Frequently Asked Questions

We are a client using the NEC3 ECC and we are also using contract management software. If the contractor notified a compensation event via the software and our project manager did not respond within the time allowed, is this an acceptance that it is a valid compensation event?
A compensation event occurs when one of the events listed in the contract as a compensation happens. In that case the compensation event can be notified by either the project manager (clause 61.1) or the contractor (clause 61.3). If the contractor notifies the compensation event, the process to deal with it is set out in clause 61.4 of the contract. Basically, the project manager has one week to reply to the notification, or such other longer periods to which the contractor has agreed (second paragraph of clause 61.4).

If the project manager does not notify their decision within the time set out, as in this case, the compensation event is not automatically accepted. But the contractor can, at any time after the period, notify the project manager that they have failed to notify their decision.

If the project manager continues to fail to notify their decision after two weeks of that contractor’s notification, the compensation event is deemed to have been accepted by the project manager and the project manager is deemed to have issued an instruction to provide a quotation (final paragraph of clause 61.4). In that case this will be treated as a compensation event, the project manager cannot argue otherwise and only the adjudicator can change that deemed acceptance.

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