Entries in the price list can be in the form of either lump sums or quantities and rates – see clauses 11.2(10) and the notes in the price list on page 5 of the contract data. That will apply both to the original entries and any made subsequently because of a compensation event.

Clause 63.1 requires that if a compensation event only affects the quantities of work shown in the price list then the assessment will use the rates for those quantities. For all other compensation events (including those that affect any work that is the subject of a lump sum) defined cost plus fee is used – see clause 63.2.

Whichever way you calculate the assessment, the resultant figure or figures can be entered into the price list in any way you want, with you as service manager having the final say if it cannot be agreed – see clause 62.4. It can be inserted as one or more lump sums, or it can be inserted using quantities and rates. In practice usually this is done by adding one or more lines to the price list referring to the compensation event number, but it could be done in the case of quantities anrates by just increasing the relevant quantities in the price list.

If the entry in the price list uses quantities and rates, the contractor will be paid the actual quantity carried out (see clause 11.2(9)), and therefore the employer takes the risks and rewards of any error in the quantities used to assess the compensation event (but not, of course its rate).

If the entry in the price list uses lump sums, then the contractor will be paid that lump sum regardless of the quantities involved (again see clause 11.2(9)), and therefore it is the contractor that takes the risk and rewards for any errors in quantities used to assess the compensation event. However, in this case an allowance for that risk must be included when the assessment is made – see clause 63.6.

Therefore the answer to your example will depend upon the way that the value of the compensation event is inserted into the price list. It will be (a) if it is inserted as a lump sum, or (b) if it is inserted as quantities and rates.

NEC3 and NEC4 Compared

NEC3 and NEC4 Compared NEC4 redlines

This is a practical reference guide which covers on a clause-by-clause basis, the differences between the NEC3 and NEC4 Engineering and Construction Contracts.

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