In brief: How NEC4 compensation events work: the eight-week notice bar, three-week quotations, delay to planned Completion under clause 63.5, and keeping the Accepted Programme current.
Under the NEC4 Engineering and Construction Contract, the contractor’s entitlement to more time and money comes through compensation events. The process is fast and has strict time limits, and it depends on the Accepted Programme. This guide covers the notice rules, quotations, how delay to Completion is assessed, and the mistakes that cost contractors time.
What is a compensation event?
Clause 60.1 lists the events that are at the client’s risk, such as instructions changing the Scope, late provision of information or access, physical conditions an experienced contractor would have judged to have a small chance of occurring, and weather beyond the ten-year return values. Main Option clauses and secondary Options add further events. If an event is a compensation event, the Prices, the Completion Date and any Key Dates are assessed together.
Notifying a compensation event
- The Project Manager notifies compensation events that arise from its own instructions or changes of decision.
- The contractor notifies other events. Under clause 61.3, if the contractor does not notify within eight weeks of becoming aware of the event, it loses the right to a change in the Prices, the Completion Date or a Key Date, unless the event is one the Project Manager should have notified.
- The Project Manager should reply within one week of the notification, or a longer agreed period. If it does not, the contractor can notify that failure, and a continued failure to reply leads to the event being treated as accepted.
Keep a register of every early warning and compensation event, with the dates of awareness, notification and replies. The eight-week bar is one of the most common reasons for lost entitlement.
Quotations and the programme
When instructed, the contractor submits a quotation within three weeks (clause 62.3). It must include the change to the Prices and any delay to the Completion Date and Key Dates, with a revised programme showing the effect where the programme is affected (clause 62.2). The Project Manager replies within two weeks, and there are further deemed-acceptance provisions if it fails to respond.
Under clause 63.5, delay to the Completion Date is assessed as the length of time that planned Completion is later than planned Completion shown on the Accepted Programme current at the dividing date. That is why the programme matters so much under NEC. If the programme is out of date or was never accepted, the assessment becomes much harder to agree. The Project Manager may also assess the event itself if there is no Accepted Programme or the quotation is not submitted on time.
Keeping the Accepted Programme current
- submit the first programme on time, because clause 50.5 allows one quarter of the Price for Work Done to Date to be retained until it is submitted
- include everything clause 31.2 requires, including float, time risk allowances and the order and timing of the client’s work
- submit revised programmes at the interval stated in the Contract Data (clause 32.2)
- chase acceptance, because the Project Manager must accept or give reasons within two weeks (clause 31.3)
A programme review before submission reduces the risk of rejection for missing information or poor logic.
Common mistakes
- notifying late, or only notifying the cost and not the time effect
- using a programme that does not reflect actual progress at the dividing date
- removing terminal float to absorb the event instead of showing the delay to planned Completion
- pricing on actual cost incurred months later rather than forecasting Defined Cost at the time
- letting replies lapse without using the deemed-acceptance procedure
Frequently asked questions
Is the eight-week notification period a strict time bar?
Yes. Clause 61.3 removes the right to a change in the Prices and dates if the contractor does not notify within eight weeks of becoming aware, unless the Project Manager should have notified the event.
Who owns the float under NEC4?
Float shown before planned Completion is available to absorb delay, but terminal float between planned Completion and the Completion Date belongs to the contractor. Delay is measured to planned Completion, so the contractor keeps its terminal float.
Can you prepare compensation event quotations for us?
Yes. We prepare and review NEC3 and NEC4 quotations, including the revised programme and the time impact on Completion and Key Dates.
Solvix supports UK contractors and clients with extension of time and compensation event assessments and time impact analysis. See also our UK services.
