NEC ECC Option A - Increase in cost of original works due to Compensation Event causing a delay

NEC3 and NEC4 Contracts Compensation Events
1

I am currently working on a project (NEC ECC Option A) where we have had a Compensation Event which has caused a delay to the original contracted works.

The Event requires remedial works to be undertaken within the ground which now means the original works (foundation, steel frame install etc.) will be delayed until these works have been completed.

Due to the Accepted Event the Contractor is advising they will be claiming for a cost increase to the original works packages as part of their Quotation as their belief is the cost for the packages of work have/will increase due to the delay in when they will now be undertaken the works. I understand the logic but my thoughts are that this is a fixed firm price option and so these costs should remain the same as I am sure we will not be provided with any savings should costs found to actually be cheaper.

it would be good to get someone else’s thoughts on this matter.

For clarity the X1 Clause was not included within the Contract.

2

Firstly let’s go right back to basics on compensation events, these risks are not the Contractor’s risk under the contract therefore the Contractor has not included for them in its tendered Prices.

Then clause 63.1 tells us that changes to Prices are assessed as the effects of the compensation event upon … Defined Cost … and the resulting Fee. So if the Contractor’s Defined Cost has increased as a result of the event this can form part of the assessment. If the effect of the event was to reduce Defined Cost then Employer would benefit from this also as an effect can be an increase or a decrease.

Also note that Defined Cost at clause 11.2(22) refers us to the Shorter Schedule of Cost Components whether work is subcontracted or not (assuming you’re using NEC3) so the Contractor’s quotation has to be based on the Defined Cost of people, Equipment, Plant and Materials etc and not just the difference between the lump sum quote the Subcontractor gave them at tender and the quote they are giving now. Oh and most of the Schedule refers to “amounts paid” or “payments” by the Contractor which means the costs are real and have to be proven.