NEC4 Compensation Event and Delay Analysis:

(a) Detailed Discussion of the Compensation Event Claim Mechanism under NEC4
ECC (Priced with Bills of Quantities)
Introduction
A Compensation Event (CE) under NEC4 Engineering and Construction Contract (ECC)
occurs when an event affects the cost or completion date, entitling the contractor to time
and/or cost compensation. Option B (Priced with Bill of Quantities) governs situations where
the contractor is paid based on quantities measured from the drawings.
Key Clauses:
 Clause 60: Identifies Compensation Events.
 Clause 61: Notification of the event.
 Clause 62: Submission of quotations.
 Clause 63: Assessment of compensation.
 Clause 64: PM's assessment if the contractor fails to notify.
 Clause 65: Agreement or revision of quotation.
 Clause 66: Implementation of agreed CE.
Compensation Event Process:
1. Identification of the Event (Clause 60)
o Events that change the project scope or conditions, like weather, instructions
from the Project Manager (PM), or unexpected physical conditions.
2. Early Warning (Clause 15)
o The contractor must issue an Early Warning Notice as soon as they become
aware of a potential CE.
3. Notification of the CE (Clause 61)
o Either the PM or contractor may notify the event.

o Must be notified within 8 weeks of becoming aware.

o Late notification may result in the loss of entitlement (Time-Bar - Clause

61.3).
4. Submission of Quotation (Clause 62)
o The contractor submits a quotation within 3 weeks of notification.

o Must include time, cost, and risk impact.

5. Assessment by Project Manager (Clause 63)

 o Assessment includes defined costs, delay to the Completion Date, and any
associated risks.
o The PM may revise the quotation or make their own assessment (Clause 64).

6. Agreement or Revision (Clause 65)

o The PM can propose changes or accept the quotation.

o Negotiation between parties until the final amount and time extension are
agreed upon.
7. Implementation of CE (Clause 66)
o Once agreed, the CE is formally implemented, adjusting the contract price and
Completion Date.
Flowchart Diagram:
Compensation Event Occurs
↓
Early Warning Notice (Clause 15)
↓
Notification of CE (Clause 61)
↓
Submission of Quotation (Clause 62)
↓
PM's Assessment (Clause 63)
↓
Agreement or Revision (Clause 65)
↓
Implementation (Clause 66)
Conclusion:
The Compensation Event mechanism ensures that contractors are fairly compensated for
unforeseen circumstances. Compliance with the notification and submission timeline is
crucial to avoid forfeiting entitlements.
(b) Methods to Determine the Amount of Delays
Introduction:
Construction delays can significantly impact project costs and timelines. Determining the
amount of delay requires accurate analysis techniques, particularly in complex projects.
Key Methods:
1. As-Planned vs. As-Built Analysis:
o Compares the original program (as-planned) with the actual completion record
(as-built).
o Identifies variances and causation.

o Strength: Simple and direct comparison.

o Limitation: Does not establish causation.

2. Impacted As-Planned Analysis:

o Inserts known delay events into the planned schedule to see their impact.

o Suitable for prospective delay analysis.

o Strength: Identifies the direct impact of each event.

o Limitation: Hypothetical assumptions may distort accuracy.

3. Time Impact Analysis (TIA):

o Uses real-time project data to analyze the delay's impact on completion.

o Suitable for live projects or real-time delay claims.

o Strength: Utilizes actual data, improving reliability.

o Limitation: Requires detailed and timely records.

4. Window Analysis:
o Breaks the project into smaller time frames (windows) and examines delays in
each window.
o Helps isolate specific periods of delay.

o Strength: Manages concurrent delays.

o Limitation: Time-consuming and complex.

5. Collapsed As-Built Analysis:

o Removes employer-caused delays from the final completion date to determine
the contractor's delay.
o Useful for retrospective analysis.

o Strength: Focuses on employer-caused delays.

 o Limitation: Assumes hypothetical scenarios.

