Managing Commercial Risk Under NEC4 in Utilities and Highways Projects
Why early warning, applied properly, still makes the difference
NEC4 contracts are designed to encourage collaboration, transparency and early management of risk.
In live highways and utilities projects commercial pressure tends to build quietly as delivery progresses, often despite the contract mechanisms being well understood on paper.
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In most cases, this pressure does not arise because NEC4 is unclear. It arises because early warning and change processes are either underused, inconsistently applied, or treated as administrative rather than commercial tools.
Experience across live infrastructure delivery consistently shows that early, disciplined use of Early Warning can materially protect entitlement and reduce downstream conflict when it is applied with judgement and intent.
Where commercial risk actually develops
Commercial risk under NEC4 rarely presents as a single event. It develops through small, compounding issues that are allowed to drift:
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Scope or method changes that are treated as business as usual.
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Measurement rules that do not reflect the work being instructed.
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Early Warnings raised late, or not at all.
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Compensation Events assessed without proper operational or programme context.
Individually, these issues can appear manageable. Over time, they create uncertainty, erode entitlement and increase the likelihood of disagreement later in the project lifecycle.
Early Warning as a commercial control
Early Warning is often approached as a contractual obligation rather than a commercial safeguard.
Used properly, it provides:
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Formal visibility of emerging risk.
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A mechanism to address inconsistency before cost crystallises.
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A clear audit trail aligned with the contract.
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A structured route to managing change while delivery is ongoing.
The value of Early Warning lies not in volume, but in timing, clarity and judgement.
Experience-led early warning in practice
The approach described here is not theoretical.
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It is drawn directly from first-hand experience of the consultant now behind Redguard, developed while operating in senior commercial and operational roles across major highways and utilities projects. These practices now form standard methodology within Redguard’s consultancy work.
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Across multiple NEC projects, Early Warning was used not simply to notify change, but to actively protect entitlement and manage downstream commercial and regulatory risk through early, factual intervention.
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On a major highways programme delivered under NEC, an inconsistency was identified between the client’s stated method of measurement and the nature of the work being instructed on site. The measurement rules being applied did not accurately reflect the activities being undertaken, creating a growing gap between delivered work and recoverable cost.
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Rather than allowing the issue to surface later through contested assessments, an Early Warning Notice was raised promptly. The notice set out:
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The inconsistency in measurement application.
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The operational reality of the instructed works.
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The likely commercial impact if the issue remained unaddressed.
The Early Warning was accepted by the client and progressed through the NEC change mechanisms. The resulting Compensation Event enabled recovery of circa £250,000 of additional cost that would otherwise have been absorbed.
Addressing pricing intent and mobilisation risk
On a separate regulated utilities contract, a further inconsistency was identified within the pricing schedule issued at tender stage. The schedule allowed for daily charging of a rate that the client had intended to apply on a three-day cycle.
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Rather than relying on post-completion recovery or dispute, the issue was formally notified through Early Warning and progressed transparently through the NEC process. A Compensation Event was implemented, aligning the pricing mechanism with contractual entitlement and providing clarity for both parties.
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On the same contract, Early Warning was also used to notify that one contractor had not been afforded the same mobilisation opportunities as others operating under the framework. This disparity materially increased the risk of programme breach and regulatory exposure.
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By formally raising the issue at an early stage, it was possible to demonstrate that subsequent performance impacts were linked to mobilisation constraints outside the contractor’s control. This early notification later proved critical in protecting the contractor from full Section 74 liability, as it established that the breach would not have occurred had equivalent mobilisation opportunities been provided.
Why these outcomes were achieved
In each case, the outcome was not driven by aggressive commercial behaviour or retrospective argument. It was driven by:
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Early identification of risk.
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Clear, factual notification.
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Alignment with how the work was actually being delivered.
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Disciplined use of NEC mechanisms rather than workarounds.
By the time a Compensation Event is formally assessed, the outcome is often already influenced by the quality of early visibility and the credibility of the commercial narrative. Early Warning is where that narrative is established.
Programme integration remains critical
Programme remains the bridge between operational change and commercial impact.
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Where Early Warning leads to successful outcomes, there is typically:
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A realistic representation of delivery sequencing.
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Clear linkage between change and time impact.
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Alignment between operational teams and commercial assessment.
Where programme information is treated as static or secondary, even valid change can struggle to gain traction.
Commercial risk is operational
One of the most consistent lessons from live NEC delivery is that commercial outcomes are shaped daily by operational decisions.
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Commercial risk cannot be managed in isolation from delivery. Early Warning is most effective when it is understood, supported and applied consistently across operational, commercial and leadership teams.
Final thoughts
NEC4 provides a robust framework for managing change, but it relies on early, informed engagement to function as intended.
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Experience shows that when Early Warning is applied decisively and proportionately, it can:
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Protect entitlement.
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Reduce escalation.
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Improve commercial certainty.
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Support constructive client relationships.
The difference is rarely contractual. It is behavioural.
How this relates to REDGUARD
This experience underpins Redguard’s commercial risk and NEC contract support across highways, utilities and infrastructure projects, applying the same early, disciplined approach to identifying risk, formalising change and protecting entitlement on live projects.
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