NEC3 Compensation event notified by the Contractor

Hi all, I have a question on how to deal with compensation events notified by the Contractor.

A meeting was held amongst the Project Manager, the Contractor and Others and a change in Works Information is expected, but the details are yet to be finalised.

At this point, the Contractor notified a compensation event in accordance with Clause 61.3. While the Project Manager agrees that it is a compensation event, when he notifies the Contractor this decision, the Contractor is instructed to submit quotations at the same time.

However, given that the details of the compensation event are not finalised, there is no basis for the Contractor to prepare a quotation. In this case, how should the Project Manager deal with it?


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Welcome to the Group

The answer will depend upon how much information is currently available. If substantial information is available then the PM could use Project Manager’s assumptions to fill the gaps. In that way the Contractor can provide a quotation for acceptance and if the assumption(s) prove not to be correct then they can be revisited in a further CE – see clause 61.6.

Another option could be that the Parties agree to and extended period (agree period of time or a date) for the PM to reply to the specific notification – see clause 12.3, the agreement being captured in writing.

Another option would be to flex the contract by the PM responding acknowledging the notification is correct (ie that that the matter is a CE) and that further details will be provided.

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Thanks Dave.

Noted you have quoted Clause 12.3 for extending the period for reply to the notification of compensation event, which needs to be “confirmed in writing and signed by the Parties”.

I am wondering if extending the period for reply to a particular communication requires signing off by the Employer and the Contractor, or, only a notification is required from the Project Manager once the agreement is made with the Contractor behind the scenes under Clause 13.5.

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Just for clarity it is not actually the period for reply that applies here because there is a stated period within the clause, 61.4, itself for the PM to respond. Please see clause 13.3, clause 13.5 would therefore not apply. To draw a comparison, see clauses 61.4 and 62.5 which allow for a longer period by agreement.

Strictly, because the extension is not provided for in the contract, it would be a change to the contract. It may seem unnecessary because the parties are doing the right thing in discussing the change in advance, but will keep matters intact. If it is seen as too problematic then the PM could stretch clause 61.6 with a PM assumption that the matter will be addressed by future CE number ??

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Understood, thanks a lot!