ReachBack is a free community helpdesk for construction professionals run by Built Intelligence. A library of high quality questions from real users with answers delivered and curated by industry experts.
Here is a selection of the Compensation Event questions that have previously been answered on our community helpdesk:-
Oct '12 - The Project Manager may state assumptions to be used in the assessment of a compensation event (see Clause 61.6). If these are found to be wrong, the Project Manager notifies a correction and this is a separate compensation event (see Clause 60.1(17)). Only the work affected by the changed assump...
Oct '12 - ...the Contract Date to have such a small chance of occurring that it would have been unreasonable for him to have allowed for it and is not one of the compensation events stated in the contract.
Oct '12 - ...the Contract Date to have such a small chance of occurring that it would have been unreasonable for him to have allowed for it and is not one of the compensation events stated in the contract.
Mar '15 - Am I right in saying that this is an option C contract, with the Contractor proposing a change to the Employer’s WI under option C clause 63.11 ? If this is the case, then it is actually a compensation event, but the Prices are not reduced as stated in clause 63.11. We can discuss the contractual...
Jul '17 - ...ould treat the scope of works as a ‘configuration control’ exercise, using the Contract Date as the baseline and incrementally adjusting the scope as compensation events are notified (and accepted)… If you notify a compensation event to add to the scope of works, you would, effectively, need to notify a further compen...
Oct '12 - How is a compensation event handled if, when the Contractor submits quotations for a compensation event, the Project Manager has not accepted the Contractor’s latest programme?
Oct '12 - How is a compensation event handled if, when the Contractor submits quotations for a compensation event, he has not submitted a programme or alterations to a programme which the contract requires him to submit?
Oct '12 - How is a compensation event handled if the Project Manager decides that the Contractor has not assessed the compensation event correctly in a quotation and he does not instruct the Contractor to submit a revised quotation?
Jul '17 - No a PMI is not a compensation event in its own right. If a Project Manager is instructing something that they know IS a compensation event, then at the time of giving the instruction they should state that this event is a compensation event and request a quotation under clause 61.1. If a Contrac...
Nov '14 - You have to read clause 63.5 in conjunction with 61.5. Firstly, not all compensation events would have or could have had an early warning notified prior to becoming aware of a compensation event. The Contractor did not know you might hit bad...
Apr '20 - ...should we notify COVID-19 as being a compensation event under clause 60.1(19) and then also notify the individual events related to COVID-19 as being compensation events as and when they arise?
Jan '20 - A project was added into a package of other projects under a compensation event. At the time the consultant undertook to support the client in finalising the scope prior to the consultant finalising the compensation event cost When the consultant first submitted the compensation event the client ...
NEC3 Option B: Assessment of Bill of Quantities Item in order to assess extent of Compensation Event
Oct '16 - ...hy of 3D over 2D that has been introduced). Worth noting that any compensation event does not use B of Q rates UNLESS both Parties agree to use them. Compensation events will be assessed from first principles using Defined Cost. Hard to give an absolute definitive answer in this situation as (as is often the case) the...
Oct '15 - Yes the PM can reject this CE if it is not one. If a Contractor notifies a compensation event practically speaking then they should state why it is one - i.e. which one of the reasons within clause 60.1 makes it a compensation event. Firstly in this case I am not sure under which one the Contract...
Dec '19 - We have notified our client of a compensation event. We have been subsequently instructed to issue a quotation for the works. We have provided a quotation for the forecast compensation event. The event is likely to occur in the next few days. The contract period for reply is 7 days. We have been ...
Jul '16 - ...ur observations, the way you have described it, are entirely valid, except for the compensation event heading you describe. Events in clause 80.1 are compensation events via clause 60.1 (14). However, you don’t describe the circumstances specifically enough or point to the bullet point in clause 80.1 which you think t...
Aug '16 - Clause 60.1(12), 60.2, 60.3, 60.4 and 60.5 have been removed from an Option B Contract via a Z-Clause. The Works Information requires on site testing of formation following excavation and a construction detail to be modified if test results are below a certain threshold. The Works Information sug...
Sep '18 - I quote from Richard Patterson’s article (with his permission) in the NEC User’s Group Newsletter of October 2007 (issue No. 40) : "If an ‘Employer’s risk’ (clause 80.1) occurs, the event is a compensation event and the contractor should be compensated for any effect of the event on both time and...
Jul '19 - Firstly, the Contractor should show the effects of the compensation event and show its effects (if any) on the “planned Completion” milestone. If this effect is agreed, the amount that planned Completion has moved by will allow Completion Date to be moved by the same amount. This is why the contr...
Jul '17 - Option B is priced based contracts which essentially means that all risks not listed as compensation events fall up the Contractor. The first sentence of clause 26.1 says “If the Contractor subcontracts work, he is responsible for Providing the Works as if...
