Back to Basics #19 – The Importance of the Activity Schedule to Cash Flow on NEC Option A Contracts

Back to Basics #19 - The Importance of the Activity Schedule to Cash Flow on NEC Option A Contracts

 

The Activity Schedule is one of the Core Documents used to determine the interim Payments making it crucial on an NEC Option A Contract.

The Activity Schedule is prepared by the Contractor under the Main Contract (or the Sub-Contractor if it is an NEC sub-contract) and it should contain a list of the Activities that are planned to be carried out with a sum (the Price) stated next to each Activity.

Activities listed in the Schedule could include Site Works, Procurement and elements of the Design. Once an activity on the Schedule has been completed, the Contractor is entitled to apply for Payment of that sum in the next Payment Application Cycle.

The way in which the Schedule is set up by the Contractor (or Sub-Contractor) is fundamental to the cash flow on the Project. 

When preparing the Schedule, the following should be considered:

1. It is advisable to break the Schedule down into relatively small discrete activities, as an Activity needs to be complete before it is included in the payment.
2. The Activity Schedule should include everything that needs to be done on the project, and the Activities need to be clear definitions.
3. Sometimes it is possible to allocate costs to Activities in a way that improves the Cash Flow earlier in the project. 
4. When the Schedule is prepared it is important to consider how Management and Site Costs (referred to as Preliminaries on other forms of Contract) are shown, and allocated appropriately on the Schedule.
5. Ideally the Programme should be broken down in a similar way to the Activity Schedule, as this will assist with Project Management, accurate recording of Progress, and assessing Compensation Events.

A correctly prepared Activity Schedule is vital in obtaining payment. With expertise and experience the Schedule can be optimised to ensure Cash Flow.

Ramskill Martin can assist you in checking that any tender or contract Activity Schedule is properly detailed and sufficient to enable suitable Cash Flow under the Contract.

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