If something happens on your project and it is not a compensation event, you have no entitlement under the contract to recover its cost or time impact. There is no fallback, no alternative clause, and no way to recover missed events retrospectively at final assessment.
NEC4 clause 60.1 lists 21 compensation events. Each one entitles the Contractor to a change in the Prices, the Completion Date, Key Dates, or any combination of these. There is no other mechanism in the contract for the Contractor to claim additional payment or additional time.
What Is a Compensation Event
A compensation event is the NEC4 mechanism for adjusting the contract when something happens that was not the Contractor's responsibility. Other contract forms separate variations, claims, and extensions of time. NEC4 combines all three into one procedure, assessing every event for its effect on both cost and time simultaneously.
The assessment changes the Prices and, where applicable, the Completion Date and Key Dates. Once implemented under clause 66, the change is final unless an adjudicator or tribunal decides otherwise.
This finality is deliberate. NEC4 resolves commercial matters as they arise, not at final account. Each event is identified, notified, quoted, assessed, and implemented individually.
Why this matters commercially
On a typical NEC4 project, failing to identify and notify a compensation event within the eight-week time bar means losing entitlement permanently. The clause 53 final assessment does not reopen time-barred events. There is no global claims process and no retrospective recovery. Each CE must be captured, notified, and assessed individually as it occurs.
The Three Categories
The 21 compensation events in clause 60.1 fall into three categories based on what triggers them: 8 PM or Supervisor actions, 9 Client, PM, or Supervisor failures, and 4 supervening events. Understanding which category an event belongs to determines who should notify it, whether the eight-week time bar applies, and what evidence is needed.
Category 1: Project Manager or Supervisor actions. Instructions, notifications, certificates, or changed decisions. The PM notifies under clause 61.1 and instructs quotation submission. The Contractor time bar does not apply.
Category 2: Client, PM, or Supervisor failures. Access not provided, information not supplied, materials not delivered, acceptance withheld, reply periods missed. The Contractor notifies under clause 61.3 and the eight-week time bar applies.
Category 3: Supervening events. Physical conditions, weather, and prevention events. Neither party's fault, but clause 60.1 risk allocation determines who bears them. The Contractor notifies within eight weeks of becoming aware.
NEC4 compensation events: three categories, one assessment process for cost and time
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All 21 Compensation Events: Clause 60.1 Reference
Each clause 60.1 category has a specific trigger and a key test. The table below lists all 21, grouped by category. For detailed guidance on notification timing, see the eight-week time bar guide.
| Clause | Trigger | Key test |
|---|---|---|
| PM / Supervisor actions (PM notifies under clause 61.1, time bar does not apply) | ||
| 60.1(1) | PM instructs a change to the Scope | Does the instruction change what the Contractor must do or provide? |
| 60.1(4) | PM instructs the Contractor to stop or not start work, or changes a Key Date | Was a formal instruction issued? |
| 60.1(7) | PM instructs the Contractor to deal with an object of value or historical interest | Was the instruction given and was the object genuinely encountered? |
| 60.1(8) | PM or Supervisor changes a decision which the Contractor has already acted on | Had the Contractor already incurred cost or changed its plans based on the original decision? |
| 60.1(10) | Supervisor instructs the Contractor to search for a Defect and no Defect is found | Was the search carried out and did it confirm there was no Defect? |
| 60.1(15) | PM certifies take over of part of the works before both Completion and the Completion Date | Was take over certified earlier than both Completion and Completion Date? |
| 60.1(17) | PM corrects an assumption about a compensation event which has a later assessed effect | Was the original CE assessment based on a stated assumption that has now proved wrong? |
| 60.1(20) | PM notifies the Contractor that a proposed instruction will not be given (NEC4 addition) | Did the Contractor incur cost preparing a quotation for the proposed instruction? |
| Client, PM, or Supervisor failures (Contractor notifies under clause 61.3) | ||
| 60.1(2) | Client does not allow access by the later of its access date and the Accepted Programme date | Has the access date in the Contract Data or Accepted Programme passed? |
| 60.1(3) | Client does not provide something the contract requires by the date stated | Was the item contractually required and was the date missed? |
| 60.1(5) | Contractor encounters work by the Client or Others not stated in the Scope | Was the work undisclosed in the Scope documents? |
