Staff Cost for Compensation Events

My contract is ECC NEC4 Option B. A compensation event is being handle due to the additional works instructed by the Project Manager, in which the Prices will increase from $28M to $42M and 10 months EOT will be granted.

According to the amended SSCC of the Contract, the cost of Contractor’s management and supervisory staff (including administration, planning and coordination etc.) are treated as included in the Fee in accordance with the core clause 52.1.

Unfortunately, the Fee is inserted by the Contractor is very low. As the change in Prices is substantial and unexpected by the Contractor and the contract duration will increase from 24 months to 34 months, we consider that it may not be fair for the Contractor to undertake the additional works. Is there any way out to compensate the Contractor’s loss?

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Welcome to the forum.

You say that this situation arises as a result of an amended SSCC. Without knowing what that amended SSCC says, and what other amendments you have, it is not possible to comment. I suspect you are into the realms of requiring professional advice.

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The contract does allow for changes to the contract if agreed, confirmed in writing and signed by each party (clause 12.3 (NEC3)) i.e. a Deed of Variation.
This could be explored if both parties are in agreement.

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The compensation event should put the contractor back into the position he was in before the compensation event occured.

This if the contractors fee was too low in the first place, it should only be too low for the original scope.

The implemented CE should account for the defined Cost increase for the event. If its valuation results in the contractor suffering greater losses, then it doesn’t actually compensate the contractor and should therefore be disputed.

The if the contractor is losing money for the original €28m scope (and potentially losing €2m for arguments same) introducing a CE should result in him still losing €2m, not increasing the loses to €4m.

I’m sorry, but that’s not correct. The fee is the fee. The Contractor offered it, and has to live with it.

In any event, this question is about Option B. In Option B fee is only used in some Termination scenarios, and not in CE’s, so I struggle to see the relevance here.

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Didn’t spot it was an option B.
The fee is just a head office mark up on top of the assessed defined cost.
The rates in the SSOC will determine the majority of CE valuation.

In this case, an Option B contract isn’t designed for that level of change 50%.

It would be best to agreed a variation to the contract that everyone can live with.

If I was the contractor (and facing a substantial loss on an increased scope of €14m) I’d bring in a solicitor and find away out of doing that additional scope