A Contractor, working on a maintenance scheme, has damaged existing infrastructure, which was not part of the works. Is the repair to the damaged infrastructure disallowed cost?
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NEC3 ECC: Is Damage to Existing Infrastructure a Disallowed Cost?
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Answered: NEC3 ECC: Uplift in claimed principal contractor sub-contractor costs as a result of actual delay - Who pays?
Depends if the reason for the reason for "actual delay" is a compensation event or not. If it is a compensation event then potentially yes (as long as they can prove it is an element of Defined Cost), otherwise if not a compensation event then there is no way for the Contractor to recover this cost.
Answer also depends on which ECC option you are working under. If this is option C, then any overspend by the Contractor that is not dis-allowable is shared under the pain/gain mechanism.
If ever a Contractor says "can I claim for this thing", my answer is always "show me where in clause 60.1 that thing is a compensation event" then yes you can clam for it.
Answer also depends on which ECC option you are working under. If this is option C, then any overspend by the Contractor that is not dis-allowable is shared under the pain/gain mechanism.
If ever a Contractor says "can I claim for this thing", my answer is always "show me where in clause 60.1 that thing is a compensation event" then yes you can clam for it.
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Answered: NEC3 ECC: Can an adjudicator decide to use rates to assess a CE if one party did not agree?
I would agree that the Adjudicator did not have the power to decide to use rates. The Adjudicator's job is to answer the question put forward in accordance with the contract that has been signed up to by both Parties. The contract clearly states that if both Parties agree rates or lump sums may be used. However, if you as the Contractor did not agree, then it has to be assessed using the Defined Cost rules.
The caveat to this (as ever) is that it assumes that there are no Z clause amendments that changes the standard clauses in this regard.
It is not the first time I am afraid where i have heard of an Adjudicator making clearly (in my opinion) an incorrect decision in accordance with the contract they are being asked to assess against.
The caveat to this (as ever) is that it assumes that there are no Z clause amendments that changes the standard clauses in this regard.
It is not the first time I am afraid where i have heard of an Adjudicator making clearly (in my opinion) an incorrect decision in accordance with the contract they are being asked to assess against.
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Answered: NEC3 ECC Option B - Is the Contractor entitled to 100% of the value of 'materials on site' or can the PM make a deduction from interim payments until they are incorporated into the works
The amount due at each assessment date is determined with reference to Core Clause 50.2, and Option B Clause 11.2(28).
At each assessment date the Price of Work Done to Date is the total of :
1. The quantity of work completed for each bill item multiplied by the rate.
2. A proportion of each lump sum which is the proportion of work completed for that lump sum.
So the amount due is entirely dependant on the structure of the Bill of Quantities.
Assuming there is no item for materials on site in the Bill of Quantities then I don't believe that there is any amount due for "materials on site".
At each assessment date the Price of Work Done to Date is the total of :
1. The quantity of work completed for each bill item multiplied by the rate.
2. A proportion of each lump sum which is the proportion of work completed for that lump sum.
So the amount due is entirely dependant on the structure of the Bill of Quantities.
Assuming there is no item for materials on site in the Bill of Quantities then I don't believe that there is any amount due for "materials on site".
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Answered: NEC3 ECC: Before implementation and after instructing the Contractor to provide CE quote and proceed, can the PM change his mind on the principle and decide that the event is not a CE under the contract?
This is not a straight forward one, both contractually and practically. Whilst putting it in writing I kind of went full circle as to what I believe my answer is.
Firstly, there is no where obviously in the contract that allows the PM to change his mind as to whether something is a CE - once they have said it is one, it is one. They should spend time deciding if definitively they agree it is one before saying yes and asking for the quote. The only thing that can change is how they assess the event. It is more definitive within the contract wording that once it is implemented it cant be reassessed (65.2). The only clause that could be brought into the mix is clause 60.1(8) which states that it is a compensation event if a Project Manager changes a previous decision. The guidance notes suggest they are able to change decisions made under their authority within the contract in the same way they made their original decision. This is not specifically what this clause is primarily intended to be used for but could be the PM’s defense that they are allowed to change decisions. This CE under 60.1(8) will then be assessed on its own merits.
You may need to take this to Adjudication – where by I think the Adjudicator will consider two points. The first is whether the Project Manager can change their mind once they have said it is one. The second is whether they were right or wrong to have said it was in the first place. If the Adjudicator agrees with the PM that it was not a compensation event, I think one way or another they will find a way of finding in favor of the Employer in that situation.
Consider this: If the Contractor notified that poor ground conditions was a compensation event, and the PM agreed it was and requested a quotation. Five minutes after requesting a CE quotation, the PM realizes there is another borehole log in Site Information that shows the ground is indeed very bad and even worse than the Contractor has experienced. At the end of the day it would appear that the Contractor should have allowed for this – and there was no real contractual entitlement. I think this would be correct, both practically and morally that they can not now assess the full value as a CE. With that in mind I think the Contractor is never really home and dry with entitlement until the event has been implemented.
