Notice Provisions for Adjustment to the Completion Date NEC 3 and 4
As explained in our last “Back to Basics #3”, the timely issuing of Notices can be vital to protect your Entitlement to an alteration of the Completion Date/s defined in your contract due to delay event or change.
Under the unamended NEC 3 / 4 if an event occurs, which it is the Contractor’s obligation to notify (unexpected ground conditions for example), then this must be notified as a compensation event (commonly referred to as a “CEN” – compensation event notice or a “NCE” – notice of compensation event) within 8 weeks of the Contractor becoming aware (clause 61.3). If this doesn’t happen then the right to have the Completion Date, a Key Date or the Prices changed, is LOST. Under the NEC subcontract forms the timescale is even shorter at 7 weeks (to ensure that Main Contractor can comply with its obligation to notify in 8 weeks).
However, there is no time bar to CEN’s that the Contractor raises where these should be raised by the Project Manager (Project Manager Instructions “PMI’s” under clause 61.1 of NEC3 for example).
That being said, it should be noted that in a recent adjudication an Adjudicator decided that as soon as the Contractor became aware of an issue or event that it was obliged to notify even if this event was something that the Project Manager should have notified the Contractor on. Our advice is always issue a CEN as soon as you become aware of a possible compensation event regardless of who you believe is obliged to issue the CEN.
Whereas the JCT wording is possibly open to interpretation the NEC is absolutely clear, if you do not notify in the allotted time you will lose your rights for a change in the Completion Date.
It is common that when a Contractor / Subcontractor becomes aware of a potential risk to the Project, (financial or in terms of completion) that they raise an Early Warning (EWN) hoping that this will suffice and confuse the EWN and CEN.
Clause 16.1 under NEC3 and Clause 15.1 under NEC 4 exists for matters which may: “increase the total of the Prices, delay Completion, delay meeting a Key Date or impair the performance of the works in use”.
The focus here is entirely on the Project Team (Contractor, Project Manager, Designers etc) working together to avoid or mitigate the risk where possible.
Early Warnings are not a vehicle for recovering money or time, they exist solely for the purpose of collective project risk reduction / management.
Clause 61.3 requires that the Contractor notifies the compensation event in the case of an event occurring or if he expects it to happen.
The focus here is not on risk management of the Project, but on serving timely notices which may later need to be relied on. It could be argued that if you feel there is no way of avoiding the risk, then there are sufficient grounds to raise a compensation event.
Clause 61.5 states that the Project Manager may identify, when requesting a quotation to a submitted CEN, any matter which should have been raised in an EWN BUT under Clause 63.5 the Project Manager is required to assess the compensation event as if an EWN had been issued. Therefore, the failure to issue an EWN has no impact on the Contractors / Subcontractors right to a compensation event.
Ramskill Martin’s Team of Experts can assist you with any issue associated with the NEC suite of Contracts (3 and or 4), draft your Compensation Event Notices, provide Planning and Programming Support so you can manage your time and, if necessary, can prepare Delay Analysis to demonstrate your Entitlement (if you or others have not followed the contract).
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