When the NEC4 Engineering and Construction Contract came out in mid-2017, one of the first clauses examined was that concerning the assessment of compensation events. Was NEC to retain its prospective approach to valuing the time and money effects of a compensation event? This article looks at issues around valuing a compensation event that is a change in scope (previously called the works information) under NEC and how the rules work when the existence of such a change is only later established.

NEC3 provides at clause 63(1) that assessing the effect of a compensation event (CE) involves assessing changes to the prices of all three of:

• the actual defined cost of the work already done
• the forecast defined cost of work not yet done
• the resulting fee.

It envisages that a CE that changes the scope of the works will normally be preceded by a quotation, where the contractor is being asked to “forecast” the effect of the CE on the work still to be done. It can also claim for the effect of the CE on work already done but, given it is a look ahead to a CE still to be instructed, the main focus is the effect on the work to follow. That forecast will inform the employer whether to instruct the CE, thereby accepting the quotation and, it is argued, giving everyone certainty before they begin as to how how much the contractor will be paid.

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