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NEC ECC: Negative Compensation Events - Contractor remedies if scope is removed via a 'Negative' CE and subsequently completed by others outside of the contract.

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Under an Option C contract, should the Employer wish to issue a compensation event to remove scope from the Works Information but those works shall subsequently be undertaken via Employer self-delivery or via another contractor under a separate contract can this be done simply through Clause 60.1(1), which will request for a negative time and cost impact of the compensation event, or is formal termination the only viable option?
 
1) What would be the likely response from the Contractor as the work still needs to be done but shall be done by others?
2) Would the Contractor have any potential counter claim to come back with?
NB, Contractor is likely to breach the maximum 120% Contractor’s Share and be in 100% pain following this breach. The Employer is seeking to take back control of the continued failing delivery of the Contractor
asked Oct 4 in NEC3 Compensation Events by P_Cotty (120 points)  

1 Answer

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It looks like the contract has gone into a 'painshare' situation, for whatever reason, and the Employer is unhappy with the Contractor's performance.  In my experience the fact that a Contract is in a 'painshare' situation doesn't necessarily mean that the Contractor is not performing.  There could be numerous reasons for this, not least a PM who makes their own unrealistic assessment of CE quotations.

There is nothing to prevent an instruction to change the Works Information under clause 14.3, which removes scope and then this becomes a CE under 60.1 (1).  The Defined Cst is assessed under 63.1 but you cannot have a negative time impact on the Completion Date only the planned Completion, thereby increasing terminal float.

If the Employer instructed the PM to remove 'significant' scope and subsequently awarded this to someone else, then the Contractor could have cause to consider action outside of the contract.  The Employer, however, could terminate if they so wished for 'any reason' under NEC3 (although this has changed under NEC4), so they could pursue this course of action and follow the applicable procedure under clause 93 to assess the amount due to the Contractor.

Be aware that if the above course of action does go ahead the Contractor would likely pursue matters further, including the possibility of dispute resolution.  Informal discussions 'off the record' between the Employer and Contractor at any stage of a project are often useful to resolve or mitigate the effects of potential conflict situations, especially if the Employer intends to terminate or request that the PM instruct to remove scope.
answered Oct 4 by Andrew WI (11,460 points)  
would a request for a quotation from the contractor for a potential instruction under 61.2 be a consideration
Depending on the extent of the omitted works, the Employer's actions may amount to repudiation of the contract which could give the Contractor grounds for termination under R19 at clause 91.6. As Dave suggest maybe the Project Manager can request a quotation for a proposed instruction before acting.