Feb '15 - NEC3 contracts do not split out “prevention events” as a separate item or process. The equivalent of a prevention event is covered as one of the standard 19 reasons for which a Contractor can claim a compensation event (60.1(19)). 60.1(19) is meant for events that stops the Contractor from comple...
Feb '16 - Under the NEC3 Contract (Option C): Which compensation events is the Project responsible for notifying, and which compensation events is the Contractor responsible for notifying? For the compensation events that...
Mar '18 - Roger - just a point of clarity here whilst your sentiment is correct. You can revisit PM assumptions in an implemented compensation event but subtly that is a new compensation event under 60.1(17) rather than reopening the original implemented compensation event
Oct '12 - A breach of contract by the Employer which is not one of the other compensation events in the contract (listed in Clause 60.1) is a compensation event (see Clause 60.1(18)). This clause was added into the 2nd edition of the contract to...
10d - If the Project Manager has accepted and implemented a Compensation Event which the Employer has subsequently paid out on is the Employer then estopped (personally barred) from claiming the Compensation Event is not valid should it become the subject of adjudication with regards its implemented va...
Nov '19 - This really depends on specifically what your Works Information (or Scope under NEC4) states. If they have specifically stated this is something they would provide then yes this probably is a compensation event. If they did not specifically state or you assumed, then this would be much more subje...
Feb '19 - ...point of view, we are not obliged to show our subcontractors unit rates because we have a lump sum contract. This fact should also be applicable for compensation events (unless otherwise agreed). Furthermore, our subcontracts are not NEC subcontracts and we have also standard nondisclosure agreements with our subcont...
May '17 - ...area of the contract that NEC3 contracts don’t prescribe too well what should happen. Contract is clear you use the last Accepted Programme to assess compensation events, but what is less clear is if you can/should take into account other things that have happened since the last Accepted Programme. There are clauses t...
Oct '12 - This is a compensation event (see Clause 60.1(8)). The Contractor notifies the Project Manager of the event as a compensation event.
Oct '12 - This is a compensation event (see Clause 60.1(7)). The Contractor notifies the Project Manager of the event as a compensation event. The procedure for dealing with objects of value or historical or other interest found within the Site is stated in Clause 73.1.
Oct '12 - This is a compensation event (see Clause 60.1(6)). The Contractor notifies the Project Manager of the event as a compensation event. The obligation to reply within the relevant period is stated in Clause 13.3.
Oct '12 - This is a compensation event (see Clause 60.1(5)). The Contractor notifies the Project Manager of the event as a compensation event.
Oct '12 - This is a compensation event (see Clause 60.1(5)). The Contractor notifies the Project Manager of the event as a compensation event.
Oct '12 - This is a compensation event (see Clause 60.1(5)). The Contractor notifies the Project Manager of the event as a compensation event.
Oct '12 - This is a compensation event (see Clause 60.1(4)). The Project Manager has authority to instruct the Contractor to stop or not to start work (see Clause 34.1) and he may do this for safety or other reasons. He may also vary a Key Date (see Clause 14.3). The Contractor should notify the Project Ma...
Oct '12 - This is a compensation event. The Works Information should give details of anything, such as Plant and Materials, which the Employer is to provide and of any restrictions on when it is to be provided. The Contractor is required to include this information on the programme under Clause 31.2. The C...
Oct '12 - This is a compensation event. The Employer allows access to and use of each part of the Site to the Contractor which is necessary for the work included in this contract. Access and use is allowed on or before the later of its access date and the date for access shown on the Accepted Programme (Cl...
May '20 - The Contractor notified a compensation event under Cl.61.3, which was not accepted by the Project Manager as it was decided to have no effect upon Defined Cost or completion. The Project Managers decision was notified under Cl.61.4 and 18 weeks has now lapsed with no further communications on the...
Jun '15 - If a compensation event has been agreed and payed can the Project Manager then at the end of the contract revisit the compensation event and change his response
May '15 - During a compensation event, the Contractor had to use preliminary resources which are not additional and did not effect the Completion Date. However, the cost and need of these preliminary resources would have been saved had the compensation event not occurred resulting in a contribution to the ...
Oct '12 - Is an event which is the Employer’s risk a compensation event?
Feb '15 - Yes - potentially. Like any compensation event (positive or negative) it is assessed on its own merits using Defined Cost. If both Parties agree, for any one single issue you can use activity schedule rates to assess a compensation event - otherwise it will be Defined Cost i.e. schedule of cost c...
May '17 - This could be a compensation event under at least two headings : 60.1 (1) where the reduced WAs are a new ‘contsraint’ so a change to the Works Information; & /or 60.1 (2) where you are not allowed access to the Site, where the Site is sub-set of the Working Areas and it is the Site that is being ...
