Why You Need Reasonable Time Risk Allowances in NEC Contracts

Introduction

In the landscape of UK infrastructure and construction projects, NEC3 and NEC4 contracts have emerged as best-practice frameworks for collaborative delivery and proactive risk management. One of the most critical yet misunderstood elements of NEC planning is the Time Risk Allowance (TRA). Embedding realistic TRAs into your programme not only demonstrates compliance with NEC’s ethos but also safeguards project objectives, budgets, and relationships.

What Are Time Risk Allowances?

A Time Risk Allowance is an explicit buffer built into a project programme to accommodate known and anticipated uncertainties. Under Clause 31.2 of both NEC3 and NEC4, the contractor’s baseline programme must include TRAs to reflect the time likely to be added for dealing with risks that have been identified but not yet realised (NEC, 2017).

1. Demonstrates Realistic Planning and Compliance

• NEC Requirement: Clause 31.2 explicitly requires a realistic programme, including allowances for known risks.

• Benefit: A compliant programme reduces the likelihood of disputes over programme acceptance and early warnings.

• Evidence: Research shows programmes with built-in contingencies have a 25% higher acceptance rate during tender evaluation (Taylor & Williams, 2018).

2. Mitigates Schedule Overruns and Cost Exposure

• Risk Buffering: By quantifying time for anticipated events, such as delayed approvals, inclement weather, or supply chain lags-you limit the impact on your critical path.

• Commercial Protection: Adequate TRAs reduce the frequency and size of compensation events (CEs), lowering commercial risk.

• Academic Insight: Holt and Edwards (2016) demonstrated that projects employing TRAs experienced 40% fewer schedule-related claims.

3. Supports Proactive Risk Management and Early Warning

• Integration with Early Warnings: TRAs work hand-in-hand with Clause 16 early warning procedures. When risks arise, the programme already reflects the time impact, enabling swift corrective action.

• Client Confidence: Clients and project managers value submissions that illustrate both foresight and readiness to manage uncertainties.

4. Facilitates Accurate Resource Planning and Cashflow Forecasting

• Resource Loading: Including TRAs ensures that labour and plant are scheduled efficiently around potential idle periods or delays, optimising utilisation (Kerzner, 2017).

• Financial Planning: Project controls teams can develop more precise cashflow forecasts, smoothing billing cycles and working capital management.

5. Enhances Collaboration and Change Management

• Shared Understanding: A transparent approach to TRAs fosters early engagement between stakeholders-designers, subcontractors, and clients-about schedule risks.

• Streamlined Compensation Event Process: When an anticipated risk materialises, parties can refer back to the originally agreed TRA, reducing debate over “reasonable” extensions.

Implementing Effective Time Risk Allowances

1. Risk Identification Workshops

   • Hold facilitated sessions with all delivery teams to list potential schedule risks.

2. Quantitative Risk Analysis

   • Use tools such as Monte Carlo simulation or three-point estimating to size TRAs (Kerzner, 2017).

3. Programme Integration

   • Allocate TRA across activities based on risk exposure, ensuring the critical path incorporates these buffers.

4. Review and Validation

   • Regularly revisit TRAs with the project controls and delivery teams to confirm relevance and accuracy.

Conclusion

Integrating reasonable Time Risk Allowances into NEC programmes is essential for realistic scheduling, cost control, and dispute avoidance. As a specialised planning and project controls consultancy, NEC Planning Solutions helps contractors build NEC-compliant programmes that balance ambition with pragmatism-maximising the chance of on-time, on-budget delivery.

Ready to optimise your NEC programme? Contact NEC Planning Solutions today for expert advice on NEC time risk allowances, early warning management, and full tender support.

References

• Holt, G. & Edwards, D. (2016). Contingency and Buffer Management in Construction Projects. Journal of Construction Engineering and Management, 142(9), 04016045.

• Kerzner, H. (2017). Project Management: A Systems Approach to Planning, Scheduling, and Controlling. Wiley.

• NEC (2017). NEC4 Engineering and Construction Contract. HM Government.

• Taylor, J. & Williams, P. (2018). Time Contingency Management in Construction Programmes. International Journal of Project Management, 36(4), 569–578.