Jurisdiction(s):
United Kingdom

Key definition

Compensation event definition

What does Compensation event mean? In NEC contracts, a compensation event is an event that, under the contract’s risk allocation, entitles the contractor to an adjustment to the Prices and/or the Completion Date (and sometimes Key Dates). It is a defined contractual term in the NEC3 and NEC4 Engineering and Construction Contract and related NEC forms, not a statutory concept. Typical compensation events include instructions changing the Works, Employer risk events, prevention, unforeseeable physical conditions, changes in law, and failures by the Project Manager or Supervisor. The procedure is central to time and money recovery: the contractor must notify (often within eight weeks), submit a...

NEC3 2013 suite: HGCRA/LDEDCA payment and adjudication changes, project bank accounts, compensation events, termination and BIM across ECC, PSC, SC and TSC

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Practice notes

ARCHIVED: This Practice Note is archived and no longer maintained

NEC3 2013 edition

NEC3 comprises a family of construction agreements centred on pro-active project management, highlighting the importance of clear and effective communication and co-operation between the parties (refer to Practice Note: NEC contracts—introduction). A refreshed suite was issued by NEC in April 2013, succeeding the earlier edition published in June 2005 and marking the first comprehensive update since then. The 2013 suite introduced several amendments to the 2005 form—some previously released as supplements to that edition and now folded and consolidated into the 2013 texts—principally to reflect the 2011 amendments to the HGCRA 1996, to provide for project bank accounts in line with government fair payment guidance, and to revise the Compensation event mechanisms, amongst other updates and refinements. In addition, NEC released seven new 'how to' guides within the April 2013 materials to assist with completing Works information, service information and Scope, and with preparing the communication forms for the Engineering and Construction Contract (ECC), Term Service Contract (TSC) and Professional Services contract (PSC) alike, together with a guide on using BIM with NEC3 contracts, across the suite...

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Web page updated on 21/05/2026

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