NEC3 ECC Option A Contract - Contractor Delay

NEC3 and NEC4 Contracts Compensation Events
1

We have a Contractor (1) who is late in delivery of the works.
We had planned another Contractor (2) to come in after Contractor 1 had completed their works.
As it is we have had Contractor 2 come to site whilst Contractor 1 is still on site.
We have transferred the role of Principal Contractor from Contractor 1 to Contractor 2.
We issued a PMI to Contractor 1 to advise them they not longer have the PC obligations.
My Commercial Manager has stated that even though the Contract (1) is in delay of his own making we should expect to receive a negative Compensation Event quotation as the Contractor no longer has to provide welfare and site management for the forecast remaining duration of the project (3 months).
I believe that because Contractor (1) is in delay of his own making and that the welfare and site management costs are currently not included in the Total of the Prices there is no Defined Cost from which to expect a negative quotation.

Please can you advise?

2

The assessment of a compensation event is calculated using the ‘difference’ of the Defined Cost of the work (that is including the compensation event LESS not including the compensation event), rather than being based on any allowance in the Activity Schedule (Prices).

The instruction to Contractor 1, is presumably a change to the Works Information, which is a compensation event. The assessment is based upon what Defined Cost would have been incurred, compared with what Defined Cost is now forecast to be incurred, which may be a negative net value. Sub-clause 63.10 allows for such a ‘negative’ assessment to be implemented.

The fact that the Contractor is late and that such costs are not ‘allowed’ for in the total of the Prices is not relevant to a compensation event assessment.