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NEC ECS: When assessing a retrospective Compensation Event under an Option B Subcontract how do you assess Actual Cost?
If both the Contractor and Subcontractor have not followed the timescales set out in the NEC and a Compensation Event is being assessed retrospectively, would the Subcontractor be paid on records against the rates in the Contract data part 2 or based on what it has actually cost them?
In the Subcontract I am referring to there no deduction to the CECA rates in Contract Data Part 2 and therefore the Subcontractor will want to be paid as per these rates, but I have read the case of Northern Ireland Housing Executive v Healthy Buildings (Ireland) Limited and the judge refers to being paid on 'actual cost' where its agreed retrospectively.
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Just because neither party has followed the timescales does NOT mean you revert to "actual cost". Clause 63.1 states that the switch point between actual/forecast cost is either when the instruction was given, or for all other events when the compensation event was notified. It has nothing to do with when either party finally got round to doing what the contract expected.
Therefore it will be forecast costs using the Shorter Schedule of Cost Components which will all be at open market rates in line with the schedule.
Beware as well - one specific legal case does not change the rules of the contract. That case was around a specific amended contract with a specific set of circumstances so don't think that would overwrite contract clauses.
Depending on where you are, it's also worth pointing out that whilst decisions in Northern Ireland courts could be persuasive in England and Wales, they are certainly not binding.
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