The simple answer is 'No' - see clause 26.1.
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Answered: NEC ECC: Subcontract data
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Answered: NEC ECC: Recovery of full time staff costs in Compensation Events
Slightly surprised (but I will go and do a review) that you feel there is more than one school of thought on the principle of this answer as I think our experts will have a common answer to this. It may be that there are subtly different questions on a similar theme that might give rise to subtly different answers.
The intent of the contract is that the Contractor can only claim for additional resources as part of the CE quotation. If the existing team that are full time on that project can deal with that event then there is no additional cost incurred. The only exception I would say to that is that if you had a resource that would have left the project part way through, but now they are staying longer to do that CE then that could be claimed for. The problem you would have there is proving it. As a Contractor I always used to submit a resource schedule/release plan so they could see what resources I had planned throughout the project. This made it easier to justify where staff are being kept longer as otherwise it was difficult/subjective to prove.
I take your argument about that staff could have been utilised elsewhere but that is a practical or moral argument not a contractual one. The problem is if a Contractor could claim that cost for every CE, they could be doubling/trebling/quadrupling their staff costs they can claim for every CE compared to the actual resource they will have - which would not be fair on the Employer. You could argue what the contract says is not fair on the Contractor, but I think on the scale of fairness that is more closer to fair than if the Contractor can claim staff cost for every single CE that are running parallel with each other.
The intent of the contract is that the Contractor can only claim for additional resources as part of the CE quotation. If the existing team that are full time on that project can deal with that event then there is no additional cost incurred. The only exception I would say to that is that if you had a resource that would have left the project part way through, but now they are staying longer to do that CE then that could be claimed for. The problem you would have there is proving it. As a Contractor I always used to submit a resource schedule/release plan so they could see what resources I had planned throughout the project. This made it easier to justify where staff are being kept longer as otherwise it was difficult/subjective to prove.
I take your argument about that staff could have been utilised elsewhere but that is a practical or moral argument not a contractual one. The problem is if a Contractor could claim that cost for every CE, they could be doubling/trebling/quadrupling their staff costs they can claim for every CE compared to the actual resource they will have - which would not be fair on the Employer. You could argue what the contract says is not fair on the Contractor, but I think on the scale of fairness that is more closer to fair than if the Contractor can claim staff cost for every single CE that are running parallel with each other.
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Answered: NEC ECS: Can Liquidated Damages be taken from Retention?
Yes, that is what the retention is for.
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Answered: NEC3 ECC - Substantial Decrease in Quantities
There are contract provisions -see option B clause 60.4.provided the reduction satisfies the criteria stated in the clause. In this case, from what you have said
- there is no inutructuction changing the Works Information (tick)
- "the Defined Cost per unit of quantity" will change as the rate contains fixed overheads so the per unit of quantity costs will change (tic), and
- the unfair one if final total quantity of work done (NOT the change in quantity) x original rate actual is less than 0.5% of the Prices at the Contract Date.
Why is the last one unfair ? Because if it was not even a reasonably major quantity, then if the anticipated quantities reduce so much that the final quantity times rate x rate is less that 0.5%, the Contractor only gets the rate x quantity. In your circumstances, this potentially means you miss out on recovering your overhead / fixed costs.
- there is no inutructuction changing the Works Information (tick)
- "the Defined Cost per unit of quantity" will change as the rate contains fixed overheads so the per unit of quantity costs will change (tic), and
- the unfair one if final total quantity of work done (NOT the change in quantity) x original rate actual is less than 0.5% of the Prices at the Contract Date.
Why is the last one unfair ? Because if it was not even a reasonably major quantity, then if the anticipated quantities reduce so much that the final quantity times rate x rate is less that 0.5%, the Contractor only gets the rate x quantity. In your circumstances, this potentially means you miss out on recovering your overhead / fixed costs.
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NEC ECC: Option C - Disallowed Costs
NEC ECC Option C: Specialist Site 3D Surveying – Cost disallowed by the Client
We have employed a specialist surveying subcontractor to carry out a Ground Penetration Radar survey to locate services, and also to produce the data required for us as the contractor to produce 2D & 3D models to aid in the construction.
To date, the PM has disallowed the cost, as he believes it falls within section 44 of the schedule of cost components, specifically item h, surveying setting out.
The counter argument from ourselves as the Contractor is that the subcontractor is not to be classed as a people cost, but falls under the Schedule of Cost Components, 43 (h) ‘specialist services’.
