Prelims/Activity Schedule

We are the Contractor on an NEC3 Option A.

We have been given a PM Instruction (not a CE) to delay/defer a specific element of our scope for a period of approx 12 months (i.e. from starting in Dec-22 to starting in Dec-23). This deferment will not affect our planned Completion Date for the overall project.

We have also provided two quotations for proposed instructions in relation to this: 1 for deferment as above and 1 for omitting the installation scope entirely. Neither of these have yet been converted to a CE.

The design element for the deferred scope has already completed, it is just the site installation element that has been deferred for the 12 months.

Within our activity schedule, we have activities relating to monthly Prelims for this specific element of work based on the original plan i.e. starting Dec-22 through to June-23. The work will now run from approx Dec-23 to June-24.

Are we able to apply for payment for the Prelims starting in Dec-22 even though the work will not actually start until Dec-23. I ask this because we only have a PM Instruction for this at present and not a CE.

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Hello @peter_johnson, to answer the question in your last paragraph - no, you can’t do this. Now I’ll explain why not.

Firstly compensation events follow a defined process in the contract which is initiated with a notification, it doesn’t sound like this has happened and that you jumped straight into the next part of the process which is the submission of a quotation.

You should go back a step and notify the Project Manager of a compensation event under clause 61.3 if they aren’t responding to your quotation - the Project Manager has instructed a change to the Works Information which is a compensation event under clause 60.1(1).

Once the Project Manager notifies you that he agrees that there is a compensation event he should then instruct you to submit a quotation for it. The quotation is for both cost and time however in your example it doesn’t sound like there is any delay to planned Completion so it will be purely for cost. The contract uses the term “Defined Cost plus Fee” for the cost element with the capitalised term being defined under clause 11.2.

The quotation has to include the full cost of the compensation event, so that would include your design costs, site installation costs as well as you prelim costs. If the work has been delayed by a year then your prelims are likely to be more expensive even though the duration they’re need for is the same. This means your Defined Cost for these will have changed and therefore can be included in the quotation.

Clause 63.1 tells you that you can include in the quotation the actual Defined Cost of work already done and the forecast cost of work not yet done and the resulting Fee. It also tells you the boundary between actual and forecast which in your case is when the instruction was issued. This in effect means most if not all of the quotation will be based on forecast however that will depend on the specific circumstances.

Once prepared the quotation is submitted to the Project Manager and they decide if they want to accept it or not. If they don’t want to accept then they will either instruct you to submit a revised quotation or make their own assessment. When they accept / assess the compensation event moves onto the final stage which is implementation which means the cost can be added to the Activity Schedule and the effect on planned Completion changes the Completion Date (not relevant in your case). Only when the cost is added to the Activity Schedule is it paid and only then when the work is completed. The quotation therefore needs to comprise separate activities otherwise you will only be paid when the installation is complete.

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