NEC3 ECC Option A - Client has instructed a CE for us to procure a sub contractor (specific) whio have not performed.

NEC3 and NEC4 Contracts Compensation Events
1

Our client has sought to procure the services of a sub contractor who could not agree terms, so issued a CE to us {contractor} to utilise the specific contractor under a CE. The supplier has since not performed or responded to any correspondence they were procured under a purchase order not a NEC subcontract and the PM was not notified of our intention to procure under a PO. The client is now seeking to replace the supplier as a result of non performance at additional cost circa 8k and seeks to recover additional costs from ourselves with respect to cost and delay.

We have challenged this under 10.1 and stated the CE provided specific instruction to use a specific supplier.

What are the liabilities and can the PM subsequently offset costs against us, having acted in accordance with a CE, essentially the cient has passed the risk onto the contractor having failed to procure the services in the forst instance.

Can we raise a CE against the clients CE under clause 60.1.(12) on the basis it was unlikely we could assume the non performance and non communication from the client specified supplier under the initial CE

60.1.2 The Contractor encounters physical conditions which are within the Site, . are not weather conditions and . an experienced contractor would have judged at the Contract Date to have such a small chance of occurring that it would have been unreasonable for him to have allowed for them. Only the difference between the physical conditions encountered and those for which it would have been reasonable to have allowed is taken into account in assessing a compensation event.

2

The first thing to say is that I have no idea what clause 60.1 (12) has to do with it : it’s for physical conditions, not poor Subcontractor performance … unless the ?sluggish? performance of the Subcontractor was to do with physical conditions in which case only the part of performance which is due to the physical conditions is subject to the compensation event.

Secondly, with hindsight, you should have added in risk premiums to the quotation for poor performance and, if the PM did not like it, he could have reduced it by stating assumptions.

But that does not help you now. I cannot think of an obvious compensation event, but you may have a case under contract law. What I am thinking of is an analogous situation where the Employer has specified the works as a performance spec with low performance damages. The engineers via the PM have then wanted a different critical component - say a GEC turbine rather than a Siemens. This was agreed as a compensation event, but the works did not meet the performance criteria,. The Contractor successfully argued it was due to the change critical component. I can see an analogous situation with the supplier.

Whether it would fly legally is a different situation and you may with to take legal advice.

(However, for anybody reading this, do note that if the Employer had specified that supplier as part of the original WI, you wouldn’t - in my experience - have a chance !)