What is a compensation event under NEC4?

A compensation event is an event listed in an NEC4 contract that entitles the contractor to a change in the prices, the completion date or a key date. The contractor generally has to notify it within time limits.

The time limits to know

Under the standard NEC4 Engineering and Construction Contract, a contractor who does not notify a compensation event within eight weeks of becoming aware of it can lose the entitlement, unless the Project Manager should have notified it. After being instructed to submit a quotation, the contractor generally has three weeks to do so. Always check your contract data and any amendments.

Why records matter

The date you became aware is the date that matters, so write down when it happened, what happened and who told you. Photos and a time-stamped record make the date much easier to prove.

Other contracts

On JCT and informal contracts the same situation is usually handled as a variation or an extension of time claim, with its own notice requirements.

Common questions

What happens if I notify a compensation event late?

Under the standard NEC4 terms you can lose the right to a change in prices or dates for that event, unless the Project Manager should have notified it. Check your contract.

Is a compensation event the same as a variation?

In practice they cover similar ground. NEC4 uses compensation events with fixed notification rules, while JCT contracts use variations.

This page is general information for UK construction subcontractors and is not legal advice. Contracts differ, so check yours, and take advice on a specific dispute.