Is there a switch date in the NEC 3 standard wording?
Our clause 63.2 reads: ‘For other compensation events, the changes to the Prices are assessed as the effect of the compensation event upon the Defined Cost or, if the compensation event has already occurred, the assessment is based upon the Defined Cost due to the event which the Subcontractor has incurred. Effects on Defined Cost are assessed at open market or competitively tendered prices with deductions for all discounts, rebates and taxes which can be recovered.’
Our employer is arguing that there is not a switch date in this wording and that if the events have already occurred by the time of their assessment (our clause 64 is completely omitted by the way so there is no deadline for this!) then they are free to assess based on the resources brought to site. This puts us in a difficult position as every quotation is being rejected because we do not have the ability to predict with accuracy what we are going to use/need to the precise litre of fuel for example.
It sounds as though you are using an amended NEC conditions of contract, so answering this question will be difficult without seeing the full contract. I’ve checked the standard NEC contract I have available to me, and 63.2 refers to not reducing the Prices if a CE reduces the Defined Cost.
As per the standard NEC3 - Option A - The contract defines the ‘dividing date’ (better defined in NEC4) as ‘the date when the Project Manager instructed, or should have instructed the Contractor to submit quotations divides the work already done from the work not yet done.’ If this has come from the Project Manager, then i would suggest you could refer to 63.1 as the assessment method.
Practically speaking, the NEC ethos is to deal with Compensation Event in a timely manner and avoid having a bucket of claims at the end, if you’re raising your Notifications, and are expected to quote within 3 / 4 weeks (typical) and the forecast costs are anticipated after this , based on the Project Manager’s approach, you will never have Compensation Events Implemented within the timescales allowed.