Frequently Asked Questions

Question
We are a contractor working on an NEC3 Engineering and Construction Contract (ECC) Option A (priced contract with activity schedule). We have received a project manager’s instruction to stop works in accordance with clause 34.1. We were also instructed in accordance with clause 61.2 to submit a quotation for a proposed instruction to restart the works at a stated date. If we do not receive a project manager’s instruction (in accordance with clause 34.1) within 13 weeks to restart the works, are we entitled to termination in accordance with clause 91.6 (R19)?

So far, we have only received a proposed instruction to restart the works, which clause 61.2 states we should not put into effect. The reason for stopping the works is due to Covid-19 and for the employer wanting to maintain its business as a going concern by not spending money on capital works. Covid-19 did not itself ‘stop’ us as stated in clause 60.1(19). As such perhaps R20 is a more appropriate reason for termination than R19? 
The project manager appears confused. Their initial instruction to stop work is a compensation event under clause 60.1(4). However, any instruction to restart the work will not be a compensation event as it is not listed as such in the contract. Therefore, there can be no quotation for it, whether the instruction to restart is proposed or actual.

The project manager should instruct you to provide a quotation for the actual instruction to stop work. But, of course, that will be impossible unless you know when the work will be instructed to restart. So, the project manager should use clause 61.6 and state the assumptions that you should use when making your quotation. That would, of course include an assumption as to when the work will restart. If the assumption is later found to be wrong, the project manager must notify a correction, which will be another compensation event under clause 60.1(17), which could decrease or increase the prices.

The compensation event for stopping and restarting will be assessed in the same way as any other compensation event. As to money, it will be assessed by forecasting the effect it will have on the defined cost to carry out the rest of the work and then adding the fee, see clause 63.1. You will be able 
to make allowance in the assessment for any risks that have a significant chance of occurring, see clause 63.6, but you will also need to assume you will act promptly and competently to the event. As for time, clause 63.3 sets out how the completion date will be changed based upon the accepted programme.

As for termination, we cannot see how this can be under R20 as it is about the employer running out of money and is therefore the employer’s default. Why it has run out of money is probably irrelevant. You will need to be careful when providing a quotation for a compensation event that runs beyond the 13 weeks in clause 91.6 to reserve your right to termination. However, you must get legal advice on that issue before you proceed.

If you do terminate under R19 you will be able recover more than if the termination was under R20. Compare the relevant entries in the termination table and clause 93.2, which sets out how amount A4 is calculated. Bearing all this in mind, you need to be talking to the project manager as to how this matter should now be progressed.

Finally, we should make it clear that the prevention provisions of clauses 19.1, 60.1(19) and 91.7 do not apply in this case because the virus did not stop you from achieving completion by the date shown on the accepted programme. 

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