6. Measured Mile Analysis:

o Compares productivity rates before and after a delay.

o Effective in disruption claims where work efficiency has been impacted.

o Strength: Scientifically quantifies productivity loss.

o Limitation: Requires consistent data for comparison.

Conclusion:
Selecting the appropriate delay analysis technique depends on the project's complexity,
available records, and the type of delay (prospective or retrospective). Proper application of
these methods aids in accurate delay quantification and justifiable claims.
Question 5 (a): NEC4 Compensation Event Claim Mechanism (Priced with Bills of
Quantities - Option B)
(17 1/3 marks)
Detailed Discussion
The NEC4 Engineering and Construction Contract (ECC) is designed for proactive project
management, and its Compensation Event (CE) mechanism is central to managing change
and its consequences on time and cost. Under Main Option B (Priced contract with Bill of
Quantities), the CE process follows core clauses 60-65, with specific nuances for how cost is
assessed.
1. What is a Compensation Event?
Clause 60.1 lists events that, if they occur and are not due to the Contractor's fault, can lead to
changes in the Prices and/or the Completion Date/Key Dates. Examples include:
 Project Manager (PM) giving an instruction changing the Scope (60.1(1)).
 Employer not allowing access to the Site by the access date (60.1(2)).
 PM or Supervisor not replying to a communication within the period required
(60.1(6)).
 Physical conditions which are found to be significantly different from what an
experienced contractor would have expected (60.1(12)).
 A weather measurement meeting conditions in Contract Data (60.1(13)).
 Prevention events (60.1(19)).
2. Notification of Compensation Events:
Timely notification is crucial.
 PM Notification (Clause 61.1): The PM notifies the Contractor of a CE if it arises
from the PM or Supervisor giving an instruction, changing an earlier decision, a
certificate, or a notification. The PM also instructs the Contractor to submit
quotations.
 Contractor Notification (Clause 61.3): The Contractor notifies the PM of any other
event it believes is a CE, if the PM has not already done so. This notification must be
given within eight weeks of the Contractor becoming aware of the event. Failure
to do so means the Contractor is not entitled to a change in Prices, Completion Date,
or Key Dates, unless it was an event the PM should have notified under Clause 61.1
but did not. This eight-week rule is a critical time-bar.
 Early Warning (Clause 15): While separate, matters raised in early warnings may
later become CEs.
3. PM's Response to Contractor's Notification (Clause 61.4):
Within one week of the Contractor's notification (or longer if agreed, but no longer than the
period for reply), the PM replies, stating:
 If it is a CE (and instructing quotations).
  If it is not a CE (with reasons).
 If the event arises from the Contractor's fault.
 If it is time-barred under Clause 61.3 (unless the PM should have notified it).
If the PM fails to reply as required, the Contractor may notify the PM of this failure.
If the failure continues for a further two weeks, the notified event is treated as a CE
and an instruction to submit quotations (Clause 61.6).
4. Quotations for Compensation Events (Clause 62):
 Submission (Clause 62.3): The Contractor submits quotations for the CE within three
weeks of being instructed to do so by the PM (or an agreed longer period). The
quotation includes proposed changes to the Prices and any delays to the Completion
Date and Key Dates.
 PM's Response to Quotation (Clause 62.3, 62.4): Within two weeks of the
Contractor's submission (or an agreed longer period), the PM replies by:
o Accepting the quotation.

o Notifying the Contractor that the quotation is not accepted (with reasons), and
stating the PM's assessment of the CE.
o Instructing the Contractor to submit a revised quotation.

 If the PM fails to reply as required, the Contractor may notify the PM of this failure.
If the failure continues for a further two weeks, the quotation is treated as accepted
(Clause 62.6).
5. Assessment of Compensation Events (Clause 63):
 Effect on Prices (Clause 63.1): The change to the Prices is assessed as the effect of
the CE upon:
o The actual Defined Cost of work already done.

o The forecast Defined Cost of work not yet done.

o The resulting Fee.