Please advise?
We have employed a specialist surveying subcontractor to carry out a Ground Penetration Radar survey to locate services, and also to produce the data required for us as the contractor to produce 2D & 3D models to aid in the construction.
To date, the PM has disallowed the cost, as he believes it falls within section 44 of the schedule of cost components, specifically item h, surveying setting out.
The counter argument from ourselves as the Contractor is that the subcontractor is not to be classed as a people cost, but falls under the Schedule of Cost Components, 43 (h) ‘specialist services’.
Please advise?
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Answered: NEC ECC: Withheld Monies - Not Disallowed Cost - Option C
Just to add to Neil's answer, the Project Manager has no right to withhold amounts due on the basis of a subjective opinion that something may or may not apply. The contract gives the Project Manager the right to inspect accounts and records, which could be undertaken periodically as the work proceeds. It sounds like this hasn't occured and now an amount is being withheld to allow the PM an opportunity to inspect this information. As Neil has stated, you should be re-paid the amount plus interest, if not deducted correctly under the contract.
The opening sentence of the Disallowed Cost clause in NEC3 'cost which the Project Manager decides' has been deleted in NEC4, which reinforces the requirement for any such assessment to be undertaken clinically and methodically. An incurred cost can only be treated as Disallowed Cost only when it can actually be determined to fall under one of the stated bullet points. A subjective and 'global' application is not a correct assessment of Disallowed Cost under the contract, even though the PM is stating that his assessment is not Disalowed Cost.
Although the contract doesn't state a procedure, why not suggest to the PM that the review leads to an outcome; Defined Cost, Disallowed Cost or not proven, and you have timescales in which to address any concerns or queries before amounts are treated as Disallowed Cost. This is simlilar to the practicalities of accepting a programme, whereby minor issues are dealt with by giving the Contractor an opportunity to correct them (say 2 months), before the PM can not accept the programme. Neil has already suggested 10.1 and I think this is appropriate as the contract doesn't cover every practicality so a little co-operation and common sense need to apply.
The opening sentence of the Disallowed Cost clause in NEC3 'cost which the Project Manager decides' has been deleted in NEC4, which reinforces the requirement for any such assessment to be undertaken clinically and methodically. An incurred cost can only be treated as Disallowed Cost only when it can actually be determined to fall under one of the stated bullet points. A subjective and 'global' application is not a correct assessment of Disallowed Cost under the contract, even though the PM is stating that his assessment is not Disalowed Cost.
Although the contract doesn't state a procedure, why not suggest to the PM that the review leads to an outcome; Defined Cost, Disallowed Cost or not proven, and you have timescales in which to address any concerns or queries before amounts are treated as Disallowed Cost. This is simlilar to the practicalities of accepting a programme, whereby minor issues are dealt with by giving the Contractor an opportunity to correct them (say 2 months), before the PM can not accept the programme. Neil has already suggested 10.1 and I think this is appropriate as the contract doesn't cover every practicality so a little co-operation and common sense need to apply.
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NEC ECC: Recovery of full time staff costs in Compensation Events
Contract is Option A. The Contractor has several staff who are employed full time within the Working Area. A Compensation Event occurs which involves several of these full time staff working on the CE (eg additional planning time and supervision on site). The staff are not paid overtime and there is no impact on the programme.
Can the Contractor include time for these staff in his quote for the CE? There is no increase in his Defined Cost, but the Employer has increased the scope of the work he wants the Contractor to do and therefore reduces the opportunity for these staff to be utilised elsewhere in the business if available through efficiencies in working practice etc?
Reviewing similar questions on here there seems to be more than one school of thought!
Thanks.
Can the Contractor include time for these staff in his quote for the CE? There is no increase in his Defined Cost, but the Employer has increased the scope of the work he wants the Contractor to do and therefore reduces the opportunity for these staff to be utilised elsewhere in the business if available through efficiencies in working practice etc?
Reviewing similar questions on here there seems to be more than one school of thought!
Thanks.
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Answered: NEC ECC: Capturing Minor Delays under Option C
The only way to get recovery for any event would be to notify each minor access delay you notify as a compensation event so that it can then be assessed on its own merit. If there was only a few of these you would probably not even bother notifying/claiming as it is more hassle than its worth. However obviously several of these would be ones you can not afford to keep ignoring. These are unlikely individually to be critical (if only 30 minutes) so you are probably not looking at time affect but just cost.
