{
  "query": "NEC4 contract quotation assessment clause 64.1 contractor forecast challenge",
  "raw_results": [
    {
      "url": "https://www.fenwickelliott.com/sites/default/files/insight_september_2024.pdf",
      "title": "[PDF] Inside this issue Forecast or fantasy: Where is the NEC dividing line?",
      "content": "Clause 64.1 provides that the Project Manager can assess the compensation event in four specific circumstances rather than relying on the Contractor’s quotation. Project Managers can sometimes be keen to take on this power, particularly if they feel the quotations are exaggerated or not prepared as required under the terms of the contract. The specific circumstances in which they can exercise this power are, however, only as follows: • “if the Contractor has not submitted the quotation and details of its assessment within the time allowed, • if the Project Manager decides that the Contractor has not assessed the compensation event correctly in the quotation and has not instructed the Contractor submit a revised quotation, • if, when the Contractor submits quotations for the compensation [...] However, problems do arise when the parties fail to adhere to the rules associated with quotations for compensation events. This is particularly the case where the forecasts are exaggerated either deliberately or due to a misunderstanding as to how the contract is intended to operate.3 In this Insight, we take an in-depth look at the rules governing forecasting the costs associated with a compensation event in a quotation submitted pursuant to the NEC4 Engineering and Construction Contract (ECC) (the “NEC4”). In that context, we examine the guidance available on navigating the hotly debated issue of prospective versus retrospective assessments for compensation events. We also analyse what protections are available both pursuant to the NEC4 itself, and at common law, to protect against [...] Going back to basic principles, what has been “agreed” (or not) is essentially a question of fact. If both parties have accepted a quotation and/or assessment, then it is agreed and cannot be reopened even if subsequent events show that the forecast was wildly wrong. This applies whether or not the Quotation from the Contractor was accepted or the Project Manager made their own assessment. Indeed, this was confirmed by Deeny J in the Northern Irish case of Healthy Buildings16 in which he observed the following (in the context of an NEC3 Professional Services Contract): “ It seems to me that the language of the clause is somewhat unclear but that it is straining that language to say the process now before the court is one of implementing the compensation event. If one looks at 65.1 and",
      "score": 0.86136365,
      "raw_content": null
    },
    {
      "url": "https://www.neccontract.com/news/when-and-why-nec-project-managers-have-to-assess-compensation-events?srsltid=AfmBOor7PimXzB0TBvgOam2OiSwvPoLNSmvE6ADxtPoHHn6rnUwus9Bs",
      "title": "When and why NEC project managers have to assess compensation events | News | NEC Contracts",
      "content": "| NEC4 ECC clause 64.1 bullet point number | Bullet point text | Key linked sub-clauses |\n --- \n| 1 | if the Contractor has not submitted the quotation and details of its assessment within the time allowed | 62.2, 62.3, 62.5, 63.1, 63.5 |\n| 2 | if the Project Manager decides that the Contractor has not assessed the compensation event correctly in the quotation and has not instructed the Contractor to submit a revised quotation | 62.3, 63 |\n| 3 | if, when the Contractor submits quotations for the compensation event, it has not submitted a programme or alterations to a programme which the contract requires it to submit | 62.2 | [...] The four reasons why an NEC project manager should make their own assessment of a compensation event are stated in ECC clause 64.1. Each reason describes a failure by the contractor to comply with its obligations and relates to programme and the compensation event process (see Table 1).  \n  \nNEC contracts use the word ‘may’ to indicate that an action is discretionary. However, this word is not used in clause 64.1 so the project manager’s obligation is mandatory when one or more of the stated reasons apply. The approach taken by the contract to assessing compensation events is generally a prospective one. It requires the effects of change to be dealt with as soon as they arise so as to reduce uncertainty for the parties at the end of the contract. [...] The contractor’s obligation to submit a compensation event quotation and details of the assessment is stated in clause 62.2. The time allowed for submission is three weeks following instruction by the project manager (clause 62.3). Clause 62.6 also allows the contractor to notify the project manager of the project manager’s failure to respond to a quotation, giving rise to an automatic extension to the period in which the project manager must respond.",
      "score": 0.740494,
      "raw_content": null
    },
    {
      "url": "https://gmhplanning.co.uk/nec-guidance-notes/ecc-section-63-assessing-compensation-events/",
