NEC ECC: Under option A is common law , is contract breach recovery better than capping with X17?

NEC3 and NEC4 Contracts Secondary X, W and Y options
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We are finalising a contract under ECC Option A, we are not sure whether the use of X17 as Low Performance Damages would be useful or whether it would be best to leave out X17 and if performance is not as Works Info/Specification and this Defect is not addressed, the Employer could pursue the Contractor for all losses rather than a capped level as per X17? Many Thanks PM

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The first thing to say is that Low Performance Damages are notoriously difficult to implement as more often than not the Contractor can point to one of the following :

  • the input to a process is not exactly as stated in the Works Information, hence the out put is not stated;
  • the Employer has changed something e.g. we want you to use component X rather than Y and here’s a CE, but the C can then say well the reason the performance isn’t achieved is because you said we had to use Y. If you stuck with X it would have been fine etc etc

Having said this, Contractors like the security of known damages and, as a result, may add the risk premium to your contract.

So it comes down to :

  • how likely will we be actually be entitled to damages (it’s easier if specified);
  • how likely is it that we will actually be able to recover the damages off the Contractor (it’s easier if it a contractual provision versus in general law)
  • how much will the Contractor increase their Prices if we do / don’t specify X17 and that will be partially dependent at what level we specify them at…

This is ultimately a commercial decision.