The risk of delay is ever-present during the course of a building project. Whether due to cash flow difficulties, slow decision making, a lack of labour or severe weather – there are plenty of circumstances in which a contractor may fail to complete the works by the agreed deadline. As a consequence, standard form building contracts contain mechanisms to allow for the completion date to be extended, where delay is caused by a defined list of events.
How these ‘compensation events’, as they are known in the NEC suite of contracts, are assessed will determine whether a contractor is successful in obtaining the additional time or costs it seeks.
Following a period of extensive feedback, the NEC introduced their ‘January 2019 amendments’ with the aim of improving their suite of NEC4 contracts. The changes included a revised Clause 63.5 which changed the way delays to Completion Dates and Key Dates are managed.
Earlier this month the NEC released a practice note giving guidance on the operation of the revised clause and clarified that the assessment should take into account:
- any delay caused by the compensation event already having been implemented into the Accepted Programme; and
- any events occurring between the date of the Accepted Programme and the ‘dividing date’ (this being the date of communication by the project manager or supervisor that a compensation event has taken place).
In overview, the practice note states that:
- where a potential compensation event has been pre-empted and incorporated into the Accepted Programme, it is important to ensure this is taken into account when assessing the impact of the compensation event on planned completion;
- that in assessing the effect of a delay, any risk allowances and mitigation measures should be included. These should be accounted for on the basis that the Contractor has reacted competently and promptly to the compensation event; and
- that the parties may find it productive to prepare a version of the programme specifically for the purposes of compensation event assessment to support and set out their findings
The note also presents the approach the parties should take when assessing delay where the Accepted Programme is significantly out of date.
The NEC make it clear that when carrying out such an assessment, the objective is to assess the individual effect of any compensation event and to ignore any other factors which have caused delay. For further information on the latest NEC4 practice note surrounding assessment of delay, please see: https://www.neccontract.com/getmedia/415d4555-7980-4a18-b604-eb8369f2dd64/NEC4-ECC-Practice-Note-1-1_web.pdf