NEC4 compensation-event quotations

What you need to know

Separate the quotation timetable from the notification-reply timetable.
Use the dividing date for actual and forecast Defined Cost.
Clause 63.8 addresses risk allowances; 63.5 addresses delay assessment.
Provide programme alterations where the contract requires them.

A compensation-event quotation needs a contractual assessment, not merely a collection of invoices. Explain the effect of the event on cost and time, the assumptions used and the evidence supporting the assessment.

Follow the quotation procedure

Under standard NEC4 ECC clause 62.3, the Contractor submits its quotation within three weeks of the Project Manager’s instruction, and the Project Manager replies within two weeks. Check any agreed extension and amendments. Keep these periods distinct from the one-week reply to a Contractor’s notification of a compensation event under clause 61.4.

The quotation reply can accept the quotation, instruct a revised quotation or notify that the Project Manager will make an assessment. Do not describe a further decision that the event is not a compensation event as a fourth routine quotation reply.

Failure to reply can engage clause 62.6, but silence alone is not immediate acceptance. The Contractor must use the specified failure-notification procedure, after which the further contractual period runs. Keep a dated record of each communication and any agreed extension.

Include the required assessment

Clause 62.2 requires proposed changes to the Prices and any delay to the Completion Date and Key Dates, with details of the assessment. Include alterations to the Accepted Programme where the event alters the programme for remaining work. A programme alteration is not required merely because every quotation must have an attachment with that name; apply the actual condition.

Use the dividing date correctly

The assessment of the change to the Prices uses the relevant actual Defined Cost for work already done by the dividing date and forecast Defined Cost for work not done by that date, with the resulting Fee. It does not automatically switch every cost to actual cost simply because assessment takes place later.

Identify the dividing date for the event, the applicable cost components and the effect attributable to the event. Distinguish existing cost or inefficiency from the event’s effect. Explain forecast quantities, rates, resource durations and productivity; future cost cannot be evidenced by an invoice that does not yet exist.

Assess time and risk separately

For delay, use the Accepted Programme current at the dividing date and the applicable clause 63.5 assessment rules. Show affected operations, logic and the relevant effect on planned Completion or a Key Date condition. A two-week disruption to one activity does not necessarily move planned Completion by two weeks.

Risk allowances are addressed in clause 63.8, not clause 63.5. Explain the cost and time allowances for matters with a significant chance of occurring that are at the Contractor’s risk under the contract. Avoid an unexplained contingency percentage or double counting risk already included elsewhere.

Make the evidence easy to follow

Reference the notification and instruction to quote.
State the dividing date and assessment assumptions.
Separate actual-cost evidence from forecast calculations.
Explain programme alterations where required.
Identify risk allowances and avoid duplication.

Site records, timesheets, hire records and photographs can help explain the event and its effects. They do not guarantee acceptance, prove every forecast or replace compliance with the assessment rules.

Understand the Project Manager’s assessment

Clause 64 identifies circumstances requiring the Project Manager to make an assessment, including failure to submit a quotation and its details within the allowed time. Other grounds concern an incorrect assessment or missing or unaccepted programmes as specified in the contract. The Project Manager must apply the contract; a lower or punitive assessment is not an automatic consequence.

Implementation is addressed in NEC4 ECC clause 66. An implemented assessment is not routinely reopened simply because actual cost later differs from the forecast. Keep any contractual correction or dispute route separate from ordinary cost reporting.