Notice Provisions Protect Contractors from Risk

Notice provisions – those formal and time consuming notices to owners about delays or changes on a project – are an often ignored requirement on construction projects. While they are tedious and at times difficult to submit, following notice provisions can benefit contractors by identifying risk and providing clear reasons for costs and delays on a project.  Plus, they are required by contract.

Risk management is one of the three key pillars of project controls, and it is through that lens of risk management that we look at notice provisions. At Aegis we begin to identify potential risks before a project begins.  We work with clients to identify issues, assess the impact and to develop notice protocols so that they can quickly inform owners of delays or changes in accordance with the notice provisions.

Notice provisions typically contain two components: timing and content.  The old federal standard of 20 days from when the contractor knew of the changed condition seems luxurious compared to contemporary notice provisions.  Contracts now routinely require written notice of a change within five days of the event – and the required content of the notice seems impossibly comprehensive given the short timeframe.

Notice content matters, as does the method in which the notice is submitted.  This means daily reports, discussions, progress meetings, meeting minutes and emails probably do not satisfy these stringent notice requirements. The philosophy is that if a change or delay is not described and presented as required by the notice provision, then that change did not exist.

The difficulty of satisfying these requirements in five days does not relieve contractors of their obligations.  The notice period likely does not afford the contractor time to realistically foretell how long it will take to understand, price and resolve the changed condition.  However, contractors must still provide the written notice, noting that all related information is not yet available and follow up will be provided when the issue has been resolved or further matures.  Meeting this deadline is imperative to preserve the contractor’s rights for the change costs and any attendant delays.

Unfortunately, we often hear from contractors that the notice requirements are too complicated. This attitude is a reflection of increasingly difficult notice provisions, which present an obstacle to the contractor. However, it is critical that contractors comply with notice provisions, not just to inform owners of issues, but to protect themselves during and after the project.  We have seen that improper notice is frequently the owner’s first line of defense against a time extension request and related costs.

So, how can a contractor prepare for the unknown? How can stringent notice provisions be met on a short timetable? First, build notice provisions into a risk management plan as part of a cohesive project controls approach to the project.  Simple, practical steps include budgeting for an assistant project manager to assemble time impact analysis documentation and draft a notice letter template that can be used repeatedly and submitted in a timely fashion.  A spreadsheet that identifies each of the different types of changes and the timing and content of notice is simple to prepare and establishes the ground rule for notice.

Typically, notice provisions have been thought of as a boon to owners and a burden to contractors, but it’s time to change that paradigm.  Providing timely, compliant notice provisions means that the contractor no longer assumes all the risks for delays and costs, and building the requirement into project controls will help efficiently manage risk.

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