Compensation Events are communications that assess variations, losses, expenses, and extensions of contracts. Compensation events may or may not be due to the Contractor, as they can also include weather or site-related conditions. Compensation events are used to allocate risk between affected parties.

In compliance with NEC3 ECC, the procedure for Compensation Events is as follows a Notification > Quotation > Assessment > Implementation series of events.

The following sections describe the procedures involved in recording a Compensation Event initiated by the Project Manager and by the Contractor.