Does Acceptance of a Compensation Event Notification Negate the Need for a Formal Instruction

NEC3 and NEC4 Contracts Compensation Events
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The Contractor has undertaken additional works, which were requested to be undertaken in recent meetings and discussions with the Project Manager and Employer representatives.

The Contractor is requesting that the Project Manager retrospectively issue an instruction to undertake these completed additional works, and notify a compensation event accordingly.

The Project Manager has requested that as the works have been undertaken already, the Contractor can notify a compensation event under 60.1(1) and the Project Manager’s subsequent response accepting the notification as a compensation event, is sufficient evidence to satisfy that these works are an instructed change to the Works Information.

The Project Managers suggestion is in the interests of improving the efficiency of the NEC process, given that there are a number of reactive/incidental additional works being undertaken, for which the Contractor can actually be aware of (and have completed), prior to the Project Manager.
Whilst this defers from the compensation event procedure set out in the contract, the Contractor has agreed to notify 60.1(1) events in lieu of an Instruction, in order to expediate the process. However, prior to commencing this method, they seek assurances that acceptance of such notices constitute an instruction changing the Works Information (should there be any issues around these works in the future).

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The PM is correct, in the event that the Contractor has completed additional work (i.e. work not required by the Works Information) and wants to be compensated for this clause 61.3 requires the Contractor to notify the compensation event. Once this happens and the compensation event is implemented the fact that there was no instruction is effectively irrelevant.

One word of caution though, this approach works fine whilst the parties are getting on with each other however it can fall apart if relationships break down. My advice to contractors is don’t do any additional work without an instruction and to be very suspicious of a PM who seeks to avoid giving formal instructions.

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