NEC4 compensation events: the list, the notification bar, quotations and deemed acceptance

Published 7 September 2026 · VariationFlow

NEC4 compensation events explained for subcontractors on the Engineering and Construction Subcontract: what counts under clause 60.1, who notifies and the clause 61.3 bar (notify within seven weeks of becoming aware, often less where Z clauses shorten it), a quotation due within two weeks of being instructed and the Contractor’s four weeks to reply under clause 62.3, deemed acceptance after a further three weeks under clause 62.6 and how to make it bite, when the Contractor assesses instead, what a missed early warning costs, and why the main contract’s periods are not yours.

A groundworks subcontractor on an NEC4 subcontract breaks out a concrete slab that nothing on the drawings shows, under what the borehole logs call made ground. Three days with a breaker and a 13-tonne excavator on hire, two loads to tip: £11,400 by the time the foreman has finished. He tells the Contractor’s site agent on the Tuesday. The agent says leave it with me. Two months and two applications later the subcontractor puts the £11,400 on the account and gets a one-line reply from the Contractor’s quantity surveyor: clause 61.3, not notified in time, no change to the Prices. The slab was real and so was the cost. The entitlement was real too, for a while. Then it was not, and nothing about the slab had changed in the meantime.

What is a compensation event under NEC4?

A compensation event is an event the contract lists which, when it happens, entitles you to a change in the Prices, the Subcontract Completion Date and any Key Dates. On the NEC4 Engineering and Construction Subcontract, the form a specialist on an NEC job usually signs, nearly every listed event is something within the Contractor’s control or at its risk, and the change is assessed on the effect the event has on Defined Cost plus the Fee and on planned completion. It is the subcontract’s single mechanism for both money and time. There is no separate variation clause and no separate extension of time clause: an instruction changing your scope, a late access date and unforeseen ground conditions all go through the same procedure of notification, quotation and implementation in clauses 60 to 66. Two features set it apart from JCT. The assessment is a forecast made at the time, not a measurement after the event, and the procedure runs on short fixed periods with consequences attached to silence on both sides. Throughout this guide the other side is the Contractor: the firm that let the subcontract to you.

Which events are compensation events?

Clause 60.1 lists the core events. Main Options B and D add events about the bill of quantities, secondary Options add their own (X2, changes in the law, is the common one), and the subcontract’s data can add more. The subcontract’s core list follows the main contract’s in substance, with the Contractor taking the place the Client and the Project Manager hold on the main contract. Grouped by what actually causes them on site:

• Instructions. The Contractor instructs a change to the scope of your work (60.1(1)), tells you to stop work or not to start it or changes a Key Date (60.1(4)), or tells you how to deal with an object of value or interest found on site (60.1(7)). A change made to accept a Defect, or made to your own design at your request, is not a compensation event.
• Things the Contractor was supposed to do. You are not given access to a part of the site by the later of its access date and the date on the Accepted Programme (60.1(2)); something the Contractor is to provide has not arrived by the date on the Accepted Programme (60.1(3)); the Contractor or other trades do not work within the times or conditions shown, or do work on site the scope does not mention (60.1(5)); materials, facilities and samples for tests are not provided as the scope says they will be (60.1(16)).
• The Contractor changing its mind or going quiet. A reply to one of your communications does not arrive within the period the subcontract sets (60.1(6)); a decision already given to you is changed (60.1(8)); an acceptance is withheld for a reason the subcontract does not give (60.1(9)); you are told to search for a Defect and none is found (60.1(10)); a test or inspection holds you up unnecessarily (60.1(11)); an assumption stated about an earlier compensation event is corrected (60.1(17)).
• Conditions nobody could reasonably have priced. Physical conditions within the site, other than weather, that an experienced subcontractor pricing the job would have thought so unlikely that allowing for them would have been unreasonable (60.1(12)); and weather, measured where the contract data says, worse than the one-in-ten-year figure in the weather data (60.1(13)). In both, only the difference between what was met and what it would have been reasonable to allow for counts.
• The catch-alls. An event the subcontract makes the Contractor’s liability (60.1(14)); the Contractor taking over part of your works before both completion and the Subcontract Completion Date (60.1(15)); a breach of contract by the Contractor that no other event covers (60.1(18)); a prevention event, one that stops you completing, or completing on time, which neither party could prevent and an experienced subcontractor would not have allowed for (60.1(19)); and, new in NEC4, the Contractor telling you that your quotation for a proposed instruction is not accepted, so that the cost of pricing it is recovered (60.1(20)).

What is not on the list matters as much. Your own delays, failures by your own suppliers and sub-subcontractors, weather that is merely bad rather than one-in-ten-years, and ground conditions a competent tender should have priced are all your risk, and no amount of procedure turns them into compensation events.

Who notifies a compensation event, and what is the notification bar?