 Defined Cost (Option B - Clause 11.2(23)): Under Option B, Defined Cost is the
cost of components in the Short Schedule of Cost Components (SSCC) for work done
by the Contractor and its Subcontractors, less Disallowed Cost (Clause 11.2(26)).
 BoQ and Option B (Clause 63.13): Changes to the Prices are assessed using Defined
Cost. If the CE means a quantity in the Bill of Quantities for work yet to be done is
incorrect, the Prices are reduced if the quantity is reduced, or the BoQ is treated as
ambiguous if the quantity is increased or the item is omitted. The PM corrects the
BoQ. The effect of the CE is the change in Defined Cost due to the corrected BoQ.
This means rates in the BoQ are not automatically used for valuing changes; Defined
Cost (SSCC) is the basis.
  Effect on Time (Clause 63.5): Delay to the Completion Date is assessed as the length
of time that, due to the CE, planned Completion is later than planned Completion as
shown on the Accepted Program current at the dividing date (the date of the
instruction or notification that constitutes the CE).
 Assumptions (Clause 63.10): Assessments assume the Contractor reacts competently
and promptly, and that any Defined Cost and time due to the Contractor's fault are not
included.
6. Project Manager's Assessment (Clause 64):
If the PM decides the Contractor has not assessed a CE correctly (e.g., incorrect quotation,
failure to submit), or if the Contractor has not submitted a quotation, the PM assesses the CE
themselves (Clause 64.1) using their own forecast of Defined Cost and impact on time.
Flowchart Diagram of NEC4 CE Claim Mechanism:
This mechanism aims for proactive and contemporaneous management of change, with clear
timelines and consequences for non-compliance, promoting collaboration while protecting
both parties' interests.

Question 5 (b): Available Methods or Techniques to Determine the Amount of Delays

