EWN has been issued by Contractor regarding supply chain

The contract NEC4 Option A has been executed. No amendments, pure NEC.

The Completion Date is set, no change of specifications have been implemented, hence no CE’s to date.

Contractor issues first EWN that the lead in times for street lighting have increased and is beyond all parties influences. There is no alternative specification (street lighting) that can be used. Only one option.

This will delay completion by 4 weeks. We understand the tough circumstances at the minute due to all supply chain delays, however who is responsible for this? I feel this is not a relevant CE for the contractor, thus delay damages can be applied. However always best to collaborate to mitigate as best as possible, consider alternative specification.

You are basically correct. There does not appear to be any CE here, and the Contractor has not notified one.

However, supply chains are under pressure, so as a reasonable client you should do whatever you can to help the Contractor mitigate. It seems that is difficult, but if it can be achieved by an alternative specification, and its mutually agreeable, then why wouldn’t you accept? You then deal with that through Clause 16, which results in a reduction in the Prices. The Contractor may baulk at a reduction, but it could be of £0.01.

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Thank you Andy, helpful response.

It is not mandatory to invoke liquidated damages, so with good and supportive evidence that despite all avenues of mitigation have been taken, late delivery of the project can be accepted, without damages. The Contractor will still be under an obligation to reduce delay, and it would be sensible to agree the event as such.
The key being good honest collaboration, it works.

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I’m not sure what you mean by it not being mandatory to invoke liquidated damages.

I don’t have a copy of NEC4 to hand at the moment, but as far as certification by the Project Manager is concerned under NEC3, there is no discretion in the wording. If X7 is included in the contract then X7.1 says “The Contractor pays delay damages at the rate stated…” and 50.2 says “The amount due is … less amounts to be paid by or retained from the Contractor.”

If the Project Manager doesn’t deduct the delay damages from the sum certified, they would be in breach. I don’t think the wording is significantly different in NEC4.

If delay damages are not to be deducted, then X7 shouldn’t be included in the contract.

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With agreement with the Client, monies don’t need to be deducted. I have administered several contracts where this has happened.
There isn’t a “must” in the wording, so has been looked at as discretionary.

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I don’t think there’s a “must” anywhere in the NEC. Using that argument, it would be discretionary for the Contractor to provide the Works in accordance with the Scope (NEC4 20.1), for the Project Manager to certify payment or for the Client to pay the Contractor (NEC4 51.1)!

There is a common misconception across the industry that delay damages are discretionary, but if X7 has been incorporated in the contract and the Client decides that it is not going to deduct delay damages, then the only way that can be done while still complying with the terms of the contract is by means of a written agreement under Clause 12.3 - and I can’t imagine any Contractor is not going to agree to such a change.

However, if the Client isn’t going to deduct delay damages, I suggest it would be simpler for all concerned if it didn’t include X7 in the contract in the first place.

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Dave, I accept the “must / shall” sits more so in the works information, but I emphasize the need for all party agreement. It isn’t likely agreement would be forthcoming for the examples you have given.
Agreement may be possible in the case in question, where the problem/delay is outside the control of the main contract parties, i.e. no one is at fault, albeit the risk sits with the contractor. This to me is a fair outcome, and builds trust and collaboration.
Having X7 within the contract still allows damages to be invoked, where good reason under the contract is the case.

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Hi Steve, absolutely the Client can agree with the Contractor that damages are not taken, but as Dave describes, it has to be under a clause 12.3 agreement but there definitely is a ‘must’ in the contract, clause 10.1 imposes a mandatory obligation to act as stated in the contract, not just the Scope. The word ‘shall’ imposes a mandatory obligation on everyone to do what is stated in the contract, PMs should be very careful about doing anything different to what is stated in the contract, for a start they are not a Party to the contract and therefore cannot act under clause 12.3; the PM is there to administrator the contract and only has discretion wherever the word ‘may’ is used in relation to an action.

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Mapreader, just a thought but what about 60.1(19), can this be used? You say that it was “beyond all parties influences”, was it reasonably foreseeable at the Contract Date? If it does qualify under 60.1(19) it will also qualify as prevention event under clause 19.1 and the PM should instruct how to deal with it.

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Thanks, @stevebrownassociates .
Indeed, the agreement under clause 12.3 would be between the client and the contractor, although the PM may well be the party that suggests this as a fair method to resolve the issue.

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