In a similar principle – if the PM gives an instruction to change the Works Information that the Contractor does not identify as a CE at the time, they can still notify this right at the end of the job and claim entitlement as they are not time-barred on items that the PM is obliged to notify.
Firstly, there is no where obviously in the contract that allows the PM to change his mind as to whether something is a CE - once they have said it is one, it is one. They should spend time deciding if definitively they agree it is one before saying yes and asking for the quote. The only thing that can change is how they assess the event. It is more definitive within the contract wording that once it is implemented it cant be reassessed (65.2). The only clause that could be brought into the mix is clause 60.1(8) which states that it is a compensation event if a Project Manager changes a previous decision. The guidance notes suggest they are able to change decisions made under their authority within the contract in the same way they made their original decision. This is not specifically what this clause is primarily intended to be used for but could be the PM’s defense that they are allowed to change decisions. This CE under 60.1(8) will then be assessed on its own merits.
You may need to take this to Adjudication – where by I think the Adjudicator will consider two points. The first is whether the Project Manager can change their mind once they have said it is one. The second is whether they were right or wrong to have said it was in the first place. If the Adjudicator agrees with the PM that it was not a compensation event, I think one way or another they will find a way of finding in favor of the Employer in that situation.
Consider this: If the Contractor notified that poor ground conditions was a compensation event, and the PM agreed it was and requested a quotation. Five minutes after requesting a CE quotation, the PM realizes there is another borehole log in Site Information that shows the ground is indeed very bad and even worse than the Contractor has experienced. At the end of the day it would appear that the Contractor should have allowed for this – and there was no real contractual entitlement. I think this would be correct, both practically and morally that they can not now assess the full value as a CE. With that in mind I think the Contractor is never really home and dry with entitlement until the event has been implemented.
In a similar principle – if the PM gives an instruction to change the Works Information that the Contractor does not identify as a CE at the time, they can still notify this right at the end of the job and claim entitlement as they are not time-barred on items that the PM is obliged to notify.
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NEC3 ECC: What does clause 60.1(8) cover?
What is clause 60.1(8) specifically intended to pick up that clause 60.1(1) would already cover? If the Project Manager changes a decision that changes the Works Information then this would be covered by 60.1(1). So what examples are there of the kind of thing that would be picked up by 60.1(8) such that it was necessary to include within the contract?
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Answered: Adding Working Areas overhead percentage to defined costs within an Option C Application
You apply the percentage for Working Area overheads to the people costs listed in section 1 of the Schedule of Cost Components. People 11, 12 & 13 are cost headings for people directly employed by the Contractor and People 14 is effectively for labour only subcontractors (not Subcontractors as defined in 11.2 (11(17))) or agency staff. So Subcontractor (big 'S') people costs do not have the percentage applied.
The whole sum then attracts the direct fee percentage.
The whole sum then attracts the direct fee percentage.
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Answered: NEC3 ECC: As a client do I have to pay a finders fee passed on by my Contractor for an employee they employed?
The amount due under an Option C contract is Defined Cost plus the Fee (Refer clause 50.2, 11.2(29) and 11.2(23)). The Defined Cost for People is determined with reference to the Schedule of Cost Components(SCC) clauses 1, 11,12,13 and 14.
Main Option clause 52.1 states "All the Contractor's costs which are not included in the Defined Cost are treated as included in the Fee."
For directly employed People- finders fees are not listed in SCC clause 11,12,13 so finders fees are NOT Defined Cost and they are treated as included in the Fee. Therefore they should not be included as an individual specific item in the assessment of the amount due.
Main Option clause 52.1 states "All the Contractor's costs which are not included in the Defined Cost are treated as included in the Fee."
For directly employed People- finders fees are not listed in SCC clause 11,12,13 so finders fees are NOT Defined Cost and they are treated as included in the Fee. Therefore they should not be included as an individual specific item in the assessment of the amount due.
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Answered: NEC3 ECSC: Lack of 61.1 in the Short contract?
The answer to the first part of your question "where is the equivalent ... ?" is that there is not a direct equivalent, although the second bullet point implies that they can.
Why ? Having been lead on the development of the Professional Services Short Contract (PSSC) , under the short forms you have to be absolutely ruthless in cutting the contract back to its bones. Our first draft of the PSSC read more like a Professional Services Medium length contract so we went back to the drawing board and cut some more as well as re-engineering, to some extent, the whole CE procedure.
So this is my guess : they decided it wasn't absolutely necessary for the contracts operation.
