NEC ECC: COVID-19 - 60.1(19) - effects not impossible to mitigate

NEC3 and NEC4 Contracts Compensation Events
1

NEC3 ECC Option C
The Contractor has issued a compensation event under 60.1(19) due to COVID-19. The Contractor paused work 23/03/2020, then put measures in place to comply with the CLC guidance. Works have restarted, some impact has been shown against planned Completion on 2 of the Contractor’s programme submissions since the pause and additional costs have been incurred.

The Project Manager is minded to reject the compensation event, relying upon the NEC ECC Guidance Notes (Apr 2013) as they include the related statement “A delay to planned Completion which can (as opposed to will) be recovered by acceleration, by increased resources, or by adjusting the programme does not stop the Contractor from completing on time. The Contractor must demonstrate that there is no reasonable means by which he can complete the works on time for the event to be recognised under the second bullet point.” With regards to “reasonable means”, the Project Manager believes that due to length of time remaining on the project, mitigating the effects of COVID are not impossible, therefore the test is not satisfied.

Noting that the guidance notes are exactly that. What course of action is available to the Contractor? He has spent some of the Employer’s money, without any instruction from the PM in getting work restarted after the pause and by putting additional measures in place on site, plus will be subject to additional welfare costs and the like from sub-contractors. If the impossible test is correct, then is COVID actually a Contractor risk, from which he must attempt to recover without compensation?

2

The test under clause 19 seems to be fairly strict and I understand the word ‘stop’ is key to the intent. Although there will be a subjective assessment with what constitutes ‘stop’, on a project by project basis, it seems clear that the clause intends to provide an apportionment of risk. The Contractor assumes responsibility for the event up to the point where it ‘stops’ or prevents the works being completed at all, or by the (planned) completion date, with the Employer assuming responsibility beyond that.

The Contractor manages their share of the risk by taking appropriate and necessary action to deal with the effects of such an event, which may extend to using ‘best endeavours’, that is those steps in their power which are capable of mitigating the effects of the event.

In your situation it seems that the Project Manager is assuming that the period of time to (planned) completion means that measures can be taken to mitigate the effects, which doesn’t seem unreasonable. As the test is quite strict you would need to provide evidence that ‘best endeavours’ would not be sufficient to mitigate the effects.