Frequently Asked Questions

We are the project manager on an NEC4 Engineering and Construction Contract (ECC) Option A (priced contract with activity schedule) and secondary option X7 on delay damages. If planned completion as per the accepted programme is later than the completion date, when does the client need to notify the contractor? The guidance states that the appropriate deductions are made in the first assessment after completion, and subsequent assessments until either completion, take over or termination. When and how does the client make the contractor aware that delay damages will occur and is there a specific document required? Are we correct in thinking that the applicable deduction (as per set out in contract data) is then deducted from each monthly valuation until completion, take over or termination?

If this process has not happened to date, and the deductions were not initially removed from the first assessment after contract completion, can these be added to the next assessment?

The process is set out in option X7. Unlike other construction contracts, it is you as the project manager, not the client, who decides when delay damages are payable and in what amount.

The first point to make is that you cannot deduct any monies before the completion date, see the first part of X7.1. What is shown on the accepted programme is irrelevant in this respect because the contractor only becomes in default when it fails to achieve completion (see clause 11.2(2)) by the completion date (see clause 11.2(3) and 30.1). Those delay damages run until the date that completion is achieved or the date the client takes over the works, whichever is earlier (see the second part of clause X7.1).

You start retaining the applicable delay damages in the first assessment you make after completion. You continue doing so at each assessment until completion is achieved, or the client takes over the works. The amount due each month is deducted from the amount due at the assessment date (see the third bullet of clause 50.3). You show the calculation of this deduction in the details of your payment certificate sent to the contractor (see clause 51.1). If the deduction of delay damages means the amount due reduces for any period, the contractor is required to pay that amount to the client (see the penultimate sentence in clause 51.1).

If you have not deducted delay damages in your previous assessments, you can, and should, include them all, including the amounts that should have been deducted but were not, in the gross amount at the next assessment. If the completion date is later extended, either by you or the adjudicator, the client repays the overpayment with interest (see clauses X7.2 and 51.3).

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