NEC ECC Option C float and the assessment of value in compensation events

NEC3 and NEC4 Contracts
1

The Target Cost includes an activity shown with a duration of 85 days and resource included in the Target Cost based upon 85 days. There is float included in this activity of 5 days such that it is anticipated that the activity duration will actually be 80 days. This is not terminal float for clarity. Assuming that the activity is completed in 80 days this would produce 5 days woth of gain. During the activity a weather event occurs resulting in the loss of 1 day to non-productive time. The activity is completed within the 85 days stated in the Programme. The assessment of the effect on the Completion Date and the Key Dates is that there is no effect. The float has been used to mitigate the weather event. What is the the assessment of the effect on the Prices based upon actual Defined Cost and/or forecast Defined Cost assuming the activity completed in 80 days or less?

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2

Time Risk Allowances belong to the Contractor and are there to mitigate his own problems.

A weather event during the activity would need to be assessed on its own merits. Contractors takes the 1 in 10 year weather risk. It would seem unlikely that in this instance a 1 day weather delay would be an event that occurs less frequenetely than one in ten years. If the weather event did occur less frequenetly than 1 in 10 years then the Contractor would be entitled to a delay to planned Completion.

3

Few points of note here:

  1. firstly I would not generally recommend activities 85 days long on a programme. You practically and contractually need activities broken into more detail to be able to manage and assess change
  2. not withstanding above, it sounds as though you have an 80 day activity with 5 days time risk allowance. You are required to show TRA on your programme so it should have been clear what your allowance was.
  3. Time Risk Allowance is Contractor owned and not available to be used in the assessment of compensation events. Likewise if planned Completion is earlier than Completion Date (terminal float) then this also is Contractor owned.
  4. It does not sound like one days worth of rain exceeds a 1 in 10 year event (60.1.13) so this should be absorbed within the Contractor’s risk. If however the rain was in excess of a 1 in 10 year event then the Contractor would be entitled to assess the time and cost effects as a compensation event which includes moving Completion Date if planned Completion had been directly affected.