Clause 60.1 (6)

Under the NEC Supply Contract, clause 61.4 states the requirement of the Supply Manager to respond to a notified CE within 1 week or at a later time agreed with the Supplier.

My understanding is that to impose a time bar thus resulting in the NCE being deemed accepted, the Supplier has to notify the Supply Manager of his/her failing of not responding to the NCE. It is not a requirement under the Supply Contract as it only states ‘may notify’, but it is only after this notification that if no response is provided for a further 2 weeks, the NCE can been deemed an accepted CE and a quotation provided accordingly.

However reviewing the NEC Supply Chain flow chart for compensation events, it shows that if the Supplier does not notify the Supply Manager then clause 60.1 (6) becomes applicable. However my understanding is that the Supplier would be required to raise and submit a CE referencing clause 60.1 (6) when stating the Supply Manager has not responded in the time period within the Supply Contract and the whole process of reviewing and responding to CE’s starts again - is this correct? Even so, what of the original event? Does it mean that as clause 60.1(6) has now been applied that the original event is deemed accepted?

My confusion is, yes, clause 60.1(6) can be applied and that the Supply Manager had not replied in the time period stated however the flow chart then follows through to clause 61.4 and surely this particular clause (60.1(6)) is one of the more difficult ones to dispute because the only real option to reject this NCE would be if the Supply Manager felt the event has no effect upon Defined Cost or Completion Date no?

Furthermore, if the Supply Manager has not responded within the 1 week allowed but instead responded 3 weeks later. Can the Supplier raise a further NCE referring to clause 60.1(6) despite a response now having been provided? (I guess they can but what is the impact of this - the NCE accepted as it was late but if the original NCE was rejected then is it now deemed accepted and a quotation received and must be assessed by the Supply Manager?)


Firstly let’s deal with the failure by the SM to reply to your notified event within one week. In this clause the word “may” means the Supplier is allowed to notify the SM of their failure, not that the requirement to notify is optional and that deemed acceptance can occur without it. In law the reminder is a condition precedent - no reminder = no deemed acceptance. If your NCE is successful in being accepted or deemed accepted you are entitled to the cost and time that flows from the breach you originally notified of.

The SM’s failure to reply is a separate breach from the original one which would be notified and dealt with separately. It can be difficult to prove any loss under this compensation event as there are only a few actions of the SM that would delay or cost the Supplier more money. Failure by the SM to reply to a NCE does not delay the Supplier per se and as such an NCE under clause 60.1(6) could most likely be rejected in the way you suggest.

So if you want to force the SM to deal with the original NCE you should notify the SM that they have failed to notify their decision. If they still don’t deal with the NCE it will be deemed accepted and you can submit a quotation, at this point the SM has lost the argument on the principle of whether it is a CE or not, and can now only argue cost / time. If the SM felt this was unfair they would have to refer this to adjudication.

If the SM did eventually reply to your NCE 3 weeks later you could technically notify this as a CE but will be met with the same problem of being able to prove any loss as a result. Whilst clause 60.1(6) may seem weak without it there is no remedy for the SM not acting in accordance with contractual timescales, and equally why should the Supplier be able to recover anything for a CE that causes no loss?

Be wary of getting caught up in petty skirmishes about compliance with timescales and focus on the substance, if they replied late did you like the reply? If not then dispute it, if so then why risk upsetting the apple cart with a technical NCE that won’t entitle you to recover any loss.

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