NEC ECC: Imposing Sectional Delay Damages

I am looking to impose Sectional Delay damages on a Contractor, however I cannot find the overall process for this.

Do I need to provide an early warning notice against the Contractor, followed by a compensation event complete with the calculation of the duration. Also, do I need to raise this communication within a duration stipulated i.e. CE is eight weeks from becoming aware of the Event?

No nothing like you describe. If you included X5 and X7 in contract data, it should be clear what the sectional completion was(X5), and the resultant liability in terms of £/day(X7). There is nothing to notify - this would just be “another amount” assessed as part of the application and you would reduce their payment that period by the amount they have exceeded the sectional Completion Date by.

Thanks Glenn, I am consious that it has been 5 months since and that we have not reduced or made any comment on the matter of damages. Since the secontional completion due date (x5 and x7) , we have not mentioned, acted or put any EWN or CE forward, hence the advise request on the proceedures to take such action later on.

To be clear, we did not need to notify our Contractor in any means of our decision to impose Sectional Delay Damages after a period, and having not devalued their account (5 months on), we are still within right to take this action and impose this?

Contractually you are still within your right but in the spirit of the contract you would like to have thought that both Parties would know where they stand in terms of liability well before now. There should have been a conversation at least to clarify that they are liable, as it is the Employers gift whether they actually choose to levy them (I have seen numerous Completion Dates missed over the years and the right to charge the delay damages has not been taken).

It is a bit like doing “disallowed cost” audits progressively throughout the project not one big audit at the end where numerous costs that had been paid are disallowed at the 11th hour and there is no chance for them to recover.

Glenn, I recall that many years ago under ICE Conditions of Contract, the deduction of liquidated damages was at the Employer’s discretion as you say.

However, under NEC conditions I don’t think that discretion exists - the wording of X7 is that “the Contractor pays delay damages”, and the wording of the amount due in is “less amounts to be paid or retained from the Contractor”. The principles are the same in NEC3 and NEC4 - there is no “may” so the PM is required to deduct the damages from the amount certified for payment.

Under NEC the Employer/Client exercises the discretion as to whether to deduct damages at the time of drawing up the contract and deciding whether to include X7.

Agreed Dave but practically it is often the case that they choose not to(levy the damages). Same as a Contractor down the line to their Subcontractor.

Hi Glenn / Dave,

This discussion is fruitful because it is not a regular withinin my experience.

The Contract data is clear, yet we do not have any verbal or written communication to hold the postion on imposing Damages. No direcression has been made, but we have continues together in a worklike manner. Considering that we are now entering the end of the project, we havent had any discussion on the matter.

EWN should be raised at a time of any matter aware by either party (this has not happend but should it have), CE need to be raised within 8 weeks of an event ( this has not happened), the assessment on our Contractors account has been in full ( with no devauation for delays.) Therefore, I am right to now at the 11th hour of project completion (5 months after the key date) to action this? Should we have done this throughout the period by assessments as said, or is as you say, this is not in “mutural trust and cooperation” Alternatively, what action is likely to return?

Alfie - as per the previous comments there is no early warning or CE not notify here. If they have missed a sectional Completion or Completion Date then you are entitled to assess that accordingly. Nothing to stop you doing it late (where as Key Dates impact has to be assessed within four weeks) but you can see why the Contractor would be aggrieved. Why has this not been addressed by both Parties to know very clearly if they will be applied or not and assessed at the time? Whilst this is not in the spirit of the contract nothing to stop you doing it contractually, but you might have trouble sleeping!?

Thanks Glenn,

I don’t fully understand why either parties have not discussed this at the time. I am self-employed and have found multiple issues with both parties not adhering to the Contract ie CE and ambiguities.

I have four queries,

One, with regards to core clause 25.3, the Project Manager decides work does not meet the condition stated for a key date, thus additional cost, the Project Manager has 4 weeks to assess the addtional cost. I assume this is in relation to damages meaning we are unable to apply after 4 weeks?

Two, what if no cost impacts have been incurrred / cannot be demonstrated. I recall that this is not a penal system, but is for recovery for loss of operation etc?

Three, further to our previous correspondence, the Project Manager may decide to change the sectional completion date and overall Completion date by instruction for sequenced work, as we have events that interfere. Whilst this change is notified 5 months after the Sectional Completion date (and original intention to apply sectional damages) the sectional completion date and overall completion date is now far right.

Four, Take over clause 35, has the Employer now taken over the work as the date within Contract data has passed without agreement?

The Project Manager now believes that we are able to apply damages for the initial 5 months, then stop until the new instruction 8 month after (3 month non damages) to later accumulate if the new sectional date is not met.
As no damages have been applied initially, and the key date has been formally changed, is the initial 5 months no longer applicable - relating to point 1, 2, 3 and 4?

Also, I do remember from additional CE after sectional date, delays freeze for days agreed before recommencement, but is this the same for the overall change without applying damages for the initial 5 months?

Your thoughts are very much welcome.

Many Thanks

with regards to your questions:

  1. I have questioned this before and this would be a legal question rather than a contractual one. The intent from the contract is clearly that it should be assessed within four weeks, but there is not a clear timebar if they don’t so I am not sure where that leaves the PM. The conclusion we came to previously was that the PM is not time barred to assess - but begs the question why have four weeks in there anyway.
  2. yes the Employer can only recover the cost they have incurred for the Key Date being missed - like Delay Damages this is not meant to be a penalty
  3. not sure what your actual question is here, but the PM does not instruct a change to Sectional or Completion Dates. They can instruct a change to Works Information which will result in the Contractor assessing impact to planned Completion/planned Sectional Completion Date as part of a CE, and once implemented that will move the Sectional/Completion Date.
  4. too detailed to go into here, but if they have exceeded either Sectional Completion or Completion Date and there is not CE that can justify its movement then delay damages are liable. You just have to follow this rule.

For reference much better to post these as individual questions in Reachback than have numerous comments further questions within comments. This will be more useful for you but also for other users who benefit from the questions/answers given.

Thanks Glenn, a very much appricated response.

Also, I will post queries individually hereon.

My last and only question is regarding point 3 ’ the PM does not instruct a change to Section or Completion date’. If a PM raised PMI to directly to change a key date in accordance to 34.1 and 14.3 without discussion with the Contractor (becuase the Employer needs to do something) - and if the Contractor is already in delay damages, would this mean with dates move right and previous delay damages are excempt?

I assume that the Contractor will also respond with CE, 60.1 (4 ).