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NEC ECC: Option C - Defect correction costs

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It is pretty clear that under an Option C defect correction is a defined cost but not a CE. However, as a result of the Defect an inherent problem has been found in a structure. Should the repair for this secondary problem be a CE?

Logically yes, however my thought is that the initial Defect caused by the Contractor has found and exacerbated the inherent issue. It has been there for 50 years and if it hadn't been uncovered, would have been safe (it became exposed to the elements water etc).

In short, a void needs to be filled in a duct but wouldn't have been had it not for the Defect. Should the reinstatement of this void be a CE?
asked Jun 1 in NEC3 Testing and Defects by BPMC (390 points)  
I believe it is a compensation event.

In accordance with Clause 11.2(5), it defines that Defect is a part of the works which is not in accordance with WI, applicable law or Contractor's designed accepted by the PM.

So, it seems that the inherent problem revealed is not a Defect as it is not something mentioned in the WI. Thus, Clause 11.2(5) does not cover the inherent problem.

Thus if you decided to ask the Contractor to deal with the inherent problem, it is a change of WI under clause 14.3 which constitutes a CE under clause 60.1(1).

However, I believe clause 61.4 bullet point 1 may also apply in this situation. That is, the event arises from a fault of the Contractor (if the Contractor did not make defective works, the inherent problem will not be exposed). In this case, the PM may notify the Contractor that the Prices, Completion Date and Key Dates are not to be changed.

1 Answer

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I agree in part with Bryan's comments although am not sure that this issue is  necessarily as straightforward as that.

The word 'fault' under clauses 61.1 and 61.4 is not defined, although probably assumes that a compensation event arises because the Contractor did, or did not do, something for which they are contractually obligated.

The inherent problem already existed but was compounded by prolonged exposure, caused by the Defect.  The issue is whether you can define a Defect as a 'fault', as it is 'a part of the works not in accordance with the Works Information'.  This could actually occur for a number of reasons, however, including one which is not the Contractor's fault, although they are still obliged to correct it.

Consequently I would be inclined to say that this matter is more appropriately dealt with by the insurance for 'loss of or damage to property ... '.
answered 5 days ago by Andrew WI (8,940 points)