NEC ECC: Cancelling Compensation Events

NEC3 and NEC4 Contracts Compensation Events
1

  1. CE was notified by Contractor (p 1), PM requested quotation (p 2), Contractor submitted quotation (p 3). Employer not in agreement and it was discussed to “cancel”. Do I do a part 4 and state the PM will do his own assessment and then do a zero assessment and close the loop that way?

  2. CE was notified by Contractor, PM requested quotation and before the quotation could be issued by the Contractor, another Contractor from Employer’s vendors list did the work. In essence the CE is “stuck” at Part 2. In order to close the loop do I request the Contractor to submit a zero rated quote and then do a part 4 accepting the zero quotation?

  3. CE was notified by Contractor, PM requested quotation. There already was the same CE in the system. In essence the CE is “stuck” at Part 2. In order to close the loop do I request the Contractor to submit a zero rated quote and then do a part 4 accepting the zero quotation?

1 Like
2

You do not state which Main Option you are using, although you should treat the scope of works as a ‘configuration control’ exercise, using the Contract Date as the baseline and incrementally adjusting the scope as compensation events are notified (and accepted)…

If you notify a compensation event to add to the scope of works, you would, effectively, need to notify a further compensation event to remove the same scope. In reality this may not be necessary if the Contractor is in agreement with a zero assessment, although remember that people come and go on any project and you need to make sure that everything is formally implemented in such a way that disputes may not arise at a later date.

Applying the contract correctly, the compensation events you mention in all three scenarios may not actually be ‘zero’ value. Remember that a PM’s assessment of a quotation must take account of Defined Cost actually incurred before the ‘switch date’, including preparation of quotations under Main Options C and D, where this is properly incurred and increases the Defined Cost.

  1. You will need to notify a further compensation event to ‘cancel’ the scope of works, because the Contractor is obliged to put this compensation event into effect.

  2. Again you will need to notify a further compensation event, as above, and for the same reason.

  3. Again you will need to notify a further compensation event, as above, and for the same reason.

It may seem ‘tidier’ to just implement ‘zero’ quotation assessments, but this does not mean that these issues will be conclusively ‘closed out’.

3

Firstly, for compensation events that the Contractor should be notifying, they are either

  • acts of omission by the Employer, PM, S or Others OR
  • neutral events (not in the control of either Party)
    which have (past tense), so I am not sure how you can cancel and event which HAS happened

Alternatively, they are positive acts of the PM or S which the PM should have notified at the time of the instruction, changed decisions, issue a certificate or correct an assumption (because what HAS happened is different - see above) etc. , so the Contractor would be notifying because the PM has not. If this is the case, then the PM needs to cancel or change back the WI to what it was, change the decision to issue a certificate etc.

So for 1, you can’t just cancel a CE which has happened because they don’t like the quotation ! But if you genuinely believe that it has a zero assessment, then you could do this.

For 2, how come another contractor is doing work which is part of the Contractor’s scope ? You could do this informally and wait for the quotation to come it at ‘£0’ and if it doesn’t make your own assessment.

For 3. ditto