the NEC contracts require the contractor to notify and then the matter gets discussed at a risk meeting where the said issue could no longer be a compensation event. In my experience, lip service is paid to the contract (sad but true), so assume the following example:
Contractor was to provide clear access and suitable hardstanding around the perimeter of the building. It was written in to the contract and as a result, increase cost came about due to a heavier crane required to lift pieces over the working area.
In this instance, would most people provide Early warning notice and a compensation event notice or maybe even the quote at the same time? or would they go EWN, go through the process, agree its a comp event and then risk the response periods dragging on and eventually some weeks later, submit the quote. In my experience, these things drag by the time it comes to monthly payment leaving the subcontractor needing to claim the amounts even though it’s technically not agreed…sometimes the main contractors ignore emails and wait until the matter is on a payment application. Is it “safer” to just put the EW/CE in at the same time? Curious to hear other people’s thoughts on the matter.
Firstly, the early warning procedure and the compensation event procedure are separate procedures under the contract. There are some links between them, however, notifications should be treated separately with no specific ‘dependency’ between the procedures, except that an early warning is not required to be notified where a matter has previously been notified as a compensation event.
Unless your contract has been amended there is an obligation on both parties to notify an early warning, with the matter subsequently discussed at a corresponding risk reduction (early warning) meeting, where appropriate. If a matter has happened, or is expected to happen, and it is a compensation event then it should be notified as a compensation event.
I am assuming that you are a subcontractor under an NEC3 ECS form. If the Contractor was required to provide ‘clear access and suitable hardstanding’ and they haven’t provided this then this is likely to be a breach of subcontract and a compensation event. Consequently you should notify the matter as a compensation event. This could also be one of the other compensation events, such as Contractor not providing something by the date shown on the Accepted programme, if you have one which shows this information.
Remember that your right to a change in the Prices is dependent upon a ‘timely’ notification under sub-clause 61.3. There is no ‘contractual’ penalty for notifying a compensation event, so if in doubt notify one anyway.
I became Part of a project that was 80% Complete. One of my task is to always understand what Compensation events was issued so for us to understand the Cash Flow status and Forecast.
As I read through the Approved Compensation Events,(Some Generated from Early Warnings) I notice that majority of the Quotes / Cost of the CE was cut and was returned to the contractor for acceptance without substantiation why but only with a cost breakdown where they used the original B.O.Q to generate the new cost for the CE.
I notice that there is time implications and Cost implication that should have been allocated to the contractor and was not allocated.
Can the Employer revert back to the B.O.Q after requesting a time a cost impact for the Early warning issued and before Issuing the CE. and If the Manager accepted the CE and returned it due to financial duress and noticed at a later stage that the Employer made a mistake on the CE, Can the Contractor Challenge and or re-visit the CE and issue the Employer with a notice of findings and claim outstanding duration and cost.
If the Employer has issued a PMI (Project Management Instruction) on Change of works and Additional works to be action with urgency, and costing was issued to the employer, only to receive back accepted cost was cut with a total of 65% after materials was supplied and fabricated and delivered as per instruction? Can the Employer revert back to the B.O.Q for pricing and Cut cost on a requested quote?
Your assistance is highly Appreciated
Thank you kind sir. You are right, we are a subcontractor under NEC ECS form. I hear what you are saying when the two processes should be treated separately. You know the majority of the time, they contractor doesn’t even respond and waits until we put it on the payment application. I’ve known QS’es at main contractors that don’t even read the notifications and instead address the issue when it comes in on a payment application. It shouldn’t be like that, but it is.
What you have described is quite a common situation, with matters dealt with in payment applications / certificates. Be mindful, however, that you need to appropriately administer your responsibilities under the contract even if the other party doesn’t. Perhaps initiate a regular commercial meeting to go through the payment application but add compensation events and early warnings as a separate discussion.