Frequently Asked Questions

We are the project manager on an ECC Option A (priced contract with activity schedule) and secondary option X1 (price adjustment for inflation) is not included. The contractor has submitted a quotation for a compensation event which includes an amount for inflation. The compensation event is due to the employer’s delay in getting planning approval at the start of the project after contract award. Does the contractor have any entitlement to inflation if option X1 is not included? Further, can the contractor claim for staff on site when the site could not be set up due to planning and the staff working from their normal offices?
As with all compensation events, this one will be assessed based upon the effect it is forecast to have upon the defined cost to carry out the works plus the fee, see clause 63.1. If the works are now going to be carried out sometime later than originally allowed for, there is a risk that the defined cost will increase because of inflation. This has nothing to do with option X1, which is about who carries the risk of inflation.

Without option X1, the contractor normally carries that risk. But when assessing the compensation event, which is at the employer’s risk, the contractor is entitled to make an allowance for matters that have a significant chance of occurring and that are at its risk under the contract, see clause 63.6. This could include the risk of inflation being greater than that allowed for in its original price.

As for the cost of people, that is only allowed for those people whose normal place of working is within the working areas, see the first bullet of item 1 of the shorter schedule of cost components. It will also include other people when they are working in the working areas (see the second bullet of item 1 of the shorter schedule of cost components), but that latter item will not apply because nobody is as yet in the working areas. Also, the cost of people whose place of work is not the working areas is assumed to be in the fee, see clause 52.1.

If the people allocated to work in the working areas on this contract cannot be found other productive short-term work because of the employer’s problem, it is only reasonable that the employer pays for the costs of them being allocated to this contract for the additional time.

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