      "title": "ECC Section 63 - Assessing Compensation Events - NEC Guidance Note",
      "content": "The Contractor has to submit their quotation within three weeks of the quotation request. It is important that they present the quotation in a format that is going to be understood and as convincing/justified as possible. It should include risk which has a significant chance of occurring and is the Contractor’s risk under the contract (63.8). That would clearly be subjective, so the Contractor just has to make it as clear and justifiable as possible within their quotation to avoid a lower Project Manager assessment. If the Contractor does not submit their quotation within three weeks then the Project Manager under clause 64.1 will make their own assessment of that compensation event (which is unlikely to be higher than the Contractor would have wanted!)",
      "score": 0.73023266,
      "raw_content": null
    },
    {
      "url": "https://www.ceca.co.uk/wp-content/uploads/legacy-media/96888/seminar_notes_-_386e__-_compensation_event_procedure___assessment_under_the_nec3.pdf",
      "title": "[PDF] Notes for Seminar Compensation events procedure and ...",
      "content": "This causes enormous dispute in practice and is not easy to interpret. In our opinion, this does not empower the Project Manager to decide that the Contractor has not assessed the compensation event correctly and impose his own assessment merely because he disagrees with the Contractor’s view of forecast effects, such as risk, resource levels and outputs, etc. It will often be more appropriate for the Project Manager to seek to agree with the Contractor the basis for a revised quotation instead of making his own assessment of such matters. not submitted a programme or alterations to a programme which this contract requires (re: clause 64.1, 3rd bullet) There is enormous potential for this if the Contractor is not dealing with programmes in accordance with clauses 31, 32 and 62. BEZZANT [...] quotation or Project Manager’s assessment, except in the latter case if the Project Manager’s assessment is challenged in accordance with the dispute resolution provisions. It is not clear whether the Employer (or indeed the Contractor) can challenge the Project Manager’s acceptance of a quotation. Even so, neither the Project Manager nor the Contractor can use records as the sole basis for revising a forecast (see clause 65.2). Correction of Project Manager’s assumptions (clauses 60.1(17) and 61.6) If the Project Manager stated under clause 61.6 assumptions to be used as the basis for assessment of a compensation event and it is later found that one or more of such assumptions is wrong, then the correction of the assumption(s) in question is treated as a new compensation event. This does [...] to act. The wording of the clause is such that the Project Manager does not have any option once the trigger event has happened. The obligation on the Project Manager is so clear that it appears that should the Project Manager fail to carry out the assessment then a breach will occur. The intent of the clause seems to be to ensure that the compensation event mechanism is carried out even where the Contractor fails to do what is required of him. The Project Manager could find himself carrying a heavy burden in this respect. In accordance with Clause 64.3, the Project Manager is obliged to provide his assessment within the period allowed for the Contractor’s assessment. This period starts when the need for the Project Manager’s assessment becomes apparent. Clause 64.2 allows the Project",
      "score": 0.6889923,
      "raw_content": null
    },
    {
      "url": "https://www.hkis.org.hk/hkis/general/events/cpd-2013108.pdf",
      "title": "[PDF] Compensation Events in NEC & Practical Issues Arising from ... - HKIS",
      "content": "The Contractor has 3 weeks to submit the quotations (Core Clauses 62.3 & 62.4) the 3 weeks limitation may be extended by agreement between the parties before the 3 weeks is due to expire (Core Clause 62.5) if the Contractor does not submit its quotations within the required time, the Project Manager would still be required to assess the compensation event (Core Clause 64.1). The basis of the assessment is set out in Core Clause 63 24 Administering Compensation Events – Quotations (9) Quotations should include the following (Core Clause 62.2): details of assessment of the changes to the Prices and the delay to the Completion Date or Key Date alterations to the Accepted Programme showing the effect of the compensation event costs and time risk allowances for matters which have a [...] costs and time risk allowances for matters which have a significant chance of occurring and are at the Contractor’s risk under the Contract alternative quotations where instructed by the Project Manager alternative quotations for other methods of dealing with the compensation event which the Contractor considers practicable The Contractor’s assessment should follow Core Clause 63 failing which, the Project Manager can make his