This webinar, attended by over 500 participants, provided an introduction to compensation events under the NEC4 Engineering and Construction Contract (ECC).
Presenters Laura Campbell (Shar rard) and Robert Jard (NEC) covered the principles, notification procedures, and best practices for compensation events, including common mistakes and assessment methods.
Key topics included the variability of compensation event lists, notification time bars, assessment and implementation of events, and the importance of collaboration and record keeping.
The session concluded with a Q&A addressing practical contract scenarios, and information on accessing further NEC resources and upcoming webinars.
Action Items
(Post-webinar, no specific due date ā Host/Organizers): Distribute the recording, slides, and Q&A responses to all attendees.
(Post-webinar, no specific due date ā Laura & Rob): Respond to unanswered Q&A queries as promised during the session.
(Ongoing ā Attendees/NEC Community members): Download and utilize the NEC Community app for further discussion and networking.
(Ongoing ā Attendees/Interested parties): Email suggestions for future webinar topics to the host.
Introduction to Compensation Events under NEC4 ECC
Compensation events are NEC contract management tools to address impacts to both time and money; they are not limited to financial claims.
The base list of compensation events is defined in clause 60.1 for most NEC contracts, with possible additions or alterations through main options, secondary options, Z Clauses, or contract data.
The list of compensation events is project-specific, requiring careful review of contract documentation for any bespoke modifications.
Claims for compensation events should account for both time and cost, even if one element is zero.
Notification and Process of Compensation Events
Typically, the Project Manager (PM) initiates compensation event notifications (approx. 90% of cases); contractors are responsible for the remainder, covered under clause 61.3.
Contractors must notify compensation events within 8 weeks (time bar); failure to do so forfeits entitlement.
Notification should be done via the agreed contract management system and as standalone correspondences for clarity.
The process for PM or contractor-initiated events differs slightly, emphasizing the need for timely and clear communication and the importance of early warnings to avoid surprises.
If the PM or supervisor fails to respond within the contractually specified timeframes, certain ādeemingā provisions can cause quotations to be automatically accepted.
Assessment and Implementation of Compensation Events
Assessment of compensation events involves analyzing both retrospective (actual) impact and prospective (forecasted) impact from a defined "dividing date," using the accepted program in place at notification.
The objective is to return the contractor to the position they would have been but for the event, ensuring fairness in assessment.
Quotations from contractors must be fully detailed and substantiated; PMs should collaborate with contractors to clarify and reach agreement where possible.
Alternatives such as agreed rates or lump sums may be used for efficiency per clause 63.2, especially for lower-value events.
Once a compensation event is implemented (by agreement, deemed acceptance, or explicit PM action), it is final and cannot be reversed under clause 66.3.
For options A and B, implementation is essential for payment certification; for options C and D, defined cost can be paid more flexibly, but timely agreement is still encouraged.
Best Practice, Common Mistakes, and Collaborative Management
Avoid "wait and see" approachesāaddress compensation events contemporaneously to maintain transparency in cost and time impacts throughout the project.
Use contract tools (early warnings, notifications) proactively for risk management.
Maintain thorough, centralized records in a contract management system to support claims and assessments.
Promote collaboration and open communication between all parties, especially when resolving or clarifying events and their impacts.
Recognize that compensation events are important but should not overshadow other fundamental contract management priorities (e.g., health & safety, program management, scope clarity).
Q&A and Additional Discussion Points
The Q&A covered topics including examples of additional compensation events, legal aspects of time extensions, assessment of omitted work, and payment processes if events are not implemented on time.
Clarified that reminders by contractors for late PM responses are not mandatory but can reset response deadlines; PMs remain obligated to respond regardless.
Addressed how bespoke compensation events may be drafted for project-specific risks, and outlined best practice for pricing and handling deleted or omitted work.
Decisions
No formal business decisions were made; the webinar served as a training and information session. Presenters reiterated contract positions and best practice guidance for NEC compensation events.
Open Questions / Follow-Ups
The presenters agreed to follow up on unanswered Q&A items after the webinar and distribute written responses to attendees.
Attendees were invited to suggest topics for future NEC webinars by email.
Clarification requested by attendees on certain contract scenarios (e.g., validation of notification timelines, payment on unimplemented events) to be addressed in the post-webinar Q&A summary.