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NEC ECC: Can risk be included and paid for in a CE?
Option C contract.
We currently have Compensation Events in for various items. All have an additional tab stating the risks involved in completing the works attached to the CE.
Example would be some additional drainage works, new pipe, two new Manholes. They have included weather, underground cables as a 'risk' element to the CE which gives an increase of 2% to the final agreed price.
Can this extra 2% (some as high as 8%) be paid for?
Over 100 CE's potentially the extra paid to the contractor could be as high as £50k
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Regardless of the Main Option, an appropriate risk allowance for cost and time should be included in any compensation event quotation assessment, because that is what the contract requires and the matter can't be 'opened up' once the CE is implemented, except where a PM assumption directly relates to the matter.
The value of any risk allowance in an implemented CE is 'paid' in different ways according to the main option. Under an option C the assessed CE amount is added to the total of the Prices (totP or 'target'). The Contractor is paid the Price for Work Done to Date (PWDD) which is Defined Cost plus fee, so they are actually paid for any such risks occurring, regardless of what has been included in a CE assessment.
At completion a preliminary share calculation is made between the totP and PWDD, which effectively compares the two amounts and apportions a 'pain' or 'gain' amount in accordance with the share ranges and share percentages.
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