NEC4 rewards the contractor who manages in real time and penalises the one who saves it all for a claim at the end. The mechanism is the compensation event. And the clock starts early.
In shortNEC4 handles change through the compensation event, assessed prospectively by quotation against the Accepted Programme. Clause 15 early warning comes first: failing to give a warning the contractor could have given can reduce the assessment. A contractor must notify a compensation event within eight weeks of becoming aware, or entitlement to time and money can be lost.
NEC4 is built on a simple philosophy: deal with change as it happens, together, on a forecast basis. Its engine for that is the compensation event (CE). And treating it like a traditional end-of-job claim is how contractors forfeit money they were owed.
What is the NEC4 early-warning obligation, and why does it come before a compensation event?
Before a CE, there is the early-warning obligation (Clause 15). Either party must notify matters that could increase cost, delay completion or impair performance, and manage them in a live register at early-warning meetings. It is not paperwork: failure to give an early warning a contractor could have given can reduce the CE assessment to what it would have been had the warning been given. Silence is expensive.
How long does a contractor have to notify a compensation event under NEC4?
A contractor must notify a compensation event within eight weeks of becoming aware of it. Miss that, and (unless the Project Manager should have notified it) entitlement to time and money can be lost entirely. Diarising CE awareness from the first sign of an event is not administration; it is entitlement protection.
How are compensation events assessed, and why does that make the Accepted Programme decisive?
CEs are assessed by quotation, the contractor forecasts the effect on the Prices and on planned Completion, using the Accepted Programme. Two consequences follow:
- The Accepted Programme is decisive. A programme that is not accepted, or that fails a DCMA 14-point check, undermines every CE quotation that relies on it.
- Assessment is by forecast, using Time Impact Analysis: so the quality of the contemporaneous programme, not a retrospective reconstruction, drives entitlement.
Under NEC4, the money follows the discipline: register early warnings, notify CEs on time, and keep the Accepted Programme clean. Everything else is downstream of those three habits.
How does Project Assure help with compensation event and early-warning discipline?
Our planning, controls and claims team runs CE and early-warning discipline as a live process, not a retrospective exercise, comparing NEC4 and FIDIC routes to entitlement is covered in our NEC4 vs FIDIC note.
Common questions
What happens if you miss the eight-week compensation event notification deadline under NEC4?
A contractor must notify a compensation event within eight weeks of becoming aware of it. Miss that, and unless the Project Manager should have notified it, entitlement to time and money can be lost entirely. Diarising compensation event awareness from the first sign of an event is not administration; it is entitlement protection.
What happens if a contractor fails to give an early warning under NEC4?
Under the Clause 15 early-warning obligation, either party must notify matters that could increase cost, delay completion or impair performance, and manage them in a live register at early-warning meetings. Failure to give an early warning a contractor could have given can reduce the compensation event assessment to what it would have been had the warning been given.
How is a NEC4 compensation event assessed?
Compensation events are assessed by quotation: the contractor forecasts the effect on the Prices and on planned Completion, using the Accepted Programme. Assessment is by forecast, using Time Impact Analysis, so the quality of the contemporaneous programme, not a retrospective reconstruction, drives entitlement.
What happens to a compensation event quotation if the programme is not accepted?
A programme that is not accepted, or that fails a DCMA 14-point check, undermines every compensation event quotation that relies on it, because the quotation forecasts the effect on the Prices and on planned Completion using the Accepted Programme. Under NEC4 the money follows the discipline: register early warnings, notify compensation events on time, and keep the Accepted Programme clean.
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