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The fast route to compensation


Alan Gilbertson (NCE 20 April) raises the question of how best to deal with compensation events or variations.

Gilbertson's main comments would appear to be two-fold.

First, that an informal negotiation/discussion to resolve differences is preferable to a formal, 'submit, consider' approach and second, that a flexible programme for this process is preferable to a rigid timetable approach.

I am sure that we would all agree that a negotiated settlement is far better than embarking on any dispute procedure - particularly on partnering contracts.

The Engineering and Construction Contract of the New Engineering Contract Family of Documents, of course, offers the opportunity for negotiation, and discussion through the early warning requirements (Clause 16).

There is no reason why the parties cannot agree to continue with their meetings to try and resolve issues. There is also no reason why they cannot incorporate a 'Star Chamber' level of meeting in which the off site or senior representatives of the parties meet to resolve issues that the project manager and the contractor have been unable to agree.

Additionally, in parallel with such negotiations, it would be good management practice to have a sound basis for formal notification of issues and for recording and agreeing relevant facts and documentation. The compensation event procedure covers these.

As far as the timetable goes, it will be appreciated that it is one of the NEC's main principles that compensation events and any disputes should be resolved speedily so that dealing with issues a long time after they have occurred is avoided.

This is a laudable objective as clients and contractors need to know how events could affect their financial position as soon as practicable so that they can make informed decisions on matters related to the contract.

The time limits are also intended to promote efficient management of the contract procedures.

However, the ECC does permit some flexibility to the timetable and extensions of time can be agreed for contractors submitting quotations, and the project manager replying to such quotations.

However, as Gilbertson concludes, there must always be the facility for the project manager to make an assessment so that the compensation event can be implemented.

The NEC User Group regularly debates such issues and if any reader wishes to obtain more information on the User Group and other NEC events please contact Rekha Thawrani at Thomas Telford on (020) 7665 2446.

Haro Bedelian (F)

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