Don't forget that at least once every four weeks/month you will be submitting a revised programme. At this point each period you will see the cumulative effect of progress, change in logic, delays etc upon the planned Completion. If planned Completion has moved (and a delay would be practically measured in whole days not hours) and you believe it is down to one or a number of these numerous access delays, then this delay also has to be priced demonstrated within one or a number of these individual compensation event quotations.
There is no such thing as a general disruption claim or prolongation claim under NEC contracts. You firstly have to prove that an event is a compensation event, and then demonstrate the effect of that event on the planned Completion milestone to be able to claim time cost and to get Completion Date moved as well.
Don't forget that at least once every four weeks/month you will be submitting a revised programme. At this point each period you will see the cumulative effect of progress, change in logic, delays etc upon the planned Completion. If planned Completion has moved (and a delay would be practically measured in whole days not hours) and you believe it is down to one or a number of these numerous access delays, then this delay also has to be priced demonstrated within one or a number of these individual compensation event quotations.
There is no such thing as a general disruption claim or prolongation claim under NEC contracts. You firstly have to prove that an event is a compensation event, and then demonstrate the effect of that event on the planned Completion milestone to be able to claim time cost and to get Completion Date moved as well.
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NEC ECS: Can Liquidated Damages be taken from Retention?
Following an error, the only amount due to a Subcontractor is their retained 5%. They are due to pay liquidated damages as they were late against 2 sectional completion dates.
Can the liquidated damages amount be deducted from the retention? So on the Payment Certificate, release 2.5% to them but then deduct the DD's from that?
Can the liquidated damages amount be deducted from the retention? So on the Payment Certificate, release 2.5% to them but then deduct the DD's from that?
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Answered: NEC3 ECC Option A – Weather Risk in Compensation Event Quotations
Any compensation event quotation should include risk allowances for cost and time that have a significant chance of occuring and are at the Contractor's risk. This would include weather that is below the threshold of assessment under clause 60.1 (13).
If the Subcontractor has not included this risk, then there would be no reason why the Contractor could not make a reasonable assessment, although based on the effect on their works. For example, the Subcontractor may have priced for 10 days work which could equate to 12 days with a reasonable assessment of weather risk. The Contractor could, therefore, include 2 days of associated attendant resources, although the assessment of Defined Cost for the Subcontractor would remain as 10 days, unless the weather conditions become a further compensation event.
A general percentage addition, to my mind, is not an adequate assessment of Defined Cost as it is not based on the principles of the Shorter Schedule of Cost Components, where the only 'allowable' percentage additions are people overheads and design overheads. Every other cost component is calculated by an assessment according to what is stated. I see no reason why risk allowances should not be calculated in this way, unless you agree otherwise.
An assessment of weather should be a logical calculation based on a comparison of when work was planned to be undertaken with the revised planned times. The 'difference' in weather conditions would be the subject of the quotation assessment. For instance by comparing the number of days of rain, frost, snow etc and pricing the measures required to account for these, such as protection, water pumping, road mats etc. The percentage may also be a 'catch all' and include a shortened working day (summer to winter). The best way to assess this would be to start with a detailed programme which you can agree to and then calculate the activity differences using the applicable Accepted Programme.
It is possible that a percentage addition is easier for the Contractor, especially as the cost of preparing quotations is not a Defined Cost under NEC3 Option A, although it is a 'crude' way of assessment.
If the Subcontractor has not included this risk, then there would be no reason why the Contractor could not make a reasonable assessment, although based on the effect on their works. For example, the Subcontractor may have priced for 10 days work which could equate to 12 days with a reasonable assessment of weather risk. The Contractor could, therefore, include 2 days of associated attendant resources, although the assessment of Defined Cost for the Subcontractor would remain as 10 days, unless the weather conditions become a further compensation event.
A general percentage addition, to my mind, is not an adequate assessment of Defined Cost as it is not based on the principles of the Shorter Schedule of Cost Components, where the only 'allowable' percentage additions are people overheads and design overheads. Every other cost component is calculated by an assessment according to what is stated. I see no reason why risk allowances should not be calculated in this way, unless you agree otherwise.
An assessment of weather should be a logical calculation based on a comparison of when work was planned to be undertaken with the revised planned times. The 'difference' in weather conditions would be the subject of the quotation assessment. For instance by comparing the number of days of rain, frost, snow etc and pricing the measures required to account for these, such as protection, water pumping, road mats etc. The percentage may also be a 'catch all' and include a shortened working day (summer to winter). The best way to assess this would be to start with a detailed programme which you can agree to and then calculate the activity differences using the applicable Accepted Programme.
