NEC3 ECC: Is a contractor entitled to a compensation event in a design & build contract on the basis that the reference design on which the prices is based differs from the final solution.?

NEC3 and NEC4 Contracts
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Recurring issues about the entitlement to CE’s relating to drawings included in the WI by the Employer that are detailed as ‘proposed’. The WI also confirms that the ‘accuracy of the drawings or design data’ as the intention of the inclusion was to share all known information in order to reduce the risk to the contractor and thereby lowering the tenders. The contract is ECC Option C D&B and the Contractor is of the opinion that any change compared with his final design is a CE. Is this not dealt with through the pain/gain otherwise every value engineering opportunity would result in a negative CE?

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It would only a compensation event if the Project Manager has issued an instruction to change the Works Information along the way. If the Parties agreed to do something different then that should ave been captured at the time. You also need to read the contract and Works Information carefully to see if it identifies any other risk transfer/liability. For example, the Works Information may state that there is an Employer provided outline design and the Contractor is to develop the detailed design which would not be a CE.

It is an age old industry problem however as to what is considered “design development” and what is considered a compensation event. The two are quite significant as compensation events raise the target so the Contractor carries no risk, where as “design development” is what was expected of the Contractor and is not something that will raise the target (and thus dealt with in the pain/gain). This will remain a grey area which ever form of contract you are working under as it can be very subjective.

The Contractor should be stating the reasons as to why they consider it a compensation event when they notify - and if you do not agree with the reasons then the matter ends there (their only recourse being adjudication).

You could also argue that if something has been installed that was different from the Works Information and there is no associated instruction to do it then what exists is actually a Defect!