NEC ECC: Compensation Event or Contractor's Proposal

Working under an amended form of NEC3 Option C within a collaborative partnership environment, the Contractor has issued a CE Notification for Change of Works Information.

The change has not been instructed by the PM, the change is to benefit both parties by lowering the final cost and would require an increase to the Prices.

When attempting to construct the original works, the Contractor encountered physical conditions which would have doubled the cost but would have not impacted the Prices (as physical conditions clause has been removed).

The Contractor has proceeded to construct an alternative solution, which is less cost than the actual works but is more expensive than what was originally agreed in the Prices.

The Contractor has excused working without instruction as is minimised any programme disruption while they awaited confirmation.

The Contractor’s view is that this should be treated as CE with an uplift to the Prices.

I am fully aware that they have not addressed this through the correct mechanisms, however appreciate we are working a collaborative environment and feel that this change would be more suitably categorised as a Contractor’s proposal as we have effectively reduced the foretasted out-turn cost with a lower pain share between the parties.

Is this a valid argument or would it be more reasonable to amend the Prices?

If what the Contractor is doing is not in accordance with the Works Information, then without an instruction this will be a defect that they are at risk of having to correct. If they are proposing to do something different, they can propose it and the PM can accept or not accept the proposal. If they accept, they then need to issue an instruction to change the Works Information so that what they are going to do (or in your case have already done) is NOT a defect.

However, this is an exception to it being a CE under clause 60.1(1) and will not lead to a change in the prices (i.e. will not change the option C target). Any saving or additional cost will then just be shared in accordance with the pain/gain percentages stated in the contract.

Even with a “collaborative environment” the Parties still need to follow the contractual rules.