Webinar - FastDraft Compensation Events Masterclass

This topic is for all questions raised on our webinar “FastDraft Masterclass Compensation Events”. If you haven’t already attended it, you can sign up here Webinar - FastDraft Masterclass: Compensation Events | Built Intelligence

What’s it about?

Learn about common pitfalls with compensation event process, gain a unique insight into compensation event process and learn how to help your team understand and perform better. We will also tackle common misconceptions for project teams when raising and responding to CE notices, quotes and assessment. Steven Evans and Chris Corr will be sharing their wealth of knowledge on NEC and a good dose of war stories from the good, the bad and the ugly compensation events. This webinar will also showcase our cloud-based contract management platform and its key functionality.

After attending this webinar you will:-

  1. Know how to avoid common pitfalls with compensation events
  2. Be able to flag some of the quirks of NEC compensation event clauses and
  3. Be able to use features within FastDraft to help keep on top of your Compensation Events
    @stevencevans @chriscorr

@stevencevans under NEC3 the PM had the option to request a quotation and that the contractor should put the work into immediate effect so as not to avoid delays. NEC4 doesn’t appear to offer this hence if the PM submits an instruction to change the scope should the contractor view this instruction as a requirement to put the instruction into immediate effect?

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@stevencevans For design and build project. Cost of design of a change for a CE quotation which PM decides not to instruct once quotation issued. How is design cost recovered.

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@stevencevans can the PM make his own assessment of the quotation ?

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@stevencevans A quote not accepted is a CE - if the contractor give an unreasonable quote, which is not be be accepted, how is this to be defined?

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@stevencevans Can you please provide examples of costs included in the fee?

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@stevencevans Training and Holidays, are they supposed to be included in the STAFF rates?
i.e. Option C - Contractor submits timesheets as evidence, holidays and training is part of Schedule of Cost Component, do they get paid all these hours or we assume these hours are absorbed in the rate and therefore days spent on holidays/training do not to be paid as such

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The same provision is in NEC4 - clause 27.3 ‘The Contractor obeys an instruction…’

If the design work is carried out by a consultant or a subcontractor, then the cost of design is recovered under clause 4 of the (Short) Schedule of Cost Components. If the design work is carried out by in-house designers, the cost is recovered under clause 7 of the (Short) Schedule of Cost Components at the hourly rate stated in the Contract Data.

Yes, but only in circumstances set out at clause 64.1

What happens if the contractor issues notification of the events outside of the time bar period?
@stevencevans @chriscorr

Is it allowed for contractor to submit a quotation with price but time is stated as TBC?
@stevencevans @chriscorr

Can you add the fee percentage on top of bill rates? (if both have accepted the use of these). My understanding is this covers the prelim/quotation side of the CE
@stevencevans @chriscorr

When issuing a CE accepting a Subcontractors NCE, would this be taken as an instruction to begin works or should you either clearly state this or issue a separate instruction?
@stevencevans @chriscorr


A separate instruction is required, per clauses 13.1 and 13.7.


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I presume you mean the rejection of a quotation for a proposed compensation event is rejected under the third bullet point of clause 65.2 which would be a compensation event under 60.1(20) so the Contractor can recover some of the cost of preparing a quotation which was ultimately rejected.

I understand your question to be that, if a quote for a proposed instruction is unreasonable, can the Contractor be paid for preparing the quote as a compensation event under 60.1(20).

As with all compensation events, the assessment is limited by clause 63.9 that the Defined Cost must be reasonably incurred. So it could be argued that the cost incurred in preparing an unreasonable quotation for a proposed instruction would be costs that are unreasonably incurred.

It’s better to turn the question around and ask what isn’t included in the Fee. The contract defines what costs are payable to the Contractor. These are called ‘Defined Cost’. The contract defines these costs by reference to the Short or full Schedule of Cost Components. These schedule describe, under various heading, the types of costs that are Defined Cost and which components of the costs are Defined Costs.

For example, a cost incurred in employing a person is recoverable if that cost is incurred by the person whilst they are in the Working Area. The Schedule then goes on to define which components of those costs are Defined Cost.

Anything that is not a Defined Cost is deemed to be included in the Fee. So, in the example just given, any cost incurred in employer a person whilst they are working outside the Working Area is not a Defined Cost and therefore will be included in the Fee.

Under Option C there is no ‘rate’ as such, the Contractor is reimbursed actual cost providing that cost falls under the definitions in the Schedule of Cost Components. One of those components is ‘absence due to sickness and holidays’ and so if: (a) the Contractor pays the employee holiday pay; and (b) the employee, if not absent, would be working in the Working Area, then that cost is one of the cost components that is recoverable.

The only training item in the SCC is ‘safety training’, but that does not include absences for safety training, only the cost of the training if required by the employment contract

If the notification is not one of the events required to be notified by the Project Manager then, pursuant to clause 61.3, then there is no change to the Prices, the Key Dates or the Completion Date.

Note, the drafting of the clause requires notification ‘within 8 weeks of becoming aware that the event has happened’ so there is some wriggle room as:

  1. The event must have happened (not expected to happen) and
  2. It requires actual knowledge of the event happening (so a subjective analysis not an objective one)

If the Contractor did so then it would not be a valid quotation as a quotation has to deal with both time and money (clause 62.2). In circumstances where the Contractor has insufficient information to be able to forecast the impact of the event, then the PM should state assumptions on which to base the quotation (clause 61.6)