NEC3 ECC: Reduction in lump sum cost on an Option A contract

An item of plant/equipment that was included in the lump sum price is now not required.
Can the employer ask for a reduction in the lump sum price in the form of a negative compensation event?


If this is a change to the Works Information that you are talking about here (not clear if you mean “Plant and Materials” or “Equipment” - check their definitions for the subtlety) then yes this would be a compensation event. That would then be assessed using defined cost (not activity schedule rates unless you both agree) plus fee to generate the saving.

Easy test would be if they want more of this thing would that qualify as a compensation event? If so then the same would apply if they are removing elements that was stated in Works Information.

If however this was temporary works, such as a crane is not now needed to install something then that would not be a compensation event and the total of the Prices would remain as is. If this is permanent works identified in the Works Information that is no longer required then this would result in a compensation event.

Worth noting also that the cost element may be reduced by the time element cant be. Completion dates cannot be brought forward due to negative compensation events.