Covid, X2 and Availability of Materials

We are administering a number of NEC3 Option C Contracts and have received CE Notifications about the effects of Covid seeking recovery under Secondary Option X2. The notifications reference the unprecedented increase in demand for materials, shortage of supply due to Covid and increases in costs. The Contractor’s aim is ultimately to increase the total of the Prices to capture costs over and above tendered allowances and a change to planned Completion where the increased lead-in time for materials supply impacts critical path activities.

Our view is that whilst the Covid notification under X2 may be valid, it is too generic and tenuous to evaluate. The cause and effect has to be specifically demonstrated and assessed alongside any mitigation measures that the Contractor has implemented. A blanket CEN to cover all materials supply and cost issues is not acceptable and each case must be evaluated on its own merits.

Contributors thoughts would be appreciated to find an appropriate and considered response.

If a matter is notified under secondary option X2 then you would expect the notification to reference the event (change in the law) to which it relates, otherwise, as you have said, it is not possible to identify what the notification is actually for.

The shortage / price increases of materials is a much more complex issue that is influenced by numerous factors, although partly Covid related. Objectively speaking this is usually a Contractor’s risk, although Main Option C makes this a ‘shared’ risk with Secondary Option X1 (if applicable) further mitigating the risk to the Contractor.

It seems that the notification is effectively treating various issues as a ‘global claim’, although it needs to be much more specific to be administered correctly under the contract. Even an X2 notification in relation to Covid could relate to one of several hundred pieces of secondary legislation so would need to be more specific to understand what the actual ‘change’ is.

Unless the particular contract has been amended by Z clauses, I would suggest that materials shortages/increased costs/longer lead times, if demonstrably caused by Covid, would be a compensation event under 60.1(19) irrespective of whether the delays/costs were caused by a change in the law.