The PM may issue an instruction to the Contractor on anything provided it is not impossible or illegal. cl.18.1.
You did not indicate who issued the EW, for that would clarify the situation a little. The intention of the EW “system” per cl 16 is to highlight possible problems. These may or may not have a CE implication. Given that the contractor issued the EW, it is perfectly feasible for the PM to acknowledge this, and issue an instruction on how to deal with the problem. It is then up to the Contractor to decide if this has a CE implication (cl.61.1). In the meantime he is obliged to carry out the instruction pending agreement by the PM that it is indeed a CE and agree resultant quotation.
We seem to be confusing processes within this question. You do not formally price an early warning, but you can be instructed to price a proposed quotation (61.2) which can then be instructed/implemented. Whether this was ever raised as an early warning is immaterial at this point – you are pricing the instructed proposed quote, not the early warning even if it was raised as one originally.
The subtlety here is around three separate processes under the contract:
Early warnings – raised to allow the Parties to discuss the potential affects of future issues and see if they can be avoided or at least minimised.
Project Managers instructions – these are not instantly compensation events, unless the Project Manager clearly state that they are one and request the quotation within the instruction. If the Contractor believes that the instruction is a compensation event then they are obliged to proceed with the works (27.3) but then should notify themselves that they believe this to be a compensation event (61.3).
Compensation Events – Project Managers can request a quotation under cause 61.1 and in the meantime the Contractor should proceed with the works. They can also request a quote under 61.2 (proposed instructions) or 62.1 (alternative quotations) which the Contractor should NOT be proceeding with, until the Project Manager has received the quote and then instructed accordingly if he wishes to proceed with this element or not.
The only recourse for a Contractor to recover additional time or cost under the contract is through a compensation event. The Contractor is not paid off the back of an early warning or even an instruction (although these may have led to the compensation event).
I agree with the thrust of Glenn’s comment but offer slightly different comments in regard to Early Warnings, Project Manager’s instructions (PMI’s) and compensation events (CE’s).
An early warning (cl.16) is intended to advise the PM (or Contractor) of something that the Contractor (or PM) thinks might happen, or in the case of say unexpected ground conditions, that an event has happened, hence the words “as soon as either becomes aware” in 16.1.
Turning now to CE’s, any Project Manager’s instruction which changes the Works Information, is a compensation event (cl. 60.1(1)). Most PM’s do not notify a compensation event at the time of issuing the instruction (PMI) and leave it to the contractor to so notify (issuing an NCE), but unless the contract has been changed by the Z clauses, there is no time bar on the contractor in issuing the NCE (see 61.3 and the guidance notes for using NEC3) where the PM should have notified the event but did not do so. Note in all cases it is imperative to comply with the time provisions throughout NEC3 or risk “time barring”.
The intention behind NEC3 and the compensation event regime is such that the Employer is not faced with nasty shocks at the end of the project in terms of price/time.
The words in 63.1 are crucial. “The date when the Project manager instructed or should have instructed the Contractor to submit quotations divides the work already done from the work not yet done” for the purpose of quotations and changes to the Prices (the contract sum in old money).
The whole idea is that the contractor bears the risk of cost while the Employer has some certainty over the contract sum.
Geoff – I think you have missed a subtlety of the early warning process by suggesting that if you hit unforeseen ground then as you have only just become aware that you should raise it as an early warning. The whole point of an early warning is to have the chance to mitigate the situation – and in this situation it does not look like there is anything that we can do about it. If this has happened then it is a compensation event and should be notified as soon as you become aware, and in any event within 8 weeks of becoming aware. The last line of 16.1 states that a matter that has already been raised as a compensation event does not need to be notified as an early warning matter. Following your example through you would have to raise an “early warning” as soon as you became aware of 1 in 10 year weather, lack of access etc which would be little help to either Party at that point.
However, if you hit unforeseen ground and you think that it may be an issue going forward for that area or another future area of work then that would be a worthy early warning as it might be something you can do something about – e.g. carry out investigative trial holes, surveys etc.
The rest of your comments about compensation events are very good I agree with 100%, and I believe are additional rather than contradictory to anything I highlighted within this original answer.