Preliminary items assessment when the project is in delay

NEC3 and NEC4 Contracts Compensation Events
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We have a delay on a project and we believe that the Client is responsible for the delay as the source of the delay is covered by Compensation Events, under the contract. The CEQ’s for the events have not yet been agreed however, the PM is assuming that the delays are Contractor culpable and is therefore employing an RICS method of evaluating our Preliminary costs under NEC Option B, which is used designed to be used when the Contractor is in culpable delay. The document being employed by the PM is the RICS interim valuations and payments.

The PM is using our Clause 32 programme, which has not been accepted and which, quite correctly includes a significant change to planned completion, to reflect the Client driven delays.

The PM is effectively stretching our preliminaries over the planned duration of the works, rather than the original duration for the works and upon which the original BoQ lump sum was based for our time related preliminaries.

The effect of this approach is that the monthly valuations are significantly lower than what was envisaged at tender stage and this is having a detrimental effect upon our cashflow. At present the contract is delayed by circa. 6 months.

Is the PM correct to adopt this approach under NEC 4? Is it correct to employ non contractual processes to evaluate PWDD under the NEC 4. Does the approach adopted conflict with Clause 12.4?

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Jason, from what I read it seems that the CEs have not been accepted yet (not sure if you have notified them to be honest). I infer that from your statement that “…the PM is assuming that the delays are Contractor culpable…”

Discussing the prolongation costs before establishing your CE entitlement, is somewhat premature. I would therefore strongly suggest that you go to clause 60.1 to see what CE(s) the delays caused fall under and then see clause 61.3 about notification (or 61.1 if there was an instruction by the PM). Only after notification by you and acceptance by the PM (see clause 61.4), can you start putting forward the cost and time element as part of the quotation process (clauses 62.1 to 62.6).

I hope I understood correctly your situation and I apologise if I didn’t. Give us a shout if you need more help.

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The events have been notified and accepted as CE’s. The CE’s have not yet been agreed and implemented. The PM is taking a premature position in relation to the culpable delays and assessing the amount due under PWDD based upon the delay being ours.

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