(16 marks)
Discussion
Determining the amount of delay caused by specific events is crucial for establishing
entitlement to an extension of time and, in some cases, associated costs. Various methods or
techniques are utilized by contracting parties, each with its strengths, weaknesses, and
suitability depending on the project's complexity, the quality of records, and contractual
requirements. The Society of Construction Law (SCL) Delay and Disruption Protocol (2nd
Edition, 2017) provides valuable guidance on these methods.
Key methods include:
1. As-Planned vs. As-Built Analysis:
o Technique: This is a relatively simple method that compares the contractor's
baseline (as-planned) program with the actual progress and completion dates
of activities (as-built). The difference in durations or completion dates is
presented as the delay.
o Merits: Easy to understand and present visually. Can quickly show overall
project slippage. May be adequate for very simple projects with few, clearly
defined delay events.
o Demerits: Often criticized for its simplicity. It typically fails to demonstrate
robustly cause and effect, as it doesn't easily isolate the impact of specific
events from other concurrent delays or contractor inefficiencies. It doesn't
dynamically track changes to the critical path during the project. It can lead to
a global claim approach.
2. Impacted As-Planned Analysis:
o Technique: Delay events are added (impacted) onto the baseline (as-planned)
program to model their hypothetical effect on the critical path and completion
date.
o Merits: Can demonstrate the potential impact of events if the project had
otherwise proceeded as planned. Relatively simple to perform if a good
baseline exists.
o Demerits: It is theoretical and does not consider actual progress or critical
path changes that occurred before or after the modeled event. It can ignore
contractor-caused delays or mitigation efforts. Its reliability depends heavily
on the quality of the baseline program.
3. Collapsed As-Built (or "But-For") Analysis:
 o Technique: This retrospective method starts with the as-built program. Delay
events for which the employer is allegedly responsible are then removed
("collapsed") from the as-built program to determine when the project would
have finished "but for" those events.
o Merits: Uses actual progress data. Can be useful for isolating the impact of
specific employer-risk events.
o Demerits: Can be subjective in how events are removed and how the
remaining logic is reconstructed. It may ignore the effects of contractor-caused
delays if not carefully applied. It assumes the remaining work would have
proceeded efficiently, which may not be realistic.
4. Window Analysis (or Time Slice Analysis):
o Technique: The project duration is divided into several sequential "windows"
or time periods (e.g., monthly). Within each window, delays are analyzed by
comparing planned progress (from an updated program at the start of the
window) with actual progress during that window. The critical path is
reassessed for each window.
o Merits: More dynamic than static methods as it can identify shifts in the
critical path. Allows for contemporaneous or near-contemporaneous
assessment. Better at handling multiple delay events over time. Generally
considered more reliable for complex projects.
o Demerits: Requires good quality, regularly updated programs and detailed
contemporaneous records. Can be more time-consuming and data-intensive.
Defining appropriate window periods can be subjective.
5. Time Impact Analysis (TIA):
o Technique: Often used contemporaneously or prospectively (as favored by
NEC). When a delay event occurs or is anticipated, its impact is modeled by
inserting a logic-linked fragnet (a small network of activities representing the
event) into the current, updated critical path program. The difference in the
forecasted completion date before and after inserting the fragnet represents the
delay.
o Merits: Highly effective for contemporaneous assessment. Directly links
cause and effect on the then-current critical path. Facilitates proactive
management and mitigation of delays. Aligns well with NEC's requirement to
assess delay based on the Accepted Program current at the dividing date.
o Demerits: Relies heavily on accurate and regularly updated programs. Can be
complex to implement correctly. Its prospective nature may differ from the
final actual outcome if other events intervene.
General Considerations:
 Quality of Records: All methods depend on accurate and complete contemporaneous
records (programs, site diaries, correspondence).
  Critical Path: Effective analysis must focus on the impact on the project's critical
path(s).
 Causation: The chosen method must clearly demonstrate the causal link between the
delay event and the claimed extension of time.
 Proportionality: The complexity and cost of the analysis should be proportionate to
the project and the dispute.
 SCL Protocol: Generally favors dynamic and contemporaneous methods like TIA
and Window Analysis for complex claims, cautioning against overly simplistic
approaches like As-Planned vs. As-Built for anything other than basic scenarios.
The choice of method often depends on the contract requirements, the information available,
the timing of the analysis (contemporaneous or retrospective), and the complexity of the
delays. A combination of methods may sometimes be appropriate to provide a comprehensive
view.
 Chart 2: Key Case Law by Topic (with Brief Descriptions)
Tested Area / Topic Case Name & Citation Brief Description/Relevance

1. NEC4 (Specific NEC CE time-bar cases are less prominent at SC

(General principles from CP
Compensation level, but general principles of contractual interpretation
cases apply, see below)
Events and CP enforcement are key).

Bremer Handelgesellschaft Foundational case: Clear words needed to create a

(Primarily related
mbH v Vanden Avenne- condition precedent (CP), but if clear, they will be
to Time-Bars)
Izegem PVBA [1978] enforced. (Applies to NEC 61.3 interpretation).

Supports strict interpretation of notice provisions (like JCT

2. JCT 2016 SBC WW Gear Construction Ltd v
4.23.1 for L&E) as conditions precedent, especially with
Claim Process McGee Group Ltd [2012]
"provided always that" type wording.

Emphasized importance of complying with contractual

Walter Lilly & Company Ltd
(L&E Notices) notice provisions; A/CA's duty to ascertain L&E based on
v Mackay [2012]
info provided.

London Borough of Merton v

3. JCT Employer Employer has a fundamental obligation to give possession
Stanley Hugh Leach Ltd
Risk Events of the site. Failure is a breach.
(1985)

Peak Construction Prevention Principle: Employer cannot hold contractor to

(Possession,
(Liverpool) Ltd v McKinney completion date if employer prevented timely completion;
Prevention)
Foundations Ltd (1970) EOT needed to preserve LADs.

