To benefit from the Compensation Event provisions, the Contractor must first give notice of its claim to the Authority as soon as reasonably practicable and in any case within any time period set out in the Contract. The Contractor must then, within the prescribed timescales, follow up in writing with full details of the Compensation Event, including any extension of time and/or relief and details of any Estimated Change in Project Costs, which will inform the compensation calculation.
The Contract Manager should make sure that the Contractor provides adequate evidence when claiming a Compensation Event to show that:
• the event falls within the contractual definition of Compensation Event;
• the Compensation Event has directly caused all of the matters outlined in the Contractor's notices; and
• the Contractor could not have mitigated the consequences of the Compensation Event by following Good Industry Practice.
The Contract Manager should refer this matter to the Authority's Legal Department for validation that adequate evidence has been provided.
When compensation is due to the Contractor under the WIDP Contract, it should be calculated in accordance with Clause 39, which makes a distinction between the period before and after the Services Commencement Date. The WIDP Contract (Paragraph 6 of Schedule 19) also has specific provisions setting out how Third Party Income should be taken into account when using the Financial Model to calculate the change in the Unitary Charge as a result of a Compensation Event.
The Contract Manager should be aware that the Expiry Date of the Contract is not normally extended when agreeing appropriate measures to manage a Compensation Event. If the Contractor requests an extension to the Contract as one of the compensation arrangements the Contract Manager should ensure the Authority's Finance Department has sufficient opportunity to evaluate the implications before the Authority responds to such a request. Contract extensions can be highly valuable to the Contractor and should only be agreed where something of equal value is offered in exchange.