No, the Fee percentage is only added to Defined Cost. Bill rate will be deemed to have prelims etc included within them. Compensation events are assessed using Defined Cost plus Fee not bill rates.
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Does the instruction to stop works due to safety concerns as a result of a Contractor’s improper conduct in a CDM area? Does it count as a CE? @stevencevans
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Please advise where it is specifically referenced within
the NEC4 contract that permits a CE notification and instruction to be combined under one communication? @stevencevans
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And for incorrect assessment from the contractor, can the PM make his own assessment based on the information received and facts on the ground @stevencevans
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Do you HAVE to remind a CE, even if CE was submitted last August and had no assessment? @stevencevans
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I have joined a Subcontractor who are midway through a complex NEC3 ECSC Option A. Recently, Fast Draft has been utilised and so old documentation has been put onto the new system. I have put on the old date implication of CE-001 bringing forward the key dates but your comment that you cannot bring forward dates has concerned me. If the dates cannot be brought forward, then the implication of the subsequent CE will be much lower. Please can you confirm if this is the case.
To simplify
Contract issued - key dates included
CE-001 brings forward key dates eg 100 days (costs and programme agreed)
CE-002 Contractor does not provide documentation - delay to key dates 120 days
Should CE-001 not include the shortened programme?
Should CE-002 be for 120 days or 20 days?
@stevencevans
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Please advise where it is specifically referenced within the NEC4 contract that permits a CE notification and instruction to be combined under one communication? @stevencevans
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Defined Cost slide question. Where there isnt any people cost included in the contract data, however, the contact data had sufficient breakdown of Labour cost for people. Would this be the default rate go-to? As there aren’t any people cost included in the defined cost. @stevencevans
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No, it’s not a compensation event. The PM does not have to notify the instruction as a compensation event as clause 61.2 sets out 2 exclusions to the notification being that ‘the event arises from the fault of the Contractor’
If the Contractor notifies it, then the PM can reject it for the same reasons (clause 61.4)
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Clause 61.2 - ‘The PM includes in the notification of a compensation event an instruction to the Contractor to submit quotations’
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The PM makes an assessment in the circumstances set out at 64.1. The PM basis the assessment on information within his or her possession, but must use the Accepted Programme if there is one. Note also has to be taken of the dividing date(63.1) so as the split between actual and forecast is done properly.
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No, the various clauses dealing with ‘reminders’ are not obligations, just rights. They each use the phrase ‘may notify of the failure’. That being said, it is good practice and certainly within the ethos of NEC, that such reminders are issued
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I’m not sure I completely follow. The Completion Date cannot be made earlier by the operation of the compensation event mechanism.
Key Dates can be changed directly by an instruction of the Project Manager (clause 14.3). In your case, as I understand it, the PM issued an instruction making a Key Date 100 days earlier. This is a compensation event under clause 60.1(4). If the Contractor fails to achieve the Condition by the Key Date then clause 25.3 requires the Contractor to reimburse the Client any costs incurred. I’m not sure what your CE-002 does?
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Clause 61.2 - ‘The PM includes in the notification of a compensation event an instruction to the Contractor to submit quotations’
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Main Options A and B use the Short Schedule of Cost Components which allow people rates to be listed in the Contract Data. Those rates are then used in the assessment of compensation events, The main Options which use the Schedule of Cost Components require the cost of people to be broken down into their individual components as set out in the People section of the SCC
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Hi, I have a query on grounds for recovery under NEC for material inflation rates and price increases associated with ongoing market volatility, e.g. price of fuel which has seen significant increases due to Ukraine war.
If the contract does not have Option X1 included (Price adjustment for inflation), is there still grounds for a CE due to abnormal circumstances surrounding this level of inflation, or is the Contractor at the mercy of the Employer to come to a fair and reasonable agreement? @stevencevans
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In my experience, time impacted CEs are one of the biggest blockers to getting CE quotations submitted and implemented. Partially because time usually includes high cost, but also because programmes are timely to compile and often subjective. Plus like you say, potentially not having an accepted programme to use. In ‘using’ the latest accepted programme, and there being a significant time lag between the last accepted programme and the date of the CE, is it not feasible to ‘use’ the accepted programme in actualising that programme to the CE date, then demonstrate the impact of the CE against that actualised accepted programme baseline? @stevencevans
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Does inflation under X1 option applies while building define cost on a CE? @stevencevans
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I presume that you are referring to main Option A or B? In which case, if X1 is not incorporated, then there is no mechanism to increase any of the existing prices directly. However, any compensation event, being measured on the basis of Defined Cost, will, by definition, be assessed on the actual, current costs which have been subject to inflation. Moreover, any compensation events which cause delays beyond the original completion date could included in its assessment an amount for the inflation of prices for any works that are pushed into the delayed period.
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I’m not entirely sure what you mean. Assessments based on Defined Cost (and which are based on actual cost) are made using the current prices (which would include inflation). X1 operates to increase the existing lump sum prices in the Activity Schedule or Bill of Quantities and increase the part of the Defined Cost that are based on rates stated in the Contract Data.
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