NEC ECC: Instruction to stop as a result of a risk the Contractor owns

If we instruct the Contractor to stop / not start any work this will give rise to a compensation event. The reason for instructing the Contractor to stop is because of a risk that they own.

The event will affect planned completion and will result in additional preliminary costs as well as direct costs associated with the instruction (mitigation measures need to be deployed).

Whilst the instruction to stop is a comp event our contract allows us to take into account the actions of the Contractor. Can we class a risk the Contractor owns as an ‘action’ and offset the impact of the risk the contractor owns when making our assessment. If not can we deduct the risk the contractor owns from any assessment, would assume yes?

The instruction to stop/start works is a compensation event under 60.1 (4) as you have said. If the reason why the instruction was given is due to a fault by the Contractor then the PM can state this in the instruction.

It looks like your contract has been amended to include the words ‘actions of the Contractor’, although you would need to be certain that the Contractor has actually taken some form of action, as this wouldn’t necessarily include ‘inaction’, depending on the wording. You say the Contractor owns the risk but haven’t said whether any associated events or actions have actually occurred.

I would suggest notifying an early warning and discussing your proposed action before an instruction is given. Any actions consequent to the early warning meeting may negate the need for an instruction.

Thank you for your reply Andrew. a little more detail is below for info.

Background - Our work involves crossing existing assets (the assets were known about from the outset). There are 2 assets in total. The design of the route is down to the contractor and their design has brought us closer to the assets than the indicative route identified at conceptual stage.

What happened - We’ve passed the first asset. As we passed we have noticed some settlement in the region of the asset. We are now close to crossing a second asset and we are concerned about the same issue occurring again. The contractor has stopped of their own accord and engaged with the asset owner. The asset owner is requesting some tests are carried / other mitigations to minimise any potential risk to the asset.

The contractor wants the PM to instruct them to stop giving rise to a comp event. They believe the comp event would allow them to recover time / cost for the delay and the cost associated with the mitigation measures they are deploying.

Whilst we haven’t issued an instruction to stop (they stopped of their own accord) I wanted to play the scenario out. If we did issue an instruction, we would only do so as a result of risks which the contractor owns under the contract. For clarity, the contractor owns risks associated with design, passing existing assets and physical conditions. We have therefore bought these risks within the contract price. It doesn’t feel correct that the contractor can recover costs associated with this ‘comp event’.

Hope that makes sense?

Don’t forget whilst an instruction to stop work is a compensation event, you would not notify it as being a compensation event. If the Contractor notifies that it is a compensation event, the PM can then apply the first bullet of 61.4 stating that this is an event arising from the fault of the Contractor and therefore there will be no changes to the Prices or Completion Date.

From what you have said there isn’t any need or requirement for the PM to instruct the works to stop. The Contractor is to Provide the Works in accordance with the Works Information / Scope, which includes design responsibility, to meet the stated Conditions for any Key Dates and to complete the whole of the works by the Completion Date. If an event occurs which stops progress then it would only be a compensation event if it is for a reason stated at clause 60.1. You could (and maybe should) notify an early warning and discuss the matter at a risk reduction / early warning meeting, as it could delay Completion. You would then be able to discuss proposals for how the effects of the event can be mitigated.