NEC ECS: Acceptance of TQ changing WI - CE

ECS - Option A

A subcontractor raised a TQ with an element of design. The design could’ve been adhered to but they proposed 2 alternatives with differing fittings. The design engineer (not PM) accepted one of the proposals from the TQ. The proposal was constructed and has since caused a bigger issue, meaning a solution has to be put in place. The Subcontractor is now treating this as a compensation event.

A few questions:

  1. Generally can a reply to a TQ lead to a CE? Even if it’s not from the PM/ or even a named person in the contract (albeit we, the Contractor, are the Principle Designer)?
  2. In this case, is this knock on impact a CE to the Subcontractor?
  3. Are we, the Contractor, under any obligation to accepted the TQ if it’s only value engineering for the Subcontractor, and not knowing the full / knock on impacts.
  4. Should we have followed the TQ response up with an instruction from the Project Manager, to instruct a change in the WI and therefore a CE?

From what you have said, it looks like the TQ proposed alternatives for the S/C design, one of which has been accepted, although not by the PM but by a design engineer. Design acceptances are to be given by the Contractor, so unless there is a structure of delegated authority, as notified under clause 14.2, then the S/C could argue that the design engineer IS the Contractor.

The ‘value engineering’ submission by the S/C is essentially a proposed change to the Subcontract Works Information, which under the 2nd bullet point of clause 60.1 (1) is NOT a compensation event. If there are any ‘knock on impacts’ then they could constitute a CE unless they fall under the definition of ‘Defect’.

Consideration of the implications of a S/C design should have been made as part of the acceptance process, not least because of the responsibilities of a Principal Designer under s11 of the CDM 2015 Regulations. A TQ doesn’t actually exist as a recognised formal communication under the NEC contract although is a generally accepted method to deal with technical issues which arise. These should, however, be formally addressed by one of the contract procedures, where necessary, to avoid the very problems that you are now facing, especially where the S/C design becomes part of the Contractor’s design under the main contract.