NEC3 ECC: Are costs associated with a safety stand down following a contractor accident ever disallowable?

The contract is ECC Option C.
A fall from height causes a serious injury which brings about an investigation by the Employer, Contractor and HSE. At the time the parties agreed to start Works again in 2 weeks and each would cover their own costs of the two week stand down.
Now the Contractor is looking for payment of all costs and also a CE due to the Employer restricting access to the Works. Should all costs be paid and a CE agreed?

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Firstly, let’s address the issue of compensation events. It may well be a compensation event, most possibly under clause 60.1 (4), but whose ‘fault’ does it arise from. Unless the incident can be traced back to the Employer, then it is almost certainly the Contractor’s and hence, under clause 61.4, the PM should respond to a Contractor’s notification using the first bullet point i.e. is a compensation event, but it arose from your fault, so zero change to the target Prices and Completion Date.

In terms of does the Contractor get paid Defined Cost, there are two points :

  • a lot of the costs may ultimately never be a Defined Cost in the first place as the Contractor is not paid ‘double’ for costs which they should have insured for under the contract - see Insurance 7 of the Schedule of Cost Components. I.e. up to the stated excess / deductible limit stated in the Contract Data, the Employer pays, but no more.
  • in terms of 'is it a Disallowable Cost, look at clause 11.2 (25).The most obvious questions to ask are “Has the Contractor followed all procurement or acceptance procedures ?” and / or “Did they give an early warning that they should have”. If the answer is ‘No’ and there is causal linkage to the incident then it MAY be disallowed.

Standing back from this though, remember target cost contracts share risk that is within the target. H&S is not a CE and the amounts up to what should be insured is shared. That seems equitable.