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NEC ECC: Is a CE required on an ECC option E to substantiate a change in the forecast?

+1 vote
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I am the Contractor on an NEC ECC option E contract.

1: Does a change in the forecast from the previous forecast require a CE to do so? or;
do you only include additional cost incurred in the latest forecast?
2: If a CE is not required, what is the intention of a CE in an option E? To only change, key, sectional and completion dates?
3: With the purpose of the forecast to identify the potential Defined Cost and the Defined Cost being the total of the Prices, what drives the change in the total of the Prices when changes occurs during the coarse of the project if all you have to do is update the forecast as per the contract data. (Different way of asking 1 and 2)
asked Nov 8 in Compensation Events by paul.bosua (520 points)  

1 Answer

+2 votes
I have found it useful in managing Option E contracts to have an 'audit trail' of the reasons for changes in forecast cost (and time).

I therefore follow the process of notifying/quoting for Compensation Events if they meet the criteria in Clause 60.1.

When a change in the forecast is necessary, but the reason does not meet the criteria of 60.1, I issue an Early Warning, even if the event has already occurred, so that there is a record of why the cost/time has changed.

I think it's worth doing this because otherwise there can be a tendency to get to the end of the contract and find that the cost/time has increased significantly but nobody can easily identify why.  The other point to bear in mind is that an increase in cost/time which is not a CE could be construed as being the 'fault' of the Contractor whereas those changes that result from a CE are usually fairly clearly an Employer/Client liability.
answered Nov 11 by dave meller (2,130 points)  
Good answer from Dave, the only thing I would add is that giving an early warning is important under an option E (as well as C and D), to avoid any potential Disallowed Cost issues.
Yes agree EW is essential not to have cost disallowed however, it is still unclear whether a CE is required to facilitate a change in the forecast as per the NEC, when time is not impacted? The client is extremely sensitive when NCE's are submitted under a option E and for the sake of the relationship I would like to keep NCE's at a minimum.
Paul - why are they so sensitive to CE's for your option E project? All you are trying to do is give them a heads up of more realistic cost to them the project will be. If you don't warn them of potential increase costs that could affect relationships even more in the long run!
It is the first time the Client is executing a project on the NEC. They interpret the notifying of CE's as a money hungry contractor. It is a difficult situation when not all parties understand the function of the NEC.
Understand - but they need education rather than you not following the contract. This is where a project workshop early doors helping both Parties understand the principles of the contract is invaluable and thankfully I am on average running one of these training sessions once a week now on projects where either the Client or Contractor have instigated such a workshop.