Using ECC, I understand that if the supervisor asks the contractor to search for a defect and no defect is found, then a compensation event arises. Conversely, if a defect is found, the contractor remedies this at its own cost (depending on the main option chosen). What happens where the contractor damages a part of the works and essentially creates a defect while carrying out the search? Is the contractor entitled to recover the remedial costs as a compensation event or can the contractor argue that creating a defect was a risk of carrying out the test?
Answer
The answer is going to depend upon the circumstances. If the test or inspection made the damage inevitable, it should be paid for as part of the compensation event because it was not accidental damage. So, for example, if the contractor had to break out the newly constructed asset to test or inspect something underneath, then breaking it out and reinstating it is all part of the defined cost for carrying out the test or inspection. On the other hand, if the damage was accidental in the sense that it could have been avoided but was not, then the contractor is required to insure against such damage – see the first row on the insurance table in clause 84.2. In that case the cost will not form part of the defined cost – see the first bullet of item 7 in the schedule of cost components and the shorter schedule of cost components. The contractor will have to look to its insurer to cover such costs and, if they are below the policy excess, that is the contractor’s risk.
