Question 4

A contract to construct a sports centre complex has been awarded under an Option C contract. Secondary Options X2 and X7 have
been incorporated.

The work is underway when the Contractor encounters a burst pipe which requires immediate repair in order to prevent further damage
to the rest of the works. The Contractor notifies a compensation event under clause 61.3. The Project Manager refuses to accept this as
a compensation event stating that an early warning should have been notified initially. Any response referring to dispute resolution
should identify whether Option W1 or Option W2 applies as an assumption.

a. Is the Project Manager correct to take this approach? What options are available to the Contractor?

[CC 16.1] The Contractor can give an early warning as soon as he aware of any matter which could increase the total of the Prices,
delay Completion, delay meeting a Key Date or impair the performance of the works in use. [CC 61.5] If the Project Manager decides
that the Contractor did not give an early warning of the event which an experienced contractor could have given, he notifies this decision
to the Contractor when he instructs him to submit quotations. [CC 63.5] If the Project Manager has notified the Contractor of his decision
that the Contractor did not give an early warning of a compensation event which an experienced contractor could have given, the event
is assessed as if the Contractor had given early warning. From CC 61.5 and 63.5, whether or not the event is a compensation event, it
should depend on the nature of the event itself, no notification of early warning is just affecting the assessment of such event. The
decision that the Project Manager refuses to accept this as a compensation event due to no early warning provided by the Contractor
initially is not right. The Project Manager should review the nature of the event whether it matches the detail of any stated in CC 60.1 to
decides the notification from the Contractor valid or not. In this case, CC 60.1(12) is reasonably referenced as the case are within the
Site, not related to weather conditions and the bursting of pipe is relatively small chance of occurring.

According to CC 10.1, based on a spirit of mutual trust and co-operation, the Contractor can openly discuss with the Project Manager to
explain the rationale and justification of such event is a compensation event from his point of view. If the Project Manager still in his
believe that this is not a compensation event, the Contractor can refer to the Adjudicator under Option W1. The Contractor may refer to
the Adjudicator between two and four weeks after the Contractor’s notification of the dispute to the Employer and the Project Manager
[W1.3(2)].

[7 marks]

Six months into the project, a change in law comes into effect. This is to do with electrical standards. The Contractor immediately notifies
a compensation event. The Project Manager refuses to accept this because it was known about during the tender period and was even
recorded in the minutes of an earlier meeting, 12 weeks ago.

b. Is the Contractor correct?

Depending on where the information of the change in law written in the documents during tendering stages, the result will be different. If
the details including the time, content and extent of changes clearly stated in the Works Information, and the change currently happened
is exactly matching those mentioned in the Works Information, i.e. no change in the Works Information [CC 60.1(1)], then, the Contractor
is not correct to notify this as a compensation event though he has his right to notify this [CC 61.3] as he believes that the event is a
compensation event.

However, if such law change is not stated in the Works Information but just known in somewhere such as Government consultation or
Government advertisement, this is a compensation event when it comes into effect at any time during the project. No matter this was
mentioned and recorded in the minutes of an earlier meeting.

Under X2.1, a change in the law of the country in which the Site located is a compensation event if it occurs after the Contract Date. The
Project Manager may notify the Contractor of a compensation event for a change in the law and instruct him to submit quotations.

[3 marks]

 Underground mine workings are uncovered by the Contractor. These are subsequently accepted as a compensation event. However,
the Contractor decides to fill the voids with expensive concrete which is readily available. The Project Manager accepts that this is a
compensation event but considers it could have been more efficiently dealt with by use of a weak mix concrete.

c. Upon notification of a compensation event how should the Project Manager respond and how ultimately should this be
assessed?
[CC 62.1], the Project Manager should discuss with the Contractor different ways of dealing with the compensation event which are
practicable, the Project Manager may instruct the Contractor to submit alternative quotations. There may be different view between
Project Manager and the Contractor, the Project Manager will have the final decision [CC 27.3]. The Project Manager shall also assess
the consequence of late filling of the voids and decide which should be adopted. If no impact on the Completion by using the weak mix
concrete which is not readily available but just a few days later, then the Project Manager may consider using the weak mix. If the
contractor insisted and filled the voids with expensive concrete, the assessment of the compensation event shall be based on the weak
mix concrete [CC 64.2]

However, if the filing of voids is urgently required, the Project Manager shall accept using the expensive concrete and assess the
compensation event based on the expensive concrete.

[6 marks]

 The most recent programme submitted by the Contractor forecasts that the works will not be complete before the Completion Date. This
would be disastrous for the Employer who has a number of high profile sports events booked. The Project Manager is put under
pressure by the Employer to not accept the latest programme submitted by the Contractor.

d. How should the Project Manager respond?

The Project Manager should review the program on his own judgement impartially. Check if the program is acceptable and fulfilling the
requirements as stated in CC 31.2. If the program should be accepted, the Project Manager shall accept it within two weeks [CC 31.3].
In the spirit of mutual trust and co-operation [CC 10.1], the Project Manager shall discuss with the Employer the option of acceleration
[CC 36] if the Employer would like to have on time completion of the project instead of imposing delay damages to the Contractor [X7].
The Project Manager is not correct to reject the program without acceptable reasons.

If acceleration is selected, the Project Manager states changes to the Key Dates to be included in the quotation. A quotation for an
acceleration comprises proposed changes to the Prices and a revised programme showing the earlier Completion Date amd the
changed Key Dates. The Contractor submits details of his assessment with each quotation.

[4 marks]

 The Contractor employs a new contracts manager who manages to mitigate the five week delay down to one. Ultimately, the project
finishes one week late. The Employer is delighted and agrees with the managing director of the Contractor that delay damages will not
be deducted.

e. How should the Project Manager deal with a request from the Employer to not deduct damages? What paperwork should be
in place to formalise this agreement?

In CC10.1, under spirit of mutual trust and co-operation, the decision of not deducting damages is acceptable. Under X7.2, the
Completion Date can be changed to a later date to match the Completion. This will make the waive formalized. The Project Manager
shall issue an Instruction to revise the Completion Date [CC27.4]. The Project Manager may give an instruction to the Contractor which
changes the Works Information or a Key Date. [CC 14.3]

[5 marks]

 [END]