Compensation Events Flashcards
What do Compensation Events include?
variations, loss and expense and extensions of
time;
How are relevant events in JCT treated differently to Compensation Events?
NEC
An EoT and LaE are provided together.
JCT
The contractor must apply for EoT and LaE separately
Where are compensation events found in the NEC?
Cl 60, X12,X19
What is Option Z?
The contractor may express terms which allow for additional compensation events
What is the process of a Compensation event?
i. Notification;
ii. Quotation; Contractor is obliged to provide a
quotation within 3 weeks
iii. Assessment; 2 weeks or an agreed and notified extended period
iv. Implementation.
What if the PM or Supervisor issues an instruction which leads to a compensation event?
the Project Manager must notify the Contractor for compensation event and instructs him to provide a quotation.
For all other compensation events, the Contractor has to notify the PM
When can the PM reject the Quotation?
i. The event is the Contractor’s fault;
ii. It has not occurred or is not going to occur;
iii. It has no effect on the Defined Cost and the Completion Date;
iv. It is not one of the listed events
How many quotations can the PM ask for?
The PM can instruct quotations for alternative methods.
If the effect of an event is unclear, and the PM provides details to the Contractor which is based upon the Quotation. A compensation event is viable.
What must a Quotation include?
- The quote must be assessed using the procedures in the contract and, when a contractor is providing his quote to the Project Manager.
- the Contractor must include details of his assessment and, if the compensation event affects the COMPLETION DATE or the KEY DATES, a
revised programme for acceptance - It would also include the time and money rightfully required
What are the 4 responses to the quotation?
- An acceptance of the quotation;
- A confirmation that a proposed compensation event will not be instructed;
- A notification that the quotation has not been prepared properly (with reasons) and an instruction to resubmit;
- Ditto, with a notification that the Project Manager will instead assess the compensation event.
How is the event assessed?
The event is assessed on how the event affects the:
i. The actual Defined Cost for work already done plus the Fee; and
ii. The forecast Defined Cost for work not yet done plus the fee; and
iii. Planned Completion as shown on the latest accepted programme.
The cut off point between work done and work not already done is the date of the instruction to provide the quotation
What is the Rule assessment
The assessment is based on the effect of the event on the Contractor’s cost; i.e. it either increases the cost or decreases it. The DEFINED COST
Neither party should be disadvantaged or unfairly gain from the event.
Neither the rates and prices in the Activity Schedule nor the Bill of Quantities are considered in assessing a compensation event
Give an example of how the rule assessment could impact the BoQ
traditional forms of contracts with BoQs, a contractor would be reimbursed for additional work based on an existing bill rate.
In that case, if the bill rate is unfair, the Contractor could unfairly gain an advantage or suffer a loss.
What does implementation mean?
The compensation event is finalised and can only be changed by an adjudicator
When is a Compensation Event implemented?
1) The Project Manager accepts the Contractor’s quotation;
2) The Project Manager notifies the Contractor of his
assessment;
3) The Contractor’s quotation is treated as having been
accepted by the Project Manager.