Where the event comes from the Contractor giving you an instruction or a notification, changing an earlier decision or correcting an assumption, clause 61.1 puts the duty on the Contractor: it notifies the compensation event when it makes that communication, and instructs you to quote. In practice that duty is honoured about as often as it is breached, and the breach does not cost you the entitlement, because those events are expressly kept out of the bar below. Clause 61.3 makes every other event yours to raise: where you believe something that has happened, or is going to, is a compensation event and the Contractor has not notified it, you notify it. Then the sentence that decides the cold open. Notify within seven weeks of becoming aware that the event has happened, or you lose the right to any change in the Prices, the Subcontract Completion Date or a Key Date for it, unless it is one the Contractor should have notified under 61.1. Z clauses often shorten the seven weeks further, to four or to two, so read the schedule of amendments before you count: what a Z clause is and where to find it.

Three points of practice follow. First, the seven weeks run from awareness that the event has happened, not from working out what it costs, so a notification that says the ground is not as described and the effect will follow is enough to stop the clock; the figure comes later, in the quotation. Second, a notification the subcontract requires has to be sent separately from other communications (clause 13.7). A paragraph inside a progress email, a line in the site diary or a mention at the progress meeting is not a notification of a compensation event, and neither is an early warning, which is a different notice under clause 15 with a different job to do. Send it on its own, headed as what it is, dated, to the person the subcontract names. Third, when in doubt, notify. A notification the Contractor decides is not a compensation event costs it a reply. A compensation event you never notified costs you the money.

What must the Contractor do with your notification?

Clause 61.4 gives the Contractor a short period after your notification, which you can agree to extend, to decide. It may notify that the Prices, the Subcontract Completion Date and the Key Dates are not to change, with reasons, on five grounds only: the event arises from your own fault; it has not happened and is not expected to; it was not notified within the seven weeks; it has no effect on Defined Cost, completion or a Key Date; or it is not one of the compensation events the subcontract lists. Otherwise the Contractor notifies that it is a compensation event and instructs you to quote. If no decision arrives in time, you may notify the Contractor of that failure, and if its silence then runs on through the further period the clause allows, the subcontract treats the silence as acceptance that the event is a compensation event and as an instruction to quote. That is the first of three deemed acceptances in the procedure, and it is the one most subcontractors never use: they chase by phone instead of sending the one-line notification of failure that starts the second period. Take both periods from your own clause 61.4, not from anyone’s memory of the main contract.

Two other things can come with the instruction to quote. Under clause 61.5 the Contractor may state that you did not give an early warning of the event that an experienced subcontractor could have given, which changes how the event is assessed (below). And under clause 61.6, where the effects of the event are too uncertain to forecast reasonably, the Contractor states assumptions for the quotation to be based on; if one later proves wrong the Contractor notifies a correction, and the correction is itself a compensation event under 60.1(17). That is the only route by which an implemented compensation event is reopened, so an assumption stated in the instruction is worth reading twice.

What goes in the quotation, and how long do you have?

Under clause 62.2 a quotation sets out the changes you propose to the Prices and any delay you have assessed to the Subcontract Completion Date and Key Dates, with the workings behind them, and, where the event changes the programme for the remaining work, the changes to the Accepted Programme. The change to the Prices under clause 63.1 is the event’s effect on what the work done by the dividing date actually cost and on the forecast cost of the work still to do, both measured in Defined Cost, with the Fee on top. NEC4 fixes the dividing date: for an event that comes from an instruction or notification by the Contractor it is the date of that communication, and for any other event it is the date of your notification. Work before the dividing date is priced on what it cost; work after it is forecast, and the forecast may carry allowances for cost and time risks that are reasonably likely to happen and are not themselves compensation events. Delay is the amount by which planned completion on the Accepted Programme current at the dividing date moves later, which is why a subcontractor without an accepted, up-to-date programme is arguing time with one hand tied.

• Your quotation. Submit it within two weeks of being instructed (62.3). That is the subcontract’s period, and it is the one that counts, whatever figure is quoted on site from the main contract.
• The Contractor’s reply. It has four weeks to reply (62.3), and the reply is one of four things: an instruction to submit a revised quotation; acceptance; notification that a proposed instruction will not be given; or notification that the Contractor will make its own assessment.
• Revised quotations. An instruction to revise has to come with the Contractor’s reasons, and the revised quotation has its own deadline under 62.4, so diarise it from the day the instruction arrives. A bare “not accepted, please revise” is not compliant, and it is worth saying so, politely and in writing.
• Extensions. Either period may be extended if you and the Contractor agree before the submission or reply is due, and the Contractor notifies the extension (62.5). An extension agreed after the date has passed does not undo a deemed acceptance that has already run.
• Proposed instructions. Under clause 65 the Contractor may ask you to quote for an instruction it has not yet given. You do not put a proposed instruction into effect, and pricing one is not a compensation event in itself; if the quotation is then not accepted, 60.1(20) recovers the cost of preparing it.

How does deemed acceptance work?

