I have a scenario (Option C) where an NCE has been raised and the PM has instructed the Contractor to quote and proceed. The works have started and are all but complete. The PM has changed his mind as to the validity of the CE and has rejected it. This has happened before implementation of the CE.
It is my understanding that the PM is within his rights to do this before implementation. The Contractor is arguing that this puts the Employer in breach and that the liability has already been created by the starting of the CE process.
This is not a straight forward one, both contractually and practically. Whilst putting it in writing I kind of went full circle as to what I believe my answer is.
Firstly, there is no where obviously in the contract that allows the PM to change his mind as to whether something is a CE - once they have said it is one, it is one. They should spend time deciding if definitively they agree it is one before saying yes and asking for the quote. The only thing that can change is how they assess the event. It is more definitive within the contract wording that once it is implemented it cant be reassessed (65.2). The only clause that could be brought into the mix is clause 60.1(8) which states that it is a compensation event if a Project Manager changes a previous decision. The guidance notes suggest they are able to change decisions made under their authority within the contract in the same way they made their original decision. This is not specifically what this clause is primarily intended to be used for but could be the PM’s defense that they are allowed to change decisions. This CE under 60.1(8) will then be assessed on its own merits.
You may need to take this to Adjudication – where by I think the Adjudicator will consider two points. The first is whether the Project Manager can change their mind once they have said it is one. The second is whether they were right or wrong to have said it was in the first place. If the Adjudicator agrees with the PM that it was not a compensation event, I think one way or another they will find a way of finding in favor of the Employer in that situation.
Consider this: If the Contractor notified that poor ground conditions was a compensation event, and the PM agreed it was and requested a quotation. Five minutes after requesting a CE quotation, the PM realizes there is another borehole log in Site Information that shows the ground is indeed very bad and even worse than the Contractor has experienced. At the end of the day it would appear that the Contractor should have allowed for this – and there was no real contractual entitlement. I think this would be correct, both practically and morally that they can not now assess the full value as a CE. With that in mind I think the Contractor is never really home and dry with entitlement until the event has been implemented.
In a similar principle – if the PM gives an instruction to change the Works Information that the Contractor does not identify as a CE at the time, they can still notify this right at the end of the job and claim entitlement as they are not time-barred on items that the PM is obliged to notify.
I largely agree with Glenn, but would perhaps ‘refine’ the answer in that a compensation event under clause 60.1 (8), like the majority of compensation events, can only put the Prices up unlike 60.1 (1) for changes to the Works Information and clauses 60.1 (17) for changed assumptions which can also reduce the Prices.
Consequently, as you intimate, if the PM has given an instruction to do something as a compensation event, then you have incurred Defined Cost in that belief i.e. done something you would not have done, and then the PM has retract that CE, then you would be entitled to extra cost under clause 60.1 (8).
I wonder why the drafters of NEC did no make this issue clear. Nevertheless, if the PM subsequently consider a CE is indeed not a CE, then he may do his own assessment with no change to the Prices and Completion / Key Dates. Conversely, if the PM change his decision that an event is indeed a CE, then the Contractor would unlikely dispute, so there may never be an issue