In August/September a subcontractor completed some GI work for us (the Contractor).
In their September application for payment they applied for several hours of standing time without substantiation. We told the subcontractor that until they provide substantiation for the claimed standing time we could not pay it. It has taken until now (early March) for them to provide us with daily diaries.
(As an aside, the diaries are unsigned - there is no signature from a representative of the subcontractor or the contractor. Does this have any effect on their claim?)
Due to the provision of these diaries it has now come to light that an element of the standing time was caused by the Client. Ordinarily we would raise a compensation event with the client to recover this cost. However due to the 8 week time bar stipulated in clause 61.3 there is now some confusion. Could we argue that, although we were aware of the event in September, we were not aware of the fact the event was a compensation event until more recently so we are still within the 8 week limit? Or is clause 61.3 meant to be interpreted more strictly than this?
Clause 61.3 states: “If the Contractor does not notify a compensation event within eight weeks of becoming aware that the event has happened, the Prices … are not changed”.
Do you refer to NEC3 or NEC4? Which Option do you refer to?
By “Client” do you mean the “Employer” or the “Project Manager” or the “Supervisor” or are you referring to an “Other”?
You say “the standing time was caused by the Client.”
If this means that the Project Manager, or Supervisor, issued an instruction which led to the standing time, then it is the Project Manager who is obliged to notify the compensation event, so there is no time bar on notifying a compensation event for the instruction. [See the first sentence of clause 61.1, then refer to the final phrase in clause 61.3]
If this means that the Project Manager, or Supervisor, changed an earlier decision, then it is the Project Manager who is obliged to notify the compensation event. If the Project Manager did not issue that CE Notification then you, as Contractor, are not time barred. [See the first sentence of clause 61.1, then refer to the final phrase in clause 61.3]
If the standing time was caused by the Employer preventing access to the site or part of the site [34.4] then the Project Manager should have issued an instruction to that effect [dependent on circumstances, perhaps under 34.1]. Then it is the Project Manager who is obliged to notify the compensation event, so there is no time bar on notifying a compensation event for the instruction. [See the first sentence of clause 61.1, then refer to the final phrase in clause 61.3]
On receipt of the Subcontractor’s September Application for Payment did you, as Contractor, issue an Early Warning Notification?
Did the Subcontractor issue a compensation event notification, if so – when?
In this situation I believe “Other” would be the most appropriate. The Subcontractor was awaiting an instruction from the designer - another party with a separate contract with our Employer.
An EWN was raised at the time in relation to the Subcontractor receiving instructions (and straying from the original scope) from the designer.
The Subcontractor did not issue an compensation event notification because the subcontract was remeasurable.
It strikes me that you, as the Contractor, cannot be time barred. The Designer is not a party to your contract, but seems to be an agent for the Employer, so would indeed be an “Other”.
If the standing time was caused by a change to the Scope of your contract [by the Designer] then that change should have been instructed by the Project Manager. His failure to issue a CEN reliant on that instruction means that you, as the Contractor can raise it, but you will not be time barred.
It is only reasonable [and in the spirit of mutual trust and cooperation, clause 10.2] for you and/or your subcontractor to stand if you are aware of an imminent change; to mitigate cost and delay; particularly as an EWN was issued.
Whilst I don’t necessarily agree, it may however be argued that the Designer had no authority to “instruct” you or your subcontractor and thus works should have continued on the original Scope, until an instruction to change the Scope was issued by the Project Manager, however counter intuitive that may sound. From your description it sounds as if that scenario would have led to aborted work with associated time and cost implications, not to mention possible deterioration in interparty relationships.
James, you need to be aware that under clause 26.1 the contract applies to the Contractor as if they had not subcontracted and the contract applies as if a Subcontractor’s employees were the Contractor’s. Therefore, the Contractor is responsible for notifying a compensation event within 8 weeks of becoming aware that the event has happened. The fact that you personally may not have been aware but the Subcontractor was, means that the Contractor will be deemed to have been aware of the event when it happened.
The designer or Other to which you refer, does not have authority to instruct anything under your contract unless there is an amendment to the contract which allows it or, they have been delegated authority under clause 14.2; otherwise only the PM or Supervisor can instruct.
Under clause 27.3 the Contractor only obeys instructions which are given to them by the PM or Supervisor and which are given in accordance with the contract.
If the designer is an Other, then the Contractor is required to co-operate with them under a number of clauses, primarily 25 & 27 but in order for a compensation event to arise, one of the the conditions stated in clause 60.1(5) must have happened.
The Contractor is required to show on any programme submitted for acceptance its interaction and agreements with Others and if the Other does not meet any date agreed and shown on the Accepted Programme, then 60.1(5) can be triggered, this would have to have been notified within the 8weeks in order to keep an entitlement to be compensated.
Please note that the Contractor is only relived from the 8 week time bar for CEs 60.1(1), (4), (7), (8), (10), (15), (17), (20).
The only way the Contractor can be relieved of the time bar in the situation you describe is if the instruction arose from either the PM or Supervisor; what was the information or instruction from the designer?
If it was information relating to the Scope then it is likely that it needed to be an instructed change to the Scope but that would have had to be instructed by the PM, in which case the PM would be obliged to notify the CE to the Contractor under clause 61.1 & 61.2 and the Contractor cannot be time barred.
The only relevance I can see for the fact that the subcontract was re-measurable is that they are likely to be paid for the work but not protected against delay or compensated for any time or cost effects.
Also, early warning notifications cannot be relied upon as notifications of compensation events, they must be notified separately, see clause 13.7.
A final thought is that the Contractor is obliged under clause 61.3 to notify all compensation events irrespective of whether or not they are notified within or outside of the 8 week period stipulated in 61.3, it is for the PM to decide under clause 61.4 if the event has been notified within the time allowed under the contract and whether the Prices and or Completion Date and Key Dates are to be changed or not.
I hope that helps, happy to discuss further if you have questions.