| 60.1(6) | PM or Supervisor does not reply to a communication within the period required by the contract | Has the contractual reply period expired without a response? |
| 60.1(9) | PM withholds acceptance without a valid reason or fails to reply within the required period | Was acceptance withheld without a contractual reason, or did the reply period expire? |
| 60.1(11) | Supervisor delays a test or inspection by not acting within the required time | Did the Supervisor fail to act within the contractual timescale? |
| 60.1(14) | Client does not provide materials or samples for tests as stated in the Scope | Were the materials contractually required and was the date missed? |
| 60.1(16) | Client does not provide test or inspection facilities stated in the Scope | Were facilities specified in the Scope and not provided on time? |
| 60.1(18) | A breach of contract by the Client which is not one of the other compensation events | Is there a breach by the Client that does not fall within another CE category? |
| Supervening events (Contractor notifies under clause 61.3) | ||
| 60.1(12) | Contractor encounters physical conditions (not weather) that an experienced contractor would have judged unreasonable to allow for at the Contract Date | Were the conditions so unlikely at Contract Date that it was unreasonable to allow for them? |
| 60.1(13) | Weather measurement exceeds the 1 in 10 year threshold stated in the Contract Data | Does the measurement exceed the 1 in 10 year value for that calendar month? |
| 60.1(19) | An unpreventable event that an experienced contractor would have judged unreasonable to allow for at the Contract Date (force majeure equivalent) | Was the event unpreventable by either party and unreasonably unlikely at Contract Date? |
| 60.1(21) | An additional compensation event stated in the Contract Data (NEC4 addition) | Has the Client included bespoke CEs in Contract Data Part 1? |
Clause 60.1(1) accounts for the majority of compensation events on most projects. Physical conditions (60.1(12)) and weather (60.1(13)) are the most frequently disputed because they require subjective judgement about what an experienced contractor would have allowed for.
Additional Compensation Events Outside Clause 60.1
Clause 60.1 is not the complete list. Additional CEs arise from main and secondary options.
Main Options B and D (Bills of Quantities): Clause 60.4 creates a CE when final quantities differ from the BoQ by more than 0.5% of the Prices and the unit Defined Cost changes. Clauses 60.5, 60.6, and 60.7 cover related adjustments.
Secondary Options: X2.1 (change in law), X12.3(6) (partnering information change), X14.2 (delayed advanced payment), X15.2 (Contractor corrects a Defect it is not liable for), and Y2.5 (suspension under the Construction Act 1996).
Always check which options apply. The total number of CE categories depends on the options selected.
The Notification and Assessment Process
Every compensation event follows four stages: notification (clause 61), quotation (clause 62), assessment (clauses 63 and 64), and implementation (clause 66). You cannot skip a stage.
Stage 1: Notification. For PM-caused events, the PM notifies under clause 61.1. For Contractor-notified events, the Contractor notifies under clause 61.3 within eight weeks of awareness. The PM has one week to respond: accept, reject with reasons, or confirm already notified.
Stage 2: Quotation. The Contractor submits a quotation within three weeks, including proposed changes to the Prices and, where applicable, Completion Date and Key Dates, plus a revised programme showing the effect.
Stage 3: Assessment. The PM has two weeks to accept, instruct a revised quotation, or make their own assessment. No response means deemed acceptance under clause 62.6. Assessment is based on Defined Cost plus Fee using forecasts at the dividing date. Disallowed Cost is excluded.
Stage 4: Implementation. The CE is implemented under clause 66. The Prices, Completion Date, and Key Dates are changed, feeding into the next payment assessment. The change is final. Reopening requires adjudication.
NEC4 compensation event lifecycle: four stages from notification to final implementation
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Deeming Provisions: When Silence Means Acceptance
NEC4 includes deeming provisions that prevent either party from stalling the process through inaction.
| Situation | Deemed outcome | Clause |
|---|---|---|
| PM does not respond to CE notification within one week | Notification is treated as accepted | 61.4 |
| PM does not respond to quotation within two weeks | Quotation is treated as accepted | 62.6 |
| PM does not respond to revised quotation within two weeks | Revised quotation is treated as accepted | 62.6 |
These provisions mean that commercial teams must track PM response deadlines as carefully as their own notification deadlines. A PM who does not reply to a quotation within two weeks has accepted it by default.