UK approach to concurrency: Contractor generally entitled

Henry Boot Construction
4. Delay Analysis to EOT for employer-caused delay even if concurrent with
(UK) Ltd v Malmaison Hotel
Techniques contractor delay (the "Malmaison rule"). (Time, not
(Manchester) Ltd (1999)
usually cost).

(SCL Delay & Disruption

Provides guidance on various delay analysis methods and
(Concurrency) Protocol - Not case law, but
principles, including concurrency.
influential)

Established offer can be revoked any time before

Payne v Cave (1789)
acceptance.
5. Contract Law:
Promise to keep an offer open for a set period is not
Offer, Acceptance Routledge v Grant (1828)
binding without consideration (i.e., not an option contract).
etc.
Revocation of offer is effective if communicated to
Dickinson v Dodds (1876)
offeree, even via a reliable third party.

Bremer Handelgesellschaft
(Reiteration) Foundational for establishing and enforcing
mbH v Vanden Avenne-
CPs if clearly worded.
Izegem PVBA [1978]

Multiplex Constructions
6. Conditions (UK) Ltd v Honeywell If contract requires notice in a particular way, parties must
Precedent & Time- Control Systems Ltd (No 2) comply; actual knowledge may not be a substitute.
Bar Clauses [2007]

Clarified operation of LADs upon termination. General

Triple Point Technology, Inc
rule: LADs accrue up to termination; general damages
v PTT Public Company Ltd
thereafter (unless clause states otherwise). Overturned
[2021] UKSC 29
previous CA "orthodox" view.
 Macob Civil Engineering Ltd Adjudicator's decision is binding and must be complied
v Morrison Construction Ltd with ("pay now, argue later") until finally determined by
[1999] litigation/arbitration.

Carillion Construction Ltd v Adjudicators must do their best in limited time; complexity
Devonport Royal Dockyard or volume of material doesn't necessarily invalidate
Ltd [2005] decision if fair process followed.
7. ADR
Court can penalize a winning party on costs for
(Alternative Halsey v Milton Keynes
unreasonable refusal to engage in ADR (e.g., mediation).
Dispute Resolution) General NHS Trust [2004]
Outlined factors for "unreasonable."

PGF II SA v OMFS Company Reinforced Halsey; silence or refusal of ADR without

1 Ltd [2013] good reason can be deemed unreasonable.

(Arbitration Act 1996, Mandatory stay of court proceedings if valid arbitration

Section 9 - Statute, not case agreement exists, unless agreement is null/void,
law) inoperative, or incapable of being performed.
 Chart 1A: NEC4 ECC - Key Clauses by Topic

Tested Area / Key Sub-Topic / Relevant Clauses (Illustrative, Not Exhaustive)

Topic Mechanism

1. NEC4 CE Definition & 60.1 (lists CEs like PMIs, access issues, physical
Compensation Examples conditions, weather, prevention)
Events

Early Warning 15.1 (duty to warn), 15.2 (register), 15.3 (meetings), 63.7
Obligations (assessment if no EW)

Notification (PM & 61.1 (PM notifies/instructs quotes), 61.3 (Contractor

Contractor) notifies), 61.4 (PM response to Ctr notice), 61.5 (PM
states if Ctr fault/no entitlement/already notified)

Time-Bar Rules 61.3 (8-week Ctr notification, unless PM should have

notified)

Quotation 62.1-62.3 (PM instructs, Ctr submits quote), 62.3-62.4

Procedures (PM replies to quote), 62.6 (deemed acceptance if PM
fails to reply)

Assessment (Time 63.1 (Prices: Defined Cost + Fee), 63.5 (Time: delay to
& Cost) planned Completion), 63.10 (assumptions), 11.2(23)/(25)
(Defined Cost), Short/Schedule of Cost Components