Why ? Having been lead on the development of the Professional Services Short Contract (PSSC) , under the short forms you have to be absolutely ruthless in cutting the contract back to its bones. Our first draft of the PSSC read more like a Professional Services Medium length contract so we went back to the drawing board and cut some more as well as re-engineering, to some extent, the whole CE procedure.
So this is my guess : they decided it wasn't absolutely necessary for the contracts operation.
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NEC3 ECC: What is the outcome if Clause 60.1(12) has been deleted from the contract? Does this make all ground conditions Contractor risk?
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ECC NEC3 Option E - Can the Employer offset/deduct Contractor costs due to breakdwon of sub-contractor equipment?
The scenario is;
Option E reactive/emergency project. Contractor employs a sub-contractor to carry out a specialist piece of work. The breakdwon of a sub-contractor piece of equipment causes the project to take say 5 days. Had the item of sub-contractor equipment not broken down the project would have taken 3 days.
Can the Employer deduct, from the Contractor's application, the costs they have incurred for the additonal 2 days on site (Contractor supervision, labour & prelim plant) due to the sub-contractor's equipment breaking down? Advising/suggesting the Contractor to do the same to the sub-contractor's application?
My initial thoughts are that Employer pays defined cost. Therefore, if the Contractor can negotiate a discount/contra-charge for the additonal 2 days on site with their sub-contractor then this should be passed on to the Employer. Vice-versa if the sub-contractor refuses to offer any discount/accept a contra-charge for the additonal 2 days on site then the Employer still pays the defined cost (with no deduction for the additonal 2 days on site).
Option E reactive/emergency project. Contractor employs a sub-contractor to carry out a specialist piece of work. The breakdwon of a sub-contractor piece of equipment causes the project to take say 5 days. Had the item of sub-contractor equipment not broken down the project would have taken 3 days.
Can the Employer deduct, from the Contractor's application, the costs they have incurred for the additonal 2 days on site (Contractor supervision, labour & prelim plant) due to the sub-contractor's equipment breaking down? Advising/suggesting the Contractor to do the same to the sub-contractor's application?
My initial thoughts are that Employer pays defined cost. Therefore, if the Contractor can negotiate a discount/contra-charge for the additonal 2 days on site with their sub-contractor then this should be passed on to the Employer. Vice-versa if the sub-contractor refuses to offer any discount/accept a contra-charge for the additonal 2 days on site then the Employer still pays the defined cost (with no deduction for the additonal 2 days on site).
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NEC3: Can a main Contractor make a claim against an architect regarding design errors included in work done before novation?
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Answered: NEC3 ECC: changes to the Contract Data - what is in the power of the Project Manager to instruct?
What the contract is correctly saying is that there can not be an instruction issued to change anything in Contract Data - like you say change Delay Damages form £10/day to £1000/day.
When it comes to compensation events - these can obviously affect planned Completion and thus Completion Date. If you look at the definition of Completion Date, it states that it is the date stated in the contract data unless changed in accordance with the contract. The contract states that implemented compensation events can move it later,, and acceleration once agreed can bring the date earlier. This now contractually supersedes the date stated in contract data. There is no requirement to physically go back into contract data and change the date there.
When it comes to compensation events - these can obviously affect planned Completion and thus Completion Date. If you look at the definition of Completion Date, it states that it is the date stated in the contract data unless changed in accordance with the contract. The contract states that implemented compensation events can move it later,, and acceleration once agreed can bring the date earlier. This now contractually supersedes the date stated in contract data. There is no requirement to physically go back into contract data and change the date there.
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Answered: NEC3 ECC: Can non-implemented compensation events be included on a Contractor's revised programme?
A common question to this platform so you can ave a search on answers already given, but in summary:
Yes the Contractor shows effects of non-implemented compensation events - how can they not? If the PM has instructed them to do something that is a change to the Works Information and requested a quote under 61.1, they are proceeding with those works. These may already be affecting the planned works, yet will be several weeks before the quote is agreed and hence implemented. If a Contractor has been instructed not to work in an area for the next two weeks which is a CE - they have to show that. The key here is that they should only affect planned Completion, not Completion Date. If the effect is to delay planned Completion by three weeks, planned Completion moves three weeks beyond the Completion Date. When the quote is agreed, it includes the assessment of time. If the PM agrees three weeks then Completion Date can now move and catch up with planned. If the assessment is only two weeks, then planned Completion will be one week beyond the Completion Date and Contractor liable for Delay Damages if they can not recover the time (or they go adjudication to claim the extra week if they believe they are correct). This is why we have the separation of the two milestones. Planned Completion reflects REALITY, whilst Completion Date indicates LIABILITY.
