Conflicting Pipe Diameters and Late Notification
A contractor is laying 4.2 km of water main under a £5.4 million NEC4 ECC Option B contract. The Scope contains a drawing showing 600 mm diameter pipe and a specification clause requiring 500 mm. The Contractor's site engineer emails the PM in week 1 asking which applies. The PM replies: 'Use 600 mm.' The Contractor installs 600 mm pipe. In week 9, the Contractor notifies a compensation event for the extra cost of 600 mm pipe, £96,000, and 3 weeks' delay. The PM rejects it as time-barred under the eight-week rule. The Contractor argues that the PM knew about the issue from the email and that the PM's instruction was itself the compensation event. The PM's original tender query response, issued before contract, said '500 mm unless shown otherwise on the drawings.' The drawing is dated after the tender.
1. Was the compensation event notified in time? When did the eight-week period start?
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The notification is likely to be late. The compensation event relied on is the PM's instruction in week 1 to use 600 mm pipe. The eight-week period runs from the date the Contractor became aware, or should have become aware, of the compensation event. The site engineer's email in week 1 shows that the Contractor was aware of the conflict and of the PM's instruction at that time. Notification in week 9 is therefore outside the eight-week period. The PM's knowledge of the issue does not stop the clock. The Contractor cannot rely on the PM's awareness unless the PM was itself obliged to notify the event and failed to do so, or unless the PM's instruction was not a compensation event at the time and later became one. The Contractor should have notified the compensation event in week 1 or shortly after, even while it was seeking clarification. An email asking 'which applies?' is not a compensation event notification. The PM should check the exact dates, but on the stated facts the time-bar defence is strong.
2. Does the PM's instruction to use 600 mm make the event a compensation event, and can the PM rely on the tender query response?
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The instruction may not be a compensation event at all. The tender query response said '500 mm unless shown otherwise on the drawings', and the drawing shows 600 mm. If the drawing is part of the Scope and is later than the specification clause, the PM can argue that the drawing is the 'otherwise' and that the instruction merely confirmed the existing Scope. In that case there is no change and no compensation event. If the PM's instruction changed the Scope from 500 mm to 600 mm, it would be a compensation event, but it would still be time-barred on the notification facts. The Contractor's argument that the PM 'knew' does not convert a late notification into a valid one. The PM should also consider the ambiguity clause: the Contractor was required to notify the ambiguity and should not have proceeded without resolving it. The PM's instruction resolved the ambiguity, but the resolution may have confirmed the drawing rather than changed it. The PM should compare the dates, the hierarchy of documents and the tender query response before deciding whether a change occurred.
3. What should the PM do now to avoid a dispute?
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The PM should first establish the document hierarchy and the date of the drawing. If the drawing is part of the Scope and the tender query response expressly allows the drawing to govern, the PM should confirm in writing that the instruction was a clarification, not a change, and explain why no compensation event arises. If the instruction did change the Scope, the PM should acknowledge that a compensation event occurred but state that the Contractor's notification was late. The PM should not simply ignore the Contractor's email; it should issue a formal response that identifies the trigger date, the notification date and the contractual position. To avoid a dispute, the PM can offer a without-prejudice commercial discussion, but it should not treat that as an admission of entitlement. The PM should also review whether it failed to notify a compensation event it should have notified, because that could affect the time-bar analysis. Finally, the PM should record the lesson for future instructions: where a document conflict exists, the PM should instruct clearly, state whether the instruction is a clarification or a change, and remind the Contractor of the notification obligation.