NEC ECC: Can it be a compensation event if it is outside the boundaries of the site

On an ECC option C project it was not clear at tender stage where a Contractor would set up their site offices(which also included a number of Employer offices) for what was a very congested site. Eventually a site was found that everyone agreed would be the best location and works proceeded in setting up the compound. This location was however outside the boundaries of the site.

Upon excavating for the offices the Contractor encountered asbestos in the ground that no-one could have expected to have been there. Is the Contractor entitled to claim for this as a compensation event, given that this is outside the Site?

Second spin off question on a similar theme - can a PM ever give an instruction for something that is outside the boundaries of the Site i…e is a Contractor obliged to follow?


The second question here is rather easier to answer than the first. The PM can give an instruction that changes any part of the Scope/Works Info so that may lead to a change occurring off site. For example, where design is taking place off site of course the PM can instruct a change on or impacting that design.

The difficult area and cross over with the first question is whether the PM can, on its own, instruct work to be carried out off site and if such an instruction is given do those works fall under the contract. Again, the second part is rather easier, if a lawful instruction is given it must bring with it all of the terms of the underlying contract either because the PM is only a creature of the contract and can only work within its boundaries or, if the PM stepped beyond that, it would be acting a agent for the Client (probably) and therefore the starting assumption would be the same contract is intended.

That brings you back to the difficult question of instructing works off site. In my view this depends on the type of work. If the contractor can lawfully carry out the work then the change in Scope is acceptable whether on site or off site is possible. So, as mentioned above, a change or addition of off site design is fine. Coming back to the specific question here the PM has no power to change the boundary of the and the Contractor has no right to carry our work for the client off site (there is a licence for the same given by the Client for the site). If the underlying instruction cannot be given then a change cannot be given either. So the “agreement” to use the off site area shouldn’t have been given as the contractor had no right to work there.

There is one saving I can see. If the off site area is also owned by Client then the PM, acting as agent for the Client, may have extended the site. As a matter of practicality that seems to be what has happened (no doubt for sensible practical reasons) but getting the legal interpretation to catch up will be a little tricky and require some care. The point remains however that if the work is lawful (ie a right to carry out the off site work can be demonstrated) then the identification and change to deal with asbestos found MUST follow the same principles as the underlying contract.

Rob has thoroughly answered most of the question. I will answer whether “Upon excavating for the offices the Contractor encountered asbestos in the ground that no-one could have expected to have been there.”

Under clause 60.1 (12) the unexpected physical conditions have to be within the Site for it to be a compensation event. It sounds as if the Contractor’s offices are within the Working Areas - which the Contractor specifies in Contract Data part 2 as being the "The Site and >any other areas needed

Just to add to Rob’s answer, the Working Areas and the Site (boundaries of the site) do not have to be exactly the same physical area, off-site manufacture or storage, or access to the Site, for example. Working Areas, however, can be changed under the contract by the PM whereas the Site boundaries cannot.

The Working Areas could have been extended to include the Site offices, which would have allowed Defined Cost to be properly incurred, including for People and Equipment, although there still remains the issue of the discovered asbestos, as the test under 60.1 (12) is that it is ‘within the Site’, so this matter ‘fails’ the 1st bullet point.

A Supplemental Agreement under clause 12.3 to amend the ‘boundaries of the Site’ retrospectively could be approrpiate, especially if, as Rob has mentioned, that the Employer also owns this land. There could be a technical issue as to whether the asbestos was actually ‘in the Site’ at the time of the encounter, although possibly another discussion point,

Thanks Jon, interesting, I cannot see how physical activity can be other than within the Site as that is the place in which there is a license to carry out work. To do this work at all I think the definition of Site needs to change and then it is a CE, though agree if only the Working Area definition changes then it would not, possibly, be Site and not match the 60.1(12) requirement. If that were the case then (19) may be correct of (1) as the Scope may well have changed to require the “off Site” work.