A common question under NEC contracts is whether a contractor can delay carrying out an instruction until the Project Manager has formally instructed and accepted a quotation for a compensation event.

The short answer is No.

If the Project Manager issues a valid instruction, the Contractor is obligated to comply with that instruction without waiting for the commercial process to catch up. Where the instruction changes the Scope, the Project Manager should also notify it as a compensation event and instruct a quotation. However, if that administrative step has been missed, it does not entitle the Contractor to refuse or delay carrying out the instruction.

Understandably, Contractors may be reluctant to proceed with additional or changed Scope before the cost and time implications have been agreed, but delaying compliance can expose the Contractor to allegations that they have failed to act in accordance with the contract.  

What should contractors do?

The better approach is to:

• Comply promptly with the instruction.
• Keep detailed contemporaneous records of the additional cost and programme impact.
• Notify the Project Manager if a compensation event has not been formally notified.
• Continue to follow the contractual compensation event process while mitigating any additional cost and delay.

Practical takeaway

Commercial teams should treat the instruction and the compensation event process as two related but separate contractual mechanisms. An omission by the Project Manager to instruct a quotation does not remove the Contractor's obligation to comply with a valid instruction, but it should prompt an early commercial discussion to ensure entitlement is properly protected.

If you're unsure whether an instruction has created a compensation event or whether your entitlement has been protected our NEC advice call can identify potential risks before they become a dispute.