Why most NEC3 compensation events get rejected

We see the same three patterns on every project we run.

One. The contractor notifies under Clause 61.3 but doesn't reference an event in Clause 60.1. They write a paragraph about why something is unfair and call it a CE. Under NEC, that's a complaint, not an event. The Project Manager's only honest answer is "this is not a compensation event."

Two. The notification arrives after the eight-week window. Under 61.3, late notification means the contractor loses the right to claim — barring narrow exceptions. We've watched contractors lose R3M+ on a single rejected CE for a clause they never read.

Three. The quotation under Clause 62 doesn't show effect on the Prices, the Completion Date, and the Key Dates separately. One number for "the impact" is not a quotation. The Project Manager rejects on the basis of incomplete information, the contractor resubmits, and now we're outside the assessment period.

The contract is built to be administered. Most contractors don't lose CEs because the merits are weak. They lose them on procedure.

The procedure, step by step

Most rejected compensation events fail at one of five steps, so it helps to see them in order.

Notification. The Project Manager notifies the events that arise from its own instructions or changed decisions under 61.1. The contractor notifies the rest under 61.3, within eight weeks of becoming aware of the event. The notice must identify the event, which means naming the 60.1 sub-clause it falls under.

The Project Manager’s decision. Under 61.4 the Project Manager replies within one week, or a longer period agreed, saying whether the event is a compensation event. If no reply comes, the contractor can notify that failure, and if the Project Manager still does not reply within two weeks of that notice, the event is treated as accepted. Many contractors never send the second notice and lose the benefit of the deemed acceptance.

The quotation. Under 62.3 the contractor submits a quotation within three weeks of being instructed to. It shows the change to the Prices and any delay to the Completion Date and Key Dates, with the details of the assessment. The Project Manager replies within two weeks: accepting it, asking for a revised quotation with reasons, or saying it will make its own assessment. The same deemed-acceptance route applies under 62.6 if it does not reply.

The assessment. The change to the Prices is assessed under 63.1 as the effect on Defined Cost, actual for work already done and forecast for work not yet done, plus the Fee. Delay to Completion is assessed under 63.3 against planned Completion on the Accepted Programme. If the contractor failed to give an early warning it could have given, 63.5 assesses the event as if it had.

Implementation. The event is implemented when the quotation is accepted, the Project Manager notifies its own assessment, or a quotation is treated as accepted. Only then do the Prices and dates change.

A notification that survives

• Name the event and the sub-clause of 60.1 it falls under.
• State the date you became aware of it, so the eight weeks can be checked.
• Describe what happened in facts, with references to the instruction, drawing or letter involved.
• Say whether you expect it to affect the Prices, the Completion Date or a Key Date.
• Send it through the communication method the contract requires, and keep proof of delivery.

Run a compensation event register from the first week: every event, the date of awareness, the date notified, the reply due date and the quotation due date. The register is what stops the eight-week window and the reply periods slipping past unnoticed.

More on how NEC3 handles compensation events, time and payment in the NEC3 Contract Assistant, or see how it compares to JBCC in the NEC3 vs JBCC guide.