own assessment (Core Clause 64.1) 25 Administering Compensation Events – Quotations (10) The Project Manager has 2 weeks to respond to the quotations which could be one of the following (Core Clause 62.3): an instruction to submit a revised quotation. This could occur where the Project Manager is of the view that the Contractor has assessed the event [...] is of the view that the Contractor has assessed the event incorrectly. In this case, the Project Manager has to give reasons for such instructions and the Contractor has a further 3 weeks to submit the revised quotations acceptance of the quotation in which case, the compensation event is implemented a notification that a proposed instruction or a proposed changed decision will not be given a notification that he will do his own assessment. Of course, Core Clause 64.1 needs to be satisfied 26 Administering Compensation Events – Project Manager’s own assessment (11) The Project Manager may make his own assessment of the compensation event in the following circumstances (Core Clause 64.1): the Contractor did not submit his quotations and accompanying details in time (3 week limitation)",
      "score": 0.67037153,
      "raw_content": null
    }
  ],
  "formatted": "Source: [PDF] Inside this issue Forecast or fantasy: Where is the NEC dividing line?\nURL: https://www.fenwickelliott.com/sites/default/files/insight_september_2024.pdf\nClause 64.1 provides that the Project Manager can assess the compensation event in four specific circumstances rather than relying on the Contractor’s quotation. Project Managers can sometimes be keen to take on this power, particularly if they feel the quotations are exaggerated or not prepared as required under the terms of the contract. The specific circumstances in which they can exercise this power are, however, only as follows: • “if the Contractor has not submitted the quotation and details of its assessment within the time allowed, • if the Project Manager decides that the Contractor has not assessed the compensation event correctly in the quotation and has not instructed the Contractor submit a revised quotation, • if, when the Contractor submits quotations for the compensation [...] However, problems do arise when the parties fail to adhere to the rules associated with quotations for compensation events. This is particularly the case where the forecasts are exaggerated either deliberately or due to a misunderstanding as to how the contract is intended to operate.3 In this Insight, we take an in-depth look at the rules governing forecasting the costs associated with a compensation event in a quotation submitted pursuant to the NEC4 Engineering and Construction Contract (ECC) (the “NEC4”). In that context, we examine the guidance available on navigating the hotly debated issue of prospective versus retrospective assessments for compensation events. We also analyse what protections are available both pursuant to the NEC4 itself, and at common law, to protect against [...] Going back to basic principles, what has been “agreed” (or not) is essentially a question of fact. If both parties have accepted a quotation and/or assessment, then it is agreed and cannot be re\n\n---\n\nSource: When and why NEC project managers have to assess compensation events | News | NEC Contracts\nURL: https://www.neccontract.com/news/when-and-why-nec-project-managers-have-to-assess-compensation-events?srsltid=AfmBOor7PimXzB0TBvgOam2OiSwvPoLNSmvE6ADxtPoHHn6rnUwus9Bs\n| NEC4 ECC clause 64.1 bullet point number | Bullet point text | Key linked sub-clauses | --- | 1 | if the Contractor has not submitted the quotation and details of its assessment within the time allowed | 62.2, 62.3, 62.5, 63.1, 63.5 | | 2 | if the Project Manager decides that the Contractor has not assessed the compensation event correctly in the quotation and has not instructed the Contractor to submit a revised quotation | 62.3, 63 | | 3 | if, when the Contractor submits quotations for the compensation event, it has not submitted a programme or alterations to a programme which the contract requires it to submit | 62.2 | [...] The four reasons why an NEC project manager should make their own assessment of a compensation event are stated in ECC clause 64.1. Each reason describes a failure by the contractor to comply with its obligations and relates to programme and the compensation event process (see Table 1). NEC contracts use the word ‘may’ to indicate that an action is discretionary. However, this word is not used in clause 64.1 so the project manager’s obligation is mandatory when one or more of the stated reasons apply. The approach taken by the contract to assessing compensation events is generally a prospective one. It requires the effects of change to be dealt with as soon as they arise so as to reduce uncertainty for the parties at the end of the contract. [...] The contractor’s obligation to submit a compensation event quotation and details of the assessment is stated in clause 62.2. The time allowed for submission is three weeks following instruction by the project manager (clause 