In Option C there is no procedure for the Contractor to propose changes to the Works Information as 63.11 only deals with the commercial impact of such a proposal. Whilst technically a value engineering proposal is unlikely to pass the tests at clause 16.1 to make it an early warning, in the absence of a formal mechanism I'm not sure what else you could have expected the Subcontractor to do. Therefore I doubt there's much merit in progressing an argument down the failure to give correct notification route.
What else is a proposal from the Subcontractor if it isn't a suggestion? There is no detail given in the contract as to the content of a proposal. Given that it sounds like the Employer has designed the original hoarding it would make sense that you wouldn't expect the Subcontractor to fully design his proposal, suggestion of an alternative is probably enough.
For me the real question is if it hadn't been for the proposal from the Subcontractor would anything different have happened or would you have been happy with the original hoarding? Sounds a bit like you're wanting your cake and you want to eat it as well. Remember the Employer and Contractor will still benefit if the target cost isn't reduced, whilst the Subcontractor won't benefit from his proposal if it is and therefore won't be motivated to make any further proposals!
What else is a proposal from the Subcontractor if it isn't a suggestion? There is no detail given in the contract as to the content of a proposal. Given that it sounds like the Employer has designed the original hoarding it would make sense that you wouldn't expect the Subcontractor to fully design his proposal, suggestion of an alternative is probably enough.
For me the real question is if it hadn't been for the proposal from the Subcontractor would anything different have happened or would you have been happy with the original hoarding? Sounds a bit like you're wanting your cake and you want to eat it as well. Remember the Employer and Contractor will still benefit if the target cost isn't reduced, whilst the Subcontractor won't benefit from his proposal if it is and therefore won't be motivated to make any further proposals!