NEC3 Option A: Recovery of full time staff costs in Compensation Events

Contract is NEC3 Option A.

The Contractor has supervisory staff (i.e. Works Manager / Site Agent etc) who are employed full time within the Working Area.

Compensation Events occurs which involves these full time staff working on the CE’s. These CE’s do not impact on the programme.

Whilst there is no increase in his Defined Cost (because these staff are already employed full time on the project) the Contractor has included time for these staff in his quotes for the CE’s arguing that these members of staff can be included in CE’s if the time element doesn’t fall within an period being claimed as prolongation/delay. The Contractor claims that this is to cover the disruption element that undertaking CE works incurs as the Prelims are for contract works only and goes on to say that ‘… this is a recognised industry principle …’

A very similar question has previously been raised in January 2016 and the response at the time read ‘The intent of the contract is that the Contractor can only claim for additional resources as part of the CE quotation. If the existing team that are full time on that project can deal with that CE then there is no additional cost incurred.’

Please can you elaborate on where in the Contract it identifies that the Contractor is only able to claim for additional resources. Specific supporting clause references would be appreciated.

The assessment of any compensation event is based on the principle of;

Total Defined Cost including the CE LESS total Defined Cost not including the CE (sub-clause 63.1)

This is subject to certain ‘qualifying’ principles, such as the preparation of quotations under main options A and B, etc.

Where existing staff can sensibly deal with the effects of the CE without incurring any additional Defined Cost then I would agree that there is no additional Defined Cost.

Whether the claimed additional Defined Cost is for additional work, disruption, operational prolongation or contract prolongation, there still needs to be some reasonable assessment process, including providing details of this with the quotation (sub-clause 62.2).

If the risk profile of the work changes as a direct consequence of CE’s, which may include the potential effects of disruption, then an assessment can be made for both cost and/or time under sub-clause 63.6 and included with the quotation, which may include People cost.

The inclusion of People cost within a CE quotation is a frequent source of disagreement, although there should be realistic and sensible assessment principles applied, with corresponding details, to substantiate any such inclusion.