NEC ECC: Compensation Event Assessment when Contractor delays another

NEC3 and NEC4 Contracts Compensation Events
1

I have rephrased a previously asked question as appreciate it wasn’t easy to understand.

Contractor (1) under an Option A contract are late in delivery of their works (Completion Date was July 2019). Due to their lateness they are having to pay for the welfare & site management out of their own pockets as there has been no CE to increase the period for which we will pay for welfare & site management.
Contractor (2) were meant to come in and perform another scope of works upon Contractor (1) completion. As Contractor (1) were late we had to get Contractor (2) on site at the same time. In October 2019 we transferred the PC duties from Contractor (1) to Contractor (2) and thus relieving Contractor (1) of the cost of welfare and site management.

A PMI was issued to Contractor (1) to advise that Contractor (2) would take over the PC duties.

There is a difference in opinion as to whether or not the compensation event will have a value. The two stances are;

  1. As Contractor (1) were incurring costs we should see a negative CE for the period between the PMI date and the planned completion date i.e. 3 months of welfare and site management costs.

  2. As Contractor (1) were incurring costs at their own expenses the costs for the welfare and site management are not defined costs and therefore a negative quotation cannot be expected. If a negative quotation is required/assessed this would be double jeopardy as Contractor (1) would be incurring costs (that aren’t recoverable as not in the Total of the Prices) and then further value would be removed from the Total of the Prices.

2

The answer is (1).

The logic is:

  • Presumably, it says somewhere in the Client’s Scope document that the Contractor is the Principal Contractor and is to provide welfare facilities.
  • The PM issues an instruction taking this duty out of the Scope.
  • This is a compensation event under clause 60.1(1)
  • A change to the Scope is one of the compensation events which can reduce the Prices - see NEC3 ECC clauses 63.2 & 63.10 or NEC 4 ECC clauses 63.3 and 63.4.

However, if the Principal Contractor duties are stated as a Z clause - which is where many lawyers like to put them - then you have no power to do this !

3

i think it might also raise the legal question of taking work away from one party who have contracted to do it and awarding to another party.

4

I want to give this a thumbs up, but can’t!