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Assessing compensation events: which programme do you use?


A common question asked by NEC users is, what programme do you use to assess a compensation event and what progress or change (if any) should you first take into account?

Clause 62.2 of the NEC3 Engineering and

Construction Contract (ECC) states that, ‘If the programme for remaining work is altered by the compensation event, the Contractor includes the alterations to the Accepted Programme in his quotation’. Clause 63.3 also states that, ‘A delay to the Completion Date is assessed as the length of time that, due to the compensation event, planned Completion is later than planned Completion as shown on the Accepted Programme’. What then happens if that accepted programme

is several months old and contains logic that is now clearly known to be wrong? Would you really consider that it would be contractually or practically correct blindly to ignore matters that you know have changed by taking the words of that clause so literally? Unfortunately in my experience some people

appear to take that view. They suggest that you assess the compensation event against the last accepted programme without taking into account anything that may have happened since that programme was accepted. In their interpretation, that is what the contract says.

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transfer of the ownership of IP from its supply chain. This could be along principles already present in secondary option clause X9 of the NEC3 Professional Services Contract. Such a licence could also include the need for

designers to waive their moral rights in their IP. A distinction may have to be made between IP created specifically for the project (‘foreground IP’) and that already owned by the designer prior to the project (‘background IP’). Invariably, there will be tensions with the supply chain, keen perhaps to preserve IP ownership in its creations, which will need to be resolved.

Potential and practicalities BIM represents huge opportunities in

construction. To ensure the industry maintains momentum, it needs to develop technologies and practices that tap its full potential. Traditional IP ownership and licensing

structures must be reviewed to accommodate the unique features of BIM, and the NEC3 Professional Services Contract could provide the ideal starting point to achieve this.

References Cabinet Office (2011) Government Construction Strategy, 2011. ●

For further information please ccontact Khalid Ramzan on +44 20 7490 6303 or email


Read the contract as a whole Whenever I am giving advice about the

administration of the contract a simple response is normally, ‘just do what the contract says’ or ‘follow the contract’. For the most part the contract is pretty clear on what should be done and the associated consequence for not doing it. However, there are certain areas in the contract where simply following the precise words of a single sentence or clause in the contract will not give us a concise answer because the contract needs to be read as a whole. The problem generally comes about when the

parties have not been following the contract in the first place. For whatever reason, the programme submission and acceptance process has got out of kilter, either by the contractor not producing compliant programmes, or by the project manager not following the acceptance process in the contract. Following the contract clearly puts both parties in a better place. However, if the parties have got themselves into this situation, then we have to be able to use the contract to try to get back on contractual track.

Non-implemented compensation events I wrote an article in NEC Users’ Group

newsletter issue 50 which had a similar type of problem. The ECC says you show the effects of implemented compensation events but it does not expressly mention non-implemented compensation events. By non-implemented compensation events I mean those that are currently being quoted or assessed and in the meantime are being carried out on site (as per quotes requested under clause 61.1). The conclusion I came to within that article was

that you must show notified compensation events on the programme (which I believe meets the first bullet of clause 32.1) as it would be non-sensical not to, particularly when they are affecting the programmed works and possibly even the critical path and hence planned completion. By not showing non-implemented compensation

events on the programme it would mean that the programme was not realistic and therefore a reason not to accept the programme under 31.3. I thus believe it is contractually incorrect to those who say you should not show non-implemented compensation events on the programme, despite the second bullet of 31.2 only specifically mentioning implemented ones. Whenever you assess a compensation event,

my general approach is that you take into account any progress and change that you were aware of up to the point that the compensation event was notified by the project manger (or if notified by the contractor, the point at which the project manager agreed that it was a compensation event and requested a quotation). This seems to be compliant with the first bullet of clause 32.1, although I do accept it would be more useful if either the contract or the guidance notes more expressively and clearly made this point. Following the same logic, when it says you use

the accepted programme to assess a compensation event against, you should take that as the starting point but not then blindly ignore everything that

The contractor subsequently decides to do C

first, effectively creating 8 weeks float on D. But a compensation event then arises that delays the start of D by 4 weeks, reducing the float to 4 weeks.

you know for a fact has already changed since it was accepted.

Some examples Let us look at a simple example. A contractor

shows on the original programme that it plans to do activity A then B then C then D. Each activity is 4 weeks long, making a total programme time of 16 weeks. C is critical to the start of D.

The contractor has either not had its latest

submitted programme accepted or possibly even deliberately has not updated its programme. Either way it now claims that, by using the original accepted programme, it is entitled to a 4 week delay to planned completion and hence completion date, and all of the preliminary costs that go with it. In reality the delay to activity D did not at that

point in time affect planned completion and therefore there would be no entitlement of time, but there may be cost which would be assessed on its own merit. It is worth noting that clause 64.1 also states that

the project manager can make its own assessment of a compensation event if the latest programme submitted has not been accepted. This must be because the project manager does not agree with the way that the contractor has assessed changes and progress since the last accepted programme, and can assess it directly. If it were the case that you only used the last accepted programme, then this bullet would not be needed as the rules would be clear.

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