Worked Example: Scope Change on a Water Treatment Project
A contractor is delivering a water treatment plant upgrade under an NEC4 Option C (target cost) contract. The PM instructs a change to the inlet works design, adding a third screening channel to accommodate higher peak flows identified in updated hydraulic modelling.
Worked ExamplePM issues instruction under clause 14.3 changing the Scope. This is a compensation event under clause 60.1(1). The PM notifies and instructs the Contractor to submit quotations.
The Contractor's commercial team begins preparing the quotation. The additional screening channel requires new civil works (reinforced concrete chamber), mechanical installation (screen, conveyor, compactor), electrical connections, and commissioning.
The Contractor submits the quotation within the three-week period.
| Element | Defined Cost |
|---|---|
| Civil works (RC chamber, 85m³) | £68,000 |
| Mechanical (screen, conveyor, compactor) | £124,000 |
| Electrical (MCC modifications, cabling) | £31,000 |
| Commissioning and testing | £12,000 |
| Preliminaries (3 weeks additional duration) | £45,000 |
| Total Defined Cost | £280,000 |
| Fee (8%) | £22,400 |
| Total change to Prices | £302,400 |
The quotation includes a revised programme showing three weeks of additional critical-path duration. Downstream processes cannot be commissioned until inlet screens are operational, so the Contractor proposes a three-week extension to the Completion Date.
The PM accepts the quotation within two weeks. Under Option C, the £302,400 adjusts the target. The Contractor is paid actual Defined Cost plus Fee. The pain/gain share compares actual cost to the adjusted target, so the CE is value neutral provided actual cost matches the assessment.
The PM implements the CE under clause 66. The Prices increase by £302,400. The Completion Date moves by three weeks. Both changes are final and cannot be revised in any later CE assessment.
Had the PM not responded by Day 29, the quotation would have been deemed accepted under clause 62.6.
The Relationship Between Compensation Events and Early Warnings
An early warning under clause 15 is not a compensation event notification. The two mechanisms serve different purposes. An early warning flags a risk. A CE notification asserts that a specific event has occurred and triggers the quotation process.
However, clause 63.7 creates a direct financial link between them. If the PM decides that the Contractor did not give an early warning which an experienced contractor could have given, the PM states this in the instruction to submit quotations. The CE is then assessed as if the Contractor had given early warning at the appropriate time. The assessment considers what mitigation could have been achieved. The effect is a reduction in the assessed Defined Cost, not a loss of entitlement.
The practical consequence: give early warnings liberally. An unnecessary early warning costs nothing. A missing early warning can reduce your CE recovery by whatever mitigation an early warning meeting would have achieved.
Gather's QS AI Agent identifies 40% more compensation events than manual review by analysing every site diary entry against clause 60.1 categories. Events are flagged within days, not weeks. The difference is whether your commercial team finds out in time to act.
Five Common Mistakes with Compensation Events
1. Treating the time bar as running from the event, not from awareness. Clause 61.3 says eight weeks from "becoming aware that the event has happened." Awareness means recognising both the factual event and that it constitutes a CE. Ground conditions encountered on 1 March but not identified as a CE until 15 March means the clock starts on 15 March.
2. Not tracking PM response deadlines. Most commercial teams track their own notification deadlines. Few track the PM's one-week and two-week response periods with the same discipline. If the PM does not respond, the deeming provisions in clauses 61.4 and 62.6 mean the notification or quotation is accepted by default. Missing these deadlines means missing commercial advantage.
3. Confusing early warnings with CE notifications. An early warning under clause 15 flags a risk. A CE notification under clause 61.3 asserts that a specific event has occurred. They serve different purposes, follow different procedures, and have different consequences. Giving an early warning does not satisfy the CE notification requirement.
4. Submitting quotations without a revised programme. Under clause 62, if a CE alters the programme for remaining work, the Contractor must include the alterations to the Accepted Programme in the quotation. A quotation that claims additional time without showing the programme impact gives the PM grounds to instruct a revised quotation. Always attach the revised programme, supported by contemporaneous site records that substantiate the claimed impact.
5. Assuming a CE only affects cost. The word "compensation" suggests money. Every CE assessment considers both the change to the Prices and the change to the Completion Date and Key Dates. There is no separate extension of time procedure in NEC4. If a CE causes delay, the time entitlement must be claimed within the same quotation.
These mistakes are often symptomatic of wider administration failures. A periodic contract health check identifies patterns across all five areas before they result in material financial losses.
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