Early Warnings after Notification of Compensation Events

The Project Manager is assessing Compensation Event Quotations submitted by the Contractor on the basis that Early Warnings were not given after the Notification of Compensation (NCE) was raised.

As an example, the Contractor encountered unforeseen ground conditions when piling which prevented piles being driven into the ground. The Contractor raised an NCE describing the issue but proceeded to investigate the reasons why it had encountered the issue which involved a mixture of hand-digging and bringing in heavier plant to excavate the ground. These additional works solved the issue so the piling operation could continue however, this all came at additional cost.

The Project Manager’s view is that because they were not informed via an Early Warning of the hand-digging / heavier plant they had no ability to challenge the additional cost early on and therefore they would seek to remove that cost from the compensation event quotation.

Another example of this principle being applied is a delay event. An NCE was raised highlighting there had been a delay to the works due to an Employer’s risk, the Project Manager is unhappy about certain costs claiming they were not made aware of them specifically leading them to take the view that an Early Warning should have been given.

Is the Contractor required to inform the Project Manager of the impacts of a Compensation Events via Early Warnings after the Notification of a Compensation Event has been raised ?


I would of assumed that if a compensation event has been raised then a quotation for same should of been given to the Project Manager. This should of detailed out the full works. I am only new to all this so best wait and see others advices. Assumptions could also be made a corrected

The intention of raising an early warning is to allow the PM and Contractor to discuss the best way for dealing with the issue - regardless of whose issue it is.

The principle of clause 61.5 (Contractor did not give an early warning) is to allow the PM to assess the effects of the CE had an early warning been given ie at a lesser cost.

A scenario, wind speed is a CE and the forecast is high winds for the day of the planned lift.

The Contractor (or PM) raises an early warning and it is agreed to delay the lift 2 days. The PM gives an instruction not to start the work/delay it 2 days which is a CE.

No early warning is raised, the lift gets aborted on the day due to wind speed and the Contractor notifies a CE. The PM accepts the CE but states no early warning given.

The CE is assessed on the basis that an early warning had been given and the lift was deferred.

In your scenario, presumably it was not expected to encounter the ground conditions you did encounter and therefore (clause 61.5) early warning notification not applicable however there may be an argument that you should have raise an early warning simultaneously with raising the CE notification. The discussion will be what would have happened differently had you raised the early warning, presumably it would have been the same outcome in terms of what was required. Did you get an instruction to do the hand-digging.

The above highlights the need to be informing the PM.

Good luck with it

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I would question the PMs decision, in that the contract states that there is no requirement to notify an early warning after a Compensation Event has been notified (notwithstanding the fact that it could be worthwhile or good practice to raise an EWN) and that compensation events should be assessed on the basis that the Contractor reacts competently and promptly, which you seem to have done.
Without knowing the facts it’s hard to understand the alternative to hand digging/heavier plant, but I’d assume that this would have had its own costs i.e. rig standing time and potential delay etc. If the PM is just striking out sections of the claim without reviewing/making allowance for alternatives it would seem questionable.
It sounds like the quote and assessment were made on a retrospective basis which could be queried as it isn’t necessarily in accordance with the contract, but probably understandable on an unforeseen ground conditions CE.