When work is omitted from the Scope under an NEC Option A contract, it's common for parties to look straight to the Activity Schedule to determine the value of the omission.

In most cases, that's not how the contract works.

Under NEC, the change to the Prices is assessed as the effect of the compensation event upon Defined Cost and Fee, together with any resulting impact on the Completion Date and Key Dates. The price shown against an activity in the Activity Schedule is not automatically the amount that should be deducted when work is omitted.

If an omitted activity is simply deducted at its Activity Schedule value, the assessment may not reflect the Contractor's real change in Defined Cost. Depending on the circumstances, this could result in either party being financially advantaged or disadvantaged.

The Activity Schedule is primarily used for payment, not for assessing compensation events.

What should contractors do?

When assessing an omission from the Scope:

• Consider the reduction in both actual and forecast Defined Cost resulting from the omitted work.
• Assess any consequential effects on the remaining works, including changes to sequencing, resources or programme.
• Ensure the assessment reflects the real impact of the omission rather than simply referencing the Activity Schedule.
• Submit details of the assessment with the compensation event quotation.

There is of course nothing to prevent the parties agreeing to use rates or lump sums to assess the value of the change, provided both parties agree with the approach. In practice, this is often a pragmatic way of resolving straightforward compensation events without undertaking a detailed Defined Cost assessment.

Practical takeaway

An omission under NEC is not automatically valued using the Activity Schedule. The contract requires the change to the Prices to be assessed based on the compensation event's impact on Defined Cost. Understanding this distinction can help contractors avoid incorrect assessments and ensure that changes to the Scope are valued in accordance with the contract.

If you're wondering what happens to the Completion Date check out this insight... Does omitting work from the Scope bring the Completion Date forward?