The Project Manager issued a Compensation Event (assume ref. CE2) amending a change to the Works Information issued as a previous Compensation Event (assume ref. CE1) and reducing the scope of works. Following the issue of CE1 and prior to the issue of CE2, the Contractor issued an Early Warning as required and a separate Communication detailing a Contractors Proposal. The Project Manager subsequently used the information provided within the Contractors Proposal to Change the Works Information in the form of CE2. The Project Manager has not responded directly to the Contractors Proposal to either accept or reject it.
Does bullet point one of Clause 63.11 apply to prevent the Prices being reduced? What constitutes acceptance of the change to the Works Information which the Contractor proposed?
The purpose of 63.11 (option C & D) is to encourage both sides to seek proposals to reduce the overall cost of a project. Where a contractor submits for acceptance a cost reduction proposal then the Prices (Target) are not reduced as both parties will benefit through the pain/gain mechanism.
Under 13.4 the PM is obliged to respond to a communication submitted to him for acceptance. The PM in your case does not appear to have complied with 13.4, which in itself would be a compensation event under 60.1(6) or 60.1(9).
However, looking at this more broadly one could argue that the inclusion of the Contractor’s proposals in CE2 is clearly an acceptance of them despite no formal communication from the PM. In this case therefore 63.11 does serve to prevent the total of the Prices being reduced for the change instructed under CE2
I’m concerned with the relationship between the two CE’s as reading between the lines there appears to be more going on than at first appears. Of course, if the PM does not agreee with the reasoning above, or does not accept that he got his ideas for CE2 from the Contractor’s proposal then that will be a different argument.