62.3). Clause 62.6 also allows the contractor to notify the project manager of the project manager’s failure to respond to a quotation, giving rise to an automatic extension to th\n\n---\n\nSource: ECC Section 63 - Assessing Compensation Events - NEC Guidance Note\nURL: https://gmhplanning.co.uk/nec-guidance-notes/ecc-section-63-assessing-compensation-events/\nThe Contractor has to submit their quotation within three weeks of the quotation request. It is important that they present the quotation in a format that is going to be understood and as convincing/justified as possible. It should include risk which has a significant chance of occurring and is the Contractor’s risk under the contract (63.8). That would clearly be subjective, so the Contractor just has to make it as clear and justifiable as possible within their quotation to avoid a lower Project Manager assessment. If the Contractor does not submit their quotation within three weeks then the Project Manager under clause 64.1 will make their own assessment of that compensation event (which is unlikely to be higher than the Contractor would have wanted!)\n\n---\n\nSource: [PDF] Notes for Seminar Compensation events procedure and ...\nURL: https://www.ceca.co.uk/wp-content/uploads/legacy-media/96888/seminar_notes_-_386e__-_compensation_event_procedure___assessment_under_the_nec3.pdf\nThis causes enormous dispute in practice and is not easy to interpret. In our opinion, this does not empower the Project Manager to decide that the Contractor has not assessed the compensation event correctly and impose his own assessment merely because he disagrees with the Contractor’s view of forecast effects, such as risk, resource levels and outputs, etc. It will often be more appropriate for the Project Manager to seek to agree with the Contractor the basis for a revised quotation instead of making his own assessment of such matters. not submitted a programme or alterations to a programme which this contract requires (re: clause 64.1, 3rd bullet) There is enormous potential for this if the Contractor is not dealing with programmes in accordance with clauses 31, 32 and 62. BEZZANT [...] quotation or Project Manager’s assessment, except in the latter case if the Project Manager’s assessment is challenged in accordance with the dispute resolution provisions. It is not clear whether the Employer (or indeed the Contractor) can challenge the Project Manager’s acceptance of a quotation. Even so, neither the Project Manager nor the Contractor can use records as the sole basis for revising a forecast (see clause 65.2). Correction of Project Manager’s assumptions (clauses 60.1(17) and 61.6) If the Project Manager stated under clause 61.6 assumptions to be used as the basis for assessment of a compensation event and it is later found that one or more of such assumptions is wrong, then the correction of the assumption(s) in question is treated as a new compensation event. This does [...] to act. The wording of the clause is such that the Project Manager does not have any option once the trigger event has happened. The obligation on the Project Manager is so clear that it appe\n\n---\n\nSource: [PDF] Compensation Events in NEC & Practical Issues Arising from ... - HKIS\nURL: https://www.hkis.org.hk/hkis/general/events/cpd-2013108.pdf\nThe Contractor has 3 weeks to submit the quotations (Core Clauses 62.3 & 62.4) the 3 weeks limitation may be extended by agreement between the parties before the 3 weeks is due to expire (Core Clause 62.5) if the Contractor does not submit its quotations within the required time, the Project Manager would still be required to assess the compensation event (Core Clause 64.1). The basis of the assessment is set out in Core Clause 63 24 Administering Compensation Events – Quotations (9) Quotations should include the following (Core Clause 62.2): details of assessment of the changes to the Prices and the delay to the Completion Date or Key Date alterations to the Accepted Programme showing the effect of the compensation event costs and time risk allowances for matters which have a [...] costs and time risk allowances for matters which have a significant chance of occurring and are at the Contractor’s risk under the Contract alternative quotations where instructed by the Project Manager alternative quotations for other methods of dealing with the compensation event which the Contractor considers practicable The Contractor’s assessment should follow Core Clause 63 failing which, the Project Manager can make his own assessment (Core Clause 64.1) 25 Administering Compensation Events – Quotations (10) The Project Manager has 2 weeks to respond to the quotations which could be one of the following (Core Clause 62.3): an instruction to submit a revised quotation. This could occur where the Project Manager is of the view that the Contractor has assessed the event [...] is of the view that the Contractor has assessed the event incorrectly. In this case, the Project Manager has to give reasons for such instructions and the Contractor has a further 3 weeks to submit the r"
}