Early Warnings are a bit different. The Contract used to say you show the effects of notified early warning matters on the programme, but this was taken out in 2006 as Contractors were showing potential effects of uncertain events on the programme. Therefore these should not be shown/driving the programme, but for the reasons above non-implemented compensation events absolutely should absolutely be shown (but only initially effect planned Completion).
n.b. to not show instructed works that is agreed is a CE but not yet implemented would be a reason to reject the programme under clause 31.3 as it would be unrealistic!
Yes the Contractor shows effects of non-implemented compensation events - how can they not? If the PM has instructed them to do something that is a change to the Works Information and requested a quote under 61.1, they are proceeding with those works. These may already be affecting the planned works, yet will be several weeks before the quote is agreed and hence implemented. If a Contractor has been instructed not to work in an area for the next two weeks which is a CE - they have to show that. The key here is that they should only affect planned Completion, not Completion Date. If the effect is to delay planned Completion by three weeks, planned Completion moves three weeks beyond the Completion Date. When the quote is agreed, it includes the assessment of time. If the PM agrees three weeks then Completion Date can now move and catch up with planned. If the assessment is only two weeks, then planned Completion will be one week beyond the Completion Date and Contractor liable for Delay Damages if they can not recover the time (or they go adjudication to claim the extra week if they believe they are correct). This is why we have the separation of the two milestones. Planned Completion reflects REALITY, whilst Completion Date indicates LIABILITY.
Early Warnings are a bit different. The Contract used to say you show the effects of notified early warning matters on the programme, but this was taken out in 2006 as Contractors were showing potential effects of uncertain events on the programme. Therefore these should not be shown/driving the programme, but for the reasons above non-implemented compensation events absolutely should absolutely be shown (but only initially effect planned Completion).
n.b. to not show instructed works that is agreed is a CE but not yet implemented would be a reason to reject the programme under clause 31.3 as it would be unrealistic!
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NEC3 ECC Option C - Is damage to crew transport a disallowable cost?
The Contractor has submitted costs for the repairs and replacement to hire vehicles following damage and theft. The vehicles were for the transport of personnel from their base location to site and not involved in carrying out the actual work.
The Contractor has advised that as the project is a target cost option C, it entitles them to reimbursement of all project costs relating to carrying out the activity on site.
No EW was given. Charges were included within the Payment application.
Are these charges Disallowed Costs?
The Contractor has advised that as the project is a target cost option C, it entitles them to reimbursement of all project costs relating to carrying out the activity on site.
No EW was given. Charges were included within the Payment application.
Are these charges Disallowed Costs?
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NEC3: How can I forecast defined cost of a compenation event if rates are not included in SSCC?
Thanks for the answer to my original question. Continuing along the same line I understand compensation events are assessed based up the actual defined cost, the forecast defined cost and the appropriate fee percentage. With my original question relating to weather, the compensation event was to be based on actual defined cost and there was no need to forecast defined costs, and therefore excluding specific people rates is not an issue. What happens when compensation events occur at an early stage of a Project and you are required to forecast defined cost which has not been incurred previously and is not based upon a pre-agreed rate?
I thought compensation events were not "loss and expense" in that you did not have to identify actual cost to justify entitlement, and also I thought the purpose of a SSCC was to simplify the assessment process by having rates agreed therefore reducing disputes and preventing the justification/substantiation of an assessment being overly laborious?
Any thoughts gratefully received.
I thought compensation events were not "loss and expense" in that you did not have to identify actual cost to justify entitlement, and also I thought the purpose of a SSCC was to simplify the assessment process by having rates agreed therefore reducing disputes and preventing the justification/substantiation of an assessment being overly laborious?
Any thoughts gratefully received.
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Answered: ECC NEC3 Option E - Can the Employer offset/deduct Contractor costs due to breakdwon of sub-contractor equipment?
Under options C to E a Defined Cost is what the Contractor pays the Subcontractor in accordance with the subcontract, subject to some deductions in clause 11.2 (23). So the first port of call is to look at the subcontract contract.
If the subcontractor has overpaid according to this contract, then it would be a Disallowed Cost under the second bullet of clause 11.2 (25).
If the subcontractor has overpaid according to this contract, then it would be a Disallowed Cost under the second bullet of clause 11.2 (25).
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Answered: NEC3: Can a main Contractor make a claim against an architect regarding design errors included in work done before novation?
You would have to look at the contract and obviously in particular the novation terms. In addition, whether those errors were caused by the architect NOT exercising reasonable skill and care (as defined in the contract and a judgement call to some extent) as this is the level of liability that consultants are normally liable for.
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NEC3 PM DISAGREES WITH CE EVALUATION/QUOTATION
Assuming the correct process has been followed by the PM requesting a quotation and a revised quotation; and the contractor has responded accordingly, what redress has the PM got should he/she disagree with the contractors assessment. Bearing in mind the practicalities of keeping the job moving along
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NEC3 ECC: If the Employer reduces the scope of the works to be completed, does this automatically adjust the Completion Date?
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