We are using the NEC3 Engineering and Construction Contract (ECC) main option A (priced contract with activity schedule). We appreciate that compensation events are assessed individually. As we work through the contract though, if there is a later compensation event which affects an earlier compensation event, can the earlier one be revisited?
Answer
It is difficult to see how one compensation event can affect an earlier one. It may affect what you now have to do because of the earlier one, but that will be taken into account when assessing the new one.
Let me give you an example. You issue a new drawing which adds some more work. That will be a Compensation Event that is assessed based upon what effect it has upon defined cost. So you end up with a new price for the works, by adding the value of that Compensation Event for this new work to the activity schedule. You decide that the work is valued at, say, £5,000, so you add a new item headed Compensation Event 3 with a value of £5,000.
You later issue a drawing changing that new work. Again, this will be a Compensation Event that will be assessed based upon its effect on the defined cost to carry out the work. So you take the previously added work as your baseline and fine out how much more or less the defined cost will be because of the new changes. That will be the value of the second Compensation Event, and again the activity schedule will be changed.
Let us say that the changes will result in a reduction of £1000 in the defined cost. So, your entry in the activity schedule may have a new item headed Compensation Event 7 with a value of -£1,000.
