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what happens if the PM incorrectly assesses a compensation event under ECC3

+2 votes
2,335 views
ECC 3 Option C. The PM has assessed the Contractor's quotation for a compensation event. The PM has chosen not to request revised quotations and has made his own assessment. The assessment omit works which are clearly required to provide the Works Information. Can the error be corrected other than by referral to the Adjudicator?
asked Jan 25, 2014 in NEC3 and NEC4 Contracts by badgerdamo (160 points)  
   
I, on the other hand, have been told by a lawyer that it implies that the PM can change any decision ! (but that if it is a CE under this clause, the Prices will only move one way !)

1 Answer

+2 votes
Once a compensation event has been assessed and agreed by the Project Manager or they have made their own assessment, the only official contractual recourse is formal adjudication under the contract. The idea of this being full and final is so that a line is drawn on each situation and neither Party can keep going back and trying to reopen it.

However, and this is a big however, if you can point out to the Project Manager that it is a fact that his assessment is wrong and the Project Manager can see this, by agreement the PM could re-open it and make it a mechanism to pay the Contractor their entitlement. After all - that is only what it looks like the adjudicator would say, and you both don't have to go through the hassle and cost for him to tell you that. Whilst it is not strictly in accordance with the contract, it would suit both Parties needs. If you can't convince him then your only recourse would be the adjudication route.

Generally you do not want to be re-opening CE's. If it is a bit more or a bit less than envisaged you don't want the other Party trying to get it reassessed every time. What I have seen work really well on projects is the Project Manager when they are going to make their own assessment lets the Contractor see it, to give them a final chance to convince them they are wrong before they make it "Implemented" (and final).
answered Jan 26, 2014 by Glenn Hide (27,180 points)  
From what you say, the PM has not assessed a compensation event in accordance with the criteria in clause 63 and an adjudicator would find against him. If you can persuade the PM of this, why go to the Adjudicator ?

While Glenn is right in that there is no official procedure anywhere in the ECC for the Project Manager to change a decision, which includes revising a compensation event, there is an implication that the PM can change a decision previously communicated to the Contractor as it is a compensation event under clause 60.1 (8). Note that this can only put up the Prices.

So I suggest that if the PM can be persuaded of his error, this is the contractual route used to correct it.
Sound advice from both Glenn and Jon. Firstly Glenn's comment that the PM should consult with the C before issuing is a good one, as it demonstrates that the PM is acting reasonably.
Jon's comments on changing a decision are totally,sensibl,  logical and practical.

However I have had lawyers tell me that clause 60.1(8) in itself does does not give the PM the power to change a decision. The power must be elsewhere in another clause and that no such power exists in clause 62.3 Quotations for CE's or 64 PMA's.

This perhaps highlights the subtle difference between practical and administration and legal interpretation.