NEC3 ECC - Is there a limit to the value of Compensation Events?

I have been informed that the value of compensation events cannot exceed 50% of the Contract value?

However I cannot find this within the contract, can anyone confirm if this correct?

Many thanks.


I can confirm that this is NOT true.

There is no limit to the number or value of compensation events.

Not sure who informed you of that - maybe a Client who did not want to pay you??

There is no specific maximum value for a single or sequence of compensation events.

A single CE which wholly changes the nature of the project may not be enforceable (which a single CE giving a 50% increase might be categorised as) but that would require some careful interpretation of the intent of the parties in entering into the contract in the first place.

For public sector clients there are limits set out in the Public Contracts Regulations 2015 and it’s possible that the source of this suggestion is basing the assertion on Regulation 72(1)©(iii) from which it could be inferred that the contract would need to be re-tendered. However, I think this would only be the case, as Rob suggests, if there was a single change that was more than 50% of the contract value - it would probably be worth reading Regulation 72 (or getting legal advice on it) if you are a public sector client.

Dave - the only way to achieve this would be for the Client to terminate the contract at that point which would obviously come at significant cost and time. They would have to think very carefully at that point as how much this could go on to cost, as opposed to just letting it be a CE under the original contract. There should be no rule that says “reach this level of CE’s and then you have to re-tender” - that could cost the Employer a fortune - and in the meantime not have a completed job and have no indication as to when they might get it.

Glenn, you are of course correct on all points, and I’m not aware of this ever having happened, but that is what the law says. It is of course impractical and would cost the taxpayer a fortune in terms of re-tendering costs and delay, but who said that the politicians that make the law ever have practicality in mind?

On the other hand, however, you’d have to seriously question how a project got to the point whereby a single change increased the contract sum by more than 50%.