PM Assessment 64.1 (PM assesses if Ctr fails/incorrect quote), 64.4

(deemed acceptance of Ctr assessment if PM fails to
assess)

4. Delay Contractual Basis 31.2, 31.3, 32.1 (Programme requirements, updates), 63.5
Analysis for Analysis (assessment against Accepted Programme)
Techniques

6. Conditions NEC4 CE 61.3 (8-week Ctr notification limit, with exception)

Precedent & Notification Time-
Time-Bars Bar

7. ADR NEC4 Dispute W1 (Adjudication & Tribunal), W2 (Adjudication &

(Alternative Resolution Options Tribunal - often preferred in UK), W3 (Dispute
Dispute Avoidance Board & Tribunal)
Resolution)

Statutory Housing Grants, Construction and Regeneration Act 1996

Adjudication (HGCRA) (as amended) - applies to "construction
(Context) contracts" in UK.
 Chart 1B: JCT SBC/Q 2016 - Key Clauses by Topic
Topic Key Sub-Topic Relevant Clauses (Illustrative, Not Exhaustive)

JCT 2016 EOT - Notice 2.27.1 (Ctr "forthwith" notice of likely delay), 2.27.2 (Ctr particulars
SBC Claim Requirements "as soon as practicable")
Process
EOT - Relevant Events 2.29 (lists Relevant Events, e.g., Variations, A/CA instructions,
exceptionally adverse weather, impediment by Employer, statutory
powers)

EOT - Entitlement & 2.28 (A/CA assesses EOT if Relevant Event causes delay beyond
Assessment Completion Date)

Loss/Expense - Notice 4.23.1 (Ctr application "as soon as...apparent" - condition

Requirements precedent), 4.23.2 (Ctr submits info), 4.23.3 (further info)

Loss/Expense - 4.24 (lists Relevant Matters, e.g., Variations, A/CA instructions,

Relevant Matters A/CA delay in info, impediment by Employer)

Loss/Expense - 4.23 (entitlement to direct loss/expense), 4.25 (A/CA/QS ascertains)

ADR Procedures Section 9: 9.1 (Negotiation), 9.2 (Adjudication - HGCRA applies),

9.3-9.8 (Arbitration, if stated in Contract Particulars), 9.9 (Legal
Proceedings if arbitration not chosen)

3. JCT Site Possession / 2.5 (Employer to give possession), 2.29.6 (Relevant Event:
Employer Deferment deferment of possession)
Risk Events
Variations (Employer 5.1 (Definition of Variation), 2.29.1 (Relevant Event: Variations),
Instruction) 4.24.1 (Relevant Matter: Variations)

Adverse Weather 2.29.8 (Relevant Event: exceptionally adverse weather conditions)

(Exceptional)

General 2.29.7 (Relevant Event: impediment, prevention or default by

Impediment/Preventio Employer), 4.24.6 (Relevant Matter: impediment, prevention or
n by Employer default by Employer)

A/CA Delayed 2.29.3 (Relevant Event: delay by A/CA in info), 4.24.5 (Relevant
Info/Instructions Matter: delay in receipt of info from A/CA)

4. Delay Contractual Basis for 2.28 (A/CA "fair and reasonable" EOT assessment)
Analysis Analysis

6. JCT Loss/Expense 4.23.1 ("provided always that... as soon as... apparent" - generally
Conditions Notice as CP held as CP)
Precedent &
JCT EOT Notice 2.27.1 ("forthwith" notice - generally not a strict CP barring all EOT
Time-Bars
(General Status) entitlement, but breach can have consequences)

7. ADR JCT Dispute Section 9 (as above: Negotiation, Adjudication, then Arbitration or
(Alternative Resolution Hierarchy Litigation as per Contract Particulars)
Dispute
Statutory Adjudication Housing Grants, Construction and Regeneration Act 1996 (HGCRA)
Resolution)
(Context) (as amended) - applies to "construction contracts" in UK.