Feb '19 - In short ‘Yes’, as the compensation event will have affected Defined Costs. Consequently, the Contractor is entitled to those changes in Defined Costs which are due to “the effect of the compensation event” as per clause 63.1. i.e. the 4 month delay.
Oct '16 - Yes you can have a “negative” compensation event - assuming this was originally a clear requirement in their Scope. You then assess this as a (negative) compensation event, for which you calculate the forecast cost of not doing this work and then adjust the Prices accordingly. The activity schedu...
Oct '17 - There is nothing to stop you breaking a compensation event down into smaller elements so that it allows for individual elements to be paid as they are completed. There is nothing to say that a compensation event has to be a single line. I am aware of a recent CE on one project at over £1million a...
Feb '20 - The issuing of a revised drawing is a compensation event under clause 60.1(1), any additional cost and / or time incurred by the Contractor in relation to what is shown on the revised drawing can be included the compensation event quotation. So if you have to do more design and construction work ...
Jun '18 - Under Option B, Client has issued PMI for change of Works Information but has stated that Instruction is not a compensation event. It is our opinion that the change is a clear compensation event to the tune of approx. £50k. Contractually are we obligated to proceed with this Instruction knowing t...
Oct '12 - Yes. If the Project Manager decides that the effects of a compensation event are too uncertain to be forecast reasonably, he states assumptions about the event in his instruction to the Contractor to submit quotations. Assessment of the event is based on these assumptions (see Clause 61.6). Stati...
Oct '20 - ...lanned Key Dates. The NEC produced a guidance document, which you may find useful, titled; ECC PRACTICE NOTE 1 - October 2017 Assessing delays due to compensation events. An assessment for a CE uses defined principles but is not an ‘exact science’. If you don’t think the Subcontractor has assessed the quotation correc...
Feb '17 - We are currently using an Option D Contract. We are currently in the process of assessing a Compensation Event due to revised design which leads to reduction in quantities. If Parties did not reach agreement that existing BOQ rate or a new rate shall be used in assessing a Compensation Event, the...
Nov '18 - How do I have to show a parallel impact on the programme because of two Compensation events? First Scenario: CE 1: asbestos found (CE is accepted by employer), with impact on the critical path CE 2: contaminated water found (CE is accepted b...
Jul '17 - Under an NEC3 ECC Option C Contract, which has clause 60.1 (19) deleted and replaced with “The works are affected by a Force Majeure Event”, is unofficial strike action by the Contractor’s operatives and their Subcontractors operatives a Compensation Event? The operatives who went out on strike h...
Aug '19 - I am on a NEC3 Term Service Contract Option A (Schedule of Rates) and have been building up compensation events using either; Labour, Plant, Material + direct fee as per SCDP2 (9%) Subcontractor Quote + subbie fee as per SCDP2 (11%) However within series 8000 w...
Feb '20 - ...used to the base date and a price adjustment for inflation calculation is applied to the ‘CE amount’ following inclusion in a payment assessment. If compensation events have been assessed at ‘current prices’ then they should not be subject to an inflationary adjustment and so excluded from the calculation under X1.
Oct '12 - The Project Manager may withhold acceptance of a submission by the Contractor and withholding acceptance for a reason stated in the contract is not a compensation event (see Clause 13.8). However, if the Project Manager withholds acceptance for a reason not stated in the contract and other than a...
Apr '20 - We have a site which has suffered Employer delays. Our Contractor has submitted quotations for what they are claiming the effect of the compensation events to be. One of the items within the quotation, is a change in sub-contractor (new sub-contractor is more expensive that the original sub-contractor) &...
Apr '20 - If it was only a notated design team, then the PM would need to instruct you, the Contractor of a change to the Scope which would be a compensation event under clause 60.1(1). However, often it is not just the design team that is notated, but also the design itself effectively making it the Contra...
Oct '12 - The Employer may use part of the works before Completion and, unless the use is for the reasons stated in Clause 35.2, he takes over the part when he begins to use. If take over occurs before Completion or the Completion Date, it is a compensation event (see Clause 60.1(15)). Alternatively, the P...
Jun '20 - I think this really depends on whether it was an obligation on the Employer to actually respond to this report or not. The fact that it is on the accepted programme is not really so relevant. If this was a requirement within the Scope to issue this report for acceptance and they have not responde...
Aug '19 - In accordance with Clause 62.3 of the option A subcontract we have with a Subcontractor, the Subcontractor submits a quotation within 2 weeks of being instructed to do so by the Contractor and the Contractor replies within 4 weeks. If the Subcontractor uses his full 2 weeks to submit the quotatio...
Jul '17 - If the early warning was notified in relation to a matter that is a compensation event, then a compensation event should have been notified instead. The CVI procedure, although a practical method of dealing with such issues, is not formally recognized under the contract and an appropriately recog...
Oct '12 - What are compensation events?
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