NEC3 ECC: Option D - Consequential Costs due to Defects caused by Contractor not complying with the Works Information

Under NEC 3 Option D, it is clearly stated that the “cost of correcting Defects caused by the Contractor not complying with a constraint on how he is to Provide the Works stated in the Works Information” can be disallowed by the PM.

My question is, can the PM disallow also the consequential costs due to this defect (for example cost of standby equipment which cannot proceed to the succeeding activities, extended formworks rental, productivity losses)? If not, how can the PM recover these costs as I think it would be unfair for the Employer to bear these costs.

Looking forward to your opinion on the matter.

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Through the contract, I think the answer is ‘No’, except if the Defect means :

  • a Completion goes beyond a Completion Date, which could be a sectional Completion Date and option X7 Delay damages is specified. Note that the damages are included in the amounts specified, so you cannot charge extra; or

  • a Key Date is not met in which case the consequential costs as defined in the contract i.e. "the Employer incurs additional cost either

  • in carrying out work or

  • by paying an additional amount to Others in carrying out work
    on the same project, …".

However, it has been argued that not meeting a contractual requirement without an express remedy is still a breach of contract through which the Employer could ultimately gain recourse under contract law.

Having said that, if the Defect is not in existence at a Completion Date, I think you would have a hard time justifying that it was a breach.
And if you was and was stopping Others from doing work, then the Contractor would not have achieved Completion as defined in the contract, so the remedy is in the damages.