NEC3 ECC: Recoverable cost of Subcontractor is rejected?

The Contractor says that if the Project Manager objects to XYZ Ltd he would incur additional costs which he would seek to recover as a compensation event. How should the project manager respond?

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Refer to clause 26.2 where it states that “a reason for not accepting the Subcontractor is that his appointment will not allow the Contractor to Provide the Works”, therefore provided the PM has complied with this then there would be no compensation event. So you really need to understand why the PM has not accepted the Subcontractor?

Note that the clause uses the term “will not” and not “may not”, so the PM has to be 100% confident in is reasoning otherwise the Contractor would be entitled to a compensation event under clause 60.1(9).

Under main Option A, provided there is no compensation event then the Contractor would not be paid any additional costs associated with the PM not accepting the proposed Subcontractor. Under main Option C, there would still not be a compensation event however the Contractor will be paid the additional cost as Defined Cost (provided that the additional cost does not fall within the definition of Disallowed Cost.