daniel Walker | 03 Mar 2016

NEC contract lead performance indicators – driving the right behaviours

Health and safety management has taken a step change in the last twenty years by focusing on “lead” indicators to identify trends informing proactive actions.  Traditional reporting of “lag” indicators led to learning from mistakes through accident investigation, but didn’t serve to positively encourage reporting.  Lag indicators do little to aid anticipation of where and when accidents may occur.  This makes the identification of appropriate intervention harder still.

Could the same approach be adopted with the management of NEC contracts?

What would appropriate “lead” indicators look like?

Traditionally those involved in the reporting of contractual data and contract communications under NEC have focused on compensation events, their value and the amount of “change” yet to be implemented.  This is still critical information however it could be possible that those projects with the least amount of “change” and the lowest values of implemented compensation events, may also exhibit other common characteristics that could be tracked and monitored during a project.

In Dr Martin Barnes’ preface to the NEC contract he notes that one aim of the contract is to facilitate “foresighted collaboration between all the contributors to the project”.  As the originator of the contract Dr Barnes embedded processes to stimulate good project management and these processes can be tracked and analysed to monitor performance.

One of the key processes he defined was the early warning mechanism obliging each party to warn the other of potential risks to the project.  There is no defined mapping of early warnings to compensation events and one doesn’t automatically precede the other.  That said, a potential sign of under-utilisation of the risk management process may be a very low ratio of early warnings to CE’s.  On the best projects I’ve worked on, early warnings were not frowned upon and raised in equal measure by both parties.

Start measuring the ratio of early warnings to compensation events.  Look for trends in the increased use of the early warning mechanism and any knock on effect to reducing the number or value of compensation events.

The other central pillar of the NEC contract is the programme and its critical importance to managing works and assessing change.  On most projects, monthly submissions are provided for acceptance and best practice may find an updated Accepted Programme being established every month.  The blockers to this are normally the timeliness and quality of the submissions combined with the timeliness, quality and competence of the assessments being made by the Project Manager.

A key metric to measure may be the average timeliness of programme submission against the interval period and the same for replies.  This will confirm whether the communication process is effective.  The other timescale to note is the period between programme acceptance.  These both provide some insight into the validity of the current Accepted Programme.

Start recording this programme data and set benchmark targets for reducing these timescales.  This can only have a positive impact on programme management and project performance.

In summary lag indicators, like compensation events, are the outcome of circumstances and actions that may or may not be preventable.  In order to give projects the best chance of mitigating additional cost and time impacts start looking at lead indicators, such as the ratio of early warnings to compensation events, or the timeliness of dealing with actions relating to the Accepted Programme.  There are probably many others and only by analysing your contractual communications and key metrics will they be discovered.

CEMAR Analytics brings business intelligence to your NEC portfolio and provides the ability to start reporting in aggregate across all contracts.  Reports can be filtered and grouped to provide analysis across varied data sets.  Dashboards can be created to track and monitor performance, with a specific set of metrics focused on communications and behaviours.

View our short video below for more information.  Contact us in order to explore how CEMAR Analytics can support and enhance your business reporting –

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