NEC3 Option B - Can a Contractor decline to carry out a Compensation Event


We are a main contractor working on an NEC3 Option B project.

A number of Compensation Events have been notified requiring additional works by us. We have submitted quotations and the PM has noted that they are not value for money and provided his own assessment of the CE’s. This has resulted in us losing huge values of money and we have therefore declined to carry out the additional work. The PM instruction has been issued under 27.3 - how do we proceed? It is not sustainable to carry out additional works which result in losses.

Instructions changing the Works Information are issued under Clause 14.3 and Clause 20.1 requires the Contractor to Provide the Works in accordance with the (changed) WI. Clause 27.3 obliges the Contractor to obey an instruction but if the PM is citing that clause he/she is misunderstanding the contract.

Contractually you don’t have the option to not carry out the additional/changed works unless they are completely outside the original scope of the contract. Ultimately, if you don’t agree with the PM’s assessment your only course of action is adjudication. Depending on the circumstances, it might be worth having a discussion directly with the Employer (as the adjudication is between Contractor and Employer, not PM) but there is still the problem that if the CE has been implemented it can’t be reassessed as such. It’s a difficult situation and you might need to seek legal advice.

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Hi fully agree with Dave’s comments and would add - ensure that you keep very good records of carrying out the additional work and share them with the PM