Damages in CE quotations

NEC3 and NEC4 Contracts Compensation Events
1

NEC4 - Option A Contract.
An instruction has been issued which omits work/scope on a project. This has an effect on both the Total of the Prices and planned completion. A CE has therefore been raised.

The current accepted programme shows planned completion to be 4 weeks after the completion date, however as a result of the CE this has now been brought forwards by 2 weeks.

Consequently the Contractor will no longer be liable for 2 weeks of damages.

When assessing the CE quotation or undertaking a PMA, which will be a reduction in the total of the prices, can the value of the Damages that the Contractor would have been liable for, but for the CE also be taken into account?

Therefore if for example the saving in cost of the Works/Scope is say £100k, but the Contractor has also “saved” £20k because his liability for damages is reduced, should the CE be implemented at -£120k?

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2

I can’t see why there should be an adjustment for liquidated damages because of this omission. If works are omitted then the consequences of that are a reduced liability for damages; simply handing that back to the Client seems fundamentally unfair and a penalty against the Contractor who would only 2 weeks late

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Mike, thanks i can see your point, but i do think it’s a difficult question because.

  1. In effect the Contractor is being double “rewarded” in that he is saving costs by not having to have a site set up for an additional two weeks, plus he is also saving his liability for damages. By removing one of these I would say that he is not being penalised, he is just effectively being “rewarded” once.

  2. If Damages are a defined cost to the Contractor, should they not be adjusted as any other item and therefore if there is a reduction in the cost of this item, it should be adjusted.

  3. By adding duration to a contract the employer is required to incur additional costs, is it not therefore only fair that if they reduce the duration of a contract they should be able reduce their costs.

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Robert
Delay damages are a penalty for being late. They do not qualify as a defined cost.

When you measure the effect of a compensation event, you are supposed to measure the effect of the event on planned completion.

When measuring the effect of the movement in planned completion, you measure the effect of the event on the defined cost.

Delay damages are not defined cost, including them in the assessment is wrong.

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