Examining the Early Warning System as an Essential Risk Management Tool in Engineering and Construction Projects

Description

ABSTRACT

Examining the Early Warning System as an Essential Risk Management Tool in Engineering and Construction Projects

Osinachi Nwandem*

This paper examines the early warning system as an indispensable risk management tool in construction projects. The paper contends that while the extension of time and additional payment mechanisms in construction contracts appear to compensate the Contractor during supervening events, these mechanisms are only deployed after the event. The paper observes that the workings of the early warning system help to identify and resolve events that could give rise to a potential delay or monetary claim. Given the striking benefits of the early warning system in a construction project, the paper shares guidance on designing an efficient early warning system in a construction contract. In proffering a solid guide, this paper referred to several standard forms of construction contracts used in the international construction industry, such as the New Engineering Contract (NEC), The FIDIC Red Book 2017 edition, and the General Conditions of Contract for the Procurement of Works in Nigeria, 2011 (the GCC 2011). This paper will benefit players in the construction industry who are interested in developing collaborative working relationships rather than adversarial ones throughout the construction project.

Keywords: Early warning, risk management, Construction Contract, the NEC4 Contract, GCC 2011.

INTRODUCTION
At the point of executing an engineering and construction contract, the parties are clear about the time for completing the project, the contract price and other deliverables. However, on commencing works, issues such as inflation, shortage and delay in material supply, government policies and/or legislation, or Employer-triggered events may erupt, potentially affecting the Contractor’s contractual obligation to deliver the projects within the contractual date of completion and at the agreed contract price.

Whilst several construction contracts now provide for the extension of time and additional payment mechanisms to deal with compensation events affecting the project, these mechanisms are only resorted to after the event has occurred thereby making it difficult for parties to promptly manage the project, maintain a cordial business relationship and avoid potential disputes.

* LL. B (Rivers State University), BL, LL.M (University of Ibadan). Fellow of the Institute of Construction Industry Arbitrators (FICIArb), Senior Associate at Aluko & Oyebode, PhD Candidate at the Nnamdi Azikiwe University, Nigeria.

THE GRAVITAS REVIEW OF BUSINESS & PROPERTY LAW Vol.13 No.3