If an early warning gets notified in say month 1, month 2 the issue raised becomes a problem, but it did not get raised until month 5 that the Contractor actually formally notified of this being a compensation event. When should the effects of the CE be assessed from (if at all?)
The way it should work is as follows:
- An early warning is notified as soon as you become aware of the event that COULD affect either time/cost/quality (i.e. month 1) and you jointly try to mitigate or minimize the effects of the item.
- As soon as this thing IS an actual problem that is effecting your works then it should be notified as a compensation event (i.e. month 2) – providing it fits one of the reasons for being one i.e. valid under 60.1. This notification has to be within 8 weeks of becoming aware, otherwise you lose the right for any time/cost UNLESS it is one of the items that the PM is obliged to raise. 12 of the reasons in 60.1 the Contractor is obliged to raise(2/3/5/6/9/11/12/13/14/16/18/19), and the other 7 the Project Manager is obliged to raise. Therefore it depends on which reason you are notifying – and I would question anyway why it took until month 5 to notify that this was now a CE despite it starting to have effect in month 2. If it is one of the 12 that you are obliged to notify and you hadn’t then you may well be time barred to claim anything (and by the way, the fact you raised an early warning does not count as the notification - they are separate things/communications).
- Assuming that you are not time barred and it is agreed that it is a compensation event then then it would be assessed from the time you knew it took effect which sounds like month 2 in your example. It should then be assessed using rules of 63.1 – which states you use actual defined cost and forecast defined cost, the switch point between the two being the time of the Project Managers instruction (if that is what it stemmed from) or in other cases when the Contractor notified the compensation event. Your Accepted Programme should already show the effects of the event upon planned Completion to that point – within the CE you are trying to justify the relative movement in Completion Date to capture entitlement (and also avoid Delay Damages).
- Golden rule here is to get compensation events notified as early as possible so everyone knows where they are and associated liability. However this situation plays out it will now be subjective going back in time to justify entitlement which is never a good situation to be in.