Compensation event assessment - Contractor's lost opportunity to earn profit on alternative projects

NEC3 and NEC4 Contracts Compensation Events
1

The Contractor on a NEC4 ECC project which has had significant delays caused by Client risks, is claiming in their assessments for a line item they term “loss of turnover” with costs marked as “TBC”. Through discussion with the Contractor this claim is a loss of profit type claim, submitted to compensate the Contractor for the lost opportunity to earn profit on other projects, due to delays preventing staff moving on to new projects.

An amount has not been included in the Project Manager assessments issued, as we do not believe that the Contractor is entitled to include for this item. This on the basis this item is not listed in the Short Schedule of Components and so therefore is not Defined Cost. Furthermore, clause 63.6 limits the amount the Contractor can claim against a CE, to the scope of the contract. Lastly clause 52.1 states the sum should be recovered in the Fee.

Is the Project Manager right to take this approach?

2 Likes
2

The Project Manager’s decision to exclude loss of profit from the CE assessment and the rationale for doing so is correct. To be recoverable a cost has to fall within one of the components in the schedule of cost components or short schedule of cost components (depending on main option). Loss of profit is not one of the components and therefore not recoverable and as such deemed included in the Fee.

1 Like