Three times in the procedure, the Contractor’s silence past a fixed period is treated as acceptance, and each time the mechanism has the same shape: the period expires, you notify the Contractor of its failure, and a further period of silence completes it. Under 61.4 it is acceptance that the event is a compensation event. Under 64.4 it catches a Contractor that chose to assess the event itself and then did not: you notify the failure, say which of your quotations you propose is accepted if you submitted more than one, and once the further period has run that quotation is treated as accepted. Under 62.6 it is acceptance of the quotation itself, and on the subcontract the arithmetic is this. The Contractor has four weeks to reply. If it has not, you notify the failure. If the silence runs on for a further three weeks after that notification, your quotation is treated as accepted.

A deemed acceptance is then implemented under clause 66.1 in the same way as an express one, and under 66.2 the assessment of an implemented compensation event is not revisited except where the subcontract provides for it. In other words a Contractor that lets a quotation go by default has agreed the figure. For it to hold, your side of the record has to be clean: the quotation submitted on a date you can prove, the notification of failure sent as its own communication on the day the reply period expired and not a week later, and the further three weeks counted from the day it was received. That last notification is the whole game. Most subcontractors, having sent a quotation and heard nothing, chase it at the weekly meeting for a month, and for every week they do so the deeming has not started.

When does the Contractor assess the event instead of you?

Clause 64.1 gives the Contractor four triggers for making the assessment itself: you have not submitted a quotation and the details of your assessment in time; the Contractor decides you have not assessed the event correctly and does not instruct a revised quotation; you have not submitted a programme, or alterations to one, that the subcontract requires; or your latest programme has not been accepted for one of the reasons the subcontract gives. The Contractor then has to notify you of its assessment, with details, inside the period clause 64.3 allows. A Contractor that invokes 64.1 and then does nothing is caught by 64.4, above. The practical lesson is the first trigger: a late quotation hands the assessment to the other side, and the Contractor’s forecast of your cost will not be generous.

What does a missed early warning cost?

Clause 15.1 puts the same duty on you and on the Contractor: each warns the other as soon as it becomes aware of a matter that could put the Prices up, delay completion or a Key Date, or harm how the finished works perform. Early warning matters go on the Early Warning Register, and either side can call the other to a meeting to decide what to do about them. The early warning is not the compensation event notification and does not stop the seven weeks; it is the notice that comes before it, and it carries its own sanction. If the Contractor states in the instruction to quote that you did not give an early warning an experienced subcontractor could have given (61.5), the event is assessed as if you had given it, and any cost an earlier warning would have let the Contractor avoid stays with you. On the cold open, an early warning on the Tuesday and a compensation event notification the same week would have protected the whole £11,400. The foreman’s conversation with the agent protected none of it.

Where does the main contract come in?

Above your subcontract sits the main contract between the Contractor and the Client, usually the NEC4 Engineering and Construction Contract, which runs the same procedure with the Project Manager in the place the Contractor holds on yours. Its periods are its own, and the only one worth knowing here is the main contract’s 61.3 bar of eight weeks, because it explains yours. The Contractor has to receive your notification, decide it, and notify the same event up the chain inside its own bar, so the subcontract’s is drafted a week shorter to leave it room. Every other period in the procedure differs between the two forms as well, so a figure quoted on site from the main contract is not yours to rely on. Read your own clauses, in your own edition and with your own Z clauses, before relying on any of it.

The dependency runs both ways. A late notification from you does not only cost you the entitlement; it can cost the Contractor its own one level up, and a Contractor that has lost the event upstream has every reason to find that your notification was out of time downstream. The NEC4 Short Subcontract runs a simplified version of the same procedure, and the discipline is identical.

The records that decide it

Because assessment is a forecast made at the dividing date, the question in every compensation event dispute is what was known, said and sent on which day. Five things settle it:

• The notifications themselves, each a separate communication with its date of sending and receipt: the early warning, the compensation event notification, the notification of a failure to reply, the quotation and any revision.
• The Accepted Programme current at the dividing date, because time is assessed against it and against nothing else.
• Defined Cost records for work done before the dividing date: timesheets by person and day, plant on hire with dates, materials with delivery tickets, and the accounts of your own suppliers and sub-subcontractors. Under the cost-based Options this is the money; under the priced Options it is still the basis of the quotation.
• Site evidence of the event itself: dated photographs, the site diary entry on the day, the instruction or the drawing revision that changed your scope, the measurement that shows the ground was not as described.
• A running register of open compensation events with the next date on each, because the periods are short and there are usually a dozen running at once.

VariationFlow runs the NEC4 clocks as live dates on every compensation event: the notification bar from the day the event is recorded, the quotation period from the instruction, the reply period from submission, and the further wait to deemed acceptance once a failure is notified. Each runs on the periods of the form the project is actually on, which is the subcontract unless the project says otherwise, and on a Z clause’s shorter bar where one is recorded on the project. The notifications are generated from the record, with the photographs, diary entries and cost lines attached to the event they evidence. This guide is general information about the NEC4 Engineering and Construction Subcontract, not legal advice. Your subcontract’s Options, its data and any Z clauses may change the periods and the list, and a claim of any size is worth an hour with a construction lawyer or claims consultant before it is referred.