NEC4 Opt A - Changes to Scope when design has been novated

NEC3 and NEC4 Contracts Compensation Events
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The Contractor is working on a project where they have novated the design from the Client and under the Novation Agreement, the Contractor is appointed to carry out and complete the design and construction of the project.

The novated design has subsequently been changed by a third party at the final stages of the scheme. The Contractor and the Consultant are not in contract with the third party, and this third party is charging the Client for time spent on this revised design. The Client intends to pass these design costs directly on to the Contractor.

The Contractor has raised a NCE under 60.1 (1) to ultimately charge the Client for these third-party design costs but it has been rejected on the basis that the Contractor is responsible for the design under the contract.

In summary, the third party has changed the design, not the Contractor or Consultant. This design change is of no fault of the Contractor, Consultant or original design and this extra is a “nice to have” item which has no effect on the original scope of works.

On this basis, the Contractor believes they are rightfully entitled to a CE under 60.1(1) – Is the PM (Client) being unreasonable in this case by rejecting the NCE?

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You will need to check the wording of the Novation Agreement to see if it provides for design works by others post novation. If it does also check for any statements regarding the cost.

Also check if under the contract or Novation Agreement if you are required to obtain third party approval of the design and if the design change is required to obtain such approval. If this was the case then the third party should not be altering the design but advising you of its requirements.

If there is no provision in the Novation Agreement then it is unclear to me who engaged the third part and why. You have taken on design obligations and provided it was complaint with the Scope the PM would need to instruct a change and you need clarity where liability sits.

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