NEC3 ECC: Cl 63.8, Assessing a quote as zero when the Contractor has provided incorrect information?

NEC3 and NEC4 Contracts Compensation Events
1

I have a query regarding an unaltered Option A, and assessment of a quote for a PMI where the Works Information to be altered based on information supplied by the Contractor which was incorrect. The works involve installing two new 1.2m diameter piles adjacent to an existing BT duct.

Works Information:-

The Works Information includes a series of drawings from dive surveys undertaken prior to the works which show the position of any obstructions and location of features and the BT duct

Appendix 1/16 confirms that the Contractor is to locate the duct. The Works Information also requires the Contractor to have diver attendance during piling.

The Contractor also raised a query during the tender stage regarding the duct, and it was confirmed during the tender period that they had received the updated Appendix 1/16. , this confirmed to Contractor that the requirements for working adjacent to the BT Duct and that confirmation “that the duct will remain in place during the works.”

The contractor undertook a dive survey in accordance with the Works Information, and reported back that the duct clashed with the pile locations, and a risk reduction meeting was held (notes from minutes below), and a PMI issued for an additional dive survey,:-

“Further to previous Contractors Communications, EW 5 and PMI 11, relating to BT cable duct Hamworthy side, we record that a site meeting took place on site on Monday 21 November, at which the following were agreed:
Interserve’s Sub-Contractor (TMS) to mobilise a dive team, dig down to locate the BT cable duct, determine whether the cable duct indeed passes through the location of HP03, determine whether there is sufficient slack to allow it to be locally moved. If it cannot be moved, BoP will consider how the works can be amended to accommodate.

In addition, TMS dive team to inspect the bed surface of the piles driven to date PP01-PP04 to ascertain the extent of draw down of the bed in the vicinity of the piles.

PMI no 11 for the diving works has been issued. We will maintain records of the works undertaken and resources deployed. TMS advised that the dive activity is anticipated to take 1.5 – 2 weeks to complete.

As discussed at the meeting, the piling Sub-Contractor had planned to commence installation of tubular piles after completion of deck dismantling, i.e. activities associated with piling (temp works, gates etc) are forecast to commence around 28/29 November. (NOTE: this date is in accordance with the accepted programme but the sequence has been revised). This may be delayed by the additional diving works. The PM requested details of costs associated with standing of plant so that a decision can be made as to whether to demobilise the plant or stand it. In the interim, it was agreed not to mobilise the 100T crane to the Hamworthy side until that decision is made. We attach the schedule of rates included within the Sub-Contract. TMS are making enquiries as to whether any reduction in rates can be made for ‘standing’ and will advise in due course if this is the case. We request a further PMI to cover the delay to commencement of the piling and/or demob and remob of the plant.

Diving Update
The divers were mobilised 23 November and started diving Thursday 24 November with a 5 man team, this has been increased to a 7 man team today 25 November. The divers will be working this weekend. We will provide a further update on Monday 28th November.”

Result of the survey

The 2nd dive survey (as instructed under the PMI), was carried out and the results showed that the Contractors first dive survey was incorrect and the duct was as per the Works Information and was not causing an obstruction.

The Contractor then proceeded with piling.

In summary

The works information was correct, a PMI was only issued after the contractor provided erroneous information which would have changed the works information . The Contractor then proved that the Works Information was correct and their survey that they provided was incorrect.

Can I use clause 63.8. “A compensation event which is an instruction to change the Works Information in order to resolve an ambiguity or inconsistency is assessed if the Prices, the Completion date and the Key dates were for the interpretation more favourable to the Party which did not provide the works information”

Should the PMI be assessed as “0” cost as there was no change to the works information, and the costs should be the Contractors as it was their error, ie if their first survey was as accurate, then the second survey would have not been required, and no additional costs would have been incurred by the Employer…

2

I’d have thought that, as the compensation event arose from the fault of the Contractor (doing a poor survey), it arises from their fault and therefore under 61.4, you notify no change to the Prices and Completion Date.

That assumes that there is no good reason for the first Contractor’s survey being wrong i.e. there is ‘fault’.

3

It does seem as though the Contractor caused this problem and the following points should be noted:

  1. an instruction by the Project Manager itself is not a compensation event (unless the PM has said at the same time "this is a compensation event and please give me a quotation under clause 61.1). An instruction otherwise has to be notified by the Contractor that they believe it to be one, and state why it is one under clause 60.1. It would appear that this is likely to be considered a change to the Works Information (i.e. a second survey) which would be 60.1(1).
  2. I would be interested to see how the Contractor communicated the results of the survey - i.e. was this issued for “acceptance” to become new Works Information.
  3. If this event is a compensation event then it has come about due to a difference in Works Information i.e. Employers WI says duct is not in way, Contractors WI says it is in the way then 63.8 could come into play which is assessed in favor of one who didn’t create the ambiguity.
  4. As Jon points out - under clause 61.4 this could be a reason to say it is not a compensation event anyway as it has arisen due to the fault of the Contractor and therefore there should be no change to Prices or Completion Date - and any increased cost or delay to Completion will be the Contractors liability.