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NEC ECC: Risk allocation - how is it allocated or capped?

+1 vote
If the contractor has allocated say £10k for existing structures under the ECC and it actually comes out at £60k is the Contractor liable to pay this? Can a Contractor cap his risk pot/allocation for certain risks at a figure?
asked Apr 5 in NEC3 Risk and Insurance by anonymous  

2 Answers

+2 votes
In very simple terms, there are two methods of allocating risk in the ECC :

1. by adding or deleting compensation events. These directly impact on what is included or excluded from the Prices. If no compensation events have occurred, then just because something costs a lot more, does not mean the Prices are adjusted.
2. by choice of payment option which affects how over or under runs of cost relative to the Prices are - or are not - shared. So, in your example, if it was an option A Priced Contract, all the pain would be on the Contractor; if it was an option C target contract, then the pain would be split by the sharing formula; if it was an option E cost reimbursable, it would be on the Employer.

So can the Contractor cap his liability ? Depends on the contract he signed up to.
answered Apr 6 by Jon Broome (23,720 points)  
0 votes
Part of the answer will depend upon the Option you are working under and what the specific risk is.

If the risk is the amount of repairs to the existing structure then then under Option A it is the Contractor's risk and yes he is liable to pay. If it is an Option B then you will need to review the bill of quantities for how the work is measured. If it is Option C then the risk is shared through the gainshare arrangements. If it is Option D then need to review the bill of quantities for how the work is measured.
answered Apr 6 by dave bates (5,050 points)