It is possible that a percentage addition is easier for the Contractor, especially as the cost of preparing quotations is not a Defined Cost under NEC3 Option A, although it is a 'crude' way of assessment.
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Answered: NEC ECC: Can the Client change your fee percentage?
It sounds a mess!
If the standard form has not been amended by Z clause(s) then the default assessment of compensation events remains as Defined Cost (the change in Defined Cost due to the CE) + Fee.
You should however be mindful that the use of bill rates for assessing CEs is only by agreement and therefore the PM may not agree to the use of rates for omissions (which I assume are CEs reducing the Scope).
If the standard form has not been amended by Z clause(s) then the default assessment of compensation events remains as Defined Cost (the change in Defined Cost due to the CE) + Fee.
You should however be mindful that the use of bill rates for assessing CEs is only by agreement and therefore the PM may not agree to the use of rates for omissions (which I assume are CEs reducing the Scope).
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Answered: NEC3 PSC: X9 - transfer of intellectual property rights
If the contract is a PSC between an Employer and a Consultant, then the Consultant is the Consultant irrespective of whether that organisation's main business is 'contracting' and irrespective of whether it sub-contracts all of the work cover by the Scope.
In the second sentence quoted above, "The Consultant .... obtains from a Subconsultant equivalent rights for the Employer over the material prepared by the Subconsultant." So the Consultant (who may be a 'contractor') is required to ensure that any subconsultancy contract includes a provision that the IP is transferred to the Employer in the main contract.
Clause 24 of the PSC requires acceptance by the Employer of any subcontract and a reason for not accepting is that the terms will not allow the Consultant to Provide the Services, which I would suggest includes the transfer of rights.
In the second sentence quoted above, "The Consultant .... obtains from a Subconsultant equivalent rights for the Employer over the material prepared by the Subconsultant." So the Consultant (who may be a 'contractor') is required to ensure that any subconsultancy contract includes a provision that the IP is transferred to the Employer in the main contract.
Clause 24 of the PSC requires acceptance by the Employer of any subcontract and a reason for not accepting is that the terms will not allow the Consultant to Provide the Services, which I would suggest includes the transfer of rights.
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Answered: NEC ECC: Can a CE introduce a new contractual Sectional Completion?
In short, the answer is 'No' as you would be making changes to the Contract Data which neither the Employer or Project Manager has the contractual authority to agree to.
If you do want to do it, it would be by Supplementary Agreement between the Employer and Contractor of which, part of the agreement, would almost certainly include a rise in the Prices over and above what would be in a compensation event quotation alone for the extra works (and no sectional Completion).
If you do want to do it, it would be by Supplementary Agreement between the Employer and Contractor of which, part of the agreement, would almost certainly include a rise in the Prices over and above what would be in a compensation event quotation alone for the extra works (and no sectional Completion).
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Answered: NEC ECC: Option A Substantiation of rates
For compensation events, the change in the Prices = the change in Defined Costs + Fee - see clause 63.1. So original tendered rates do not apply in calculating this change unless the Project Manager and Contractor agree - see option A clause 63.14.
So unless you agree to use the original tendered rates, the new 'lump sums' are calculated from first principles in accordance with the Shorter Schedule of Cost Components and you should be able to see that substantiation.
So unless you agree to use the original tendered rates, the new 'lump sums' are calculated from first principles in accordance with the Shorter Schedule of Cost Components and you should be able to see that substantiation.
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Answered: NEC4 ECC Option C - Inspection of records of Defined Cost
It is deliberately defined a bit vaguely because what is appropriate will vary from contract to contract : it could be by work type, by subcontract, by cost classification e.g. staff costs or, as you allude to, by time. Regardless, it as the Contractor chooses.
You are correct in that once it has been accepted or assessed, it cannot be revised, except via the disputes mechanism.
You are correct in that once it has been accepted or assessed, it cannot be revised, except via the disputes mechanism.
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Answered: NEC ECC: Representation of compensation event on a programme
It is fine and correct for their "clause 32" revised programme to show the cumulative effect. However, their individual CE quotations should be including a programme to demonstrate the specific effects of that event so that it can be considered/assessed accordingly.
Let's say in the period we have had CE01, CE02 and CE03. Cumulatively they have (say) a three week delay. CE01 should have its own quote issued with its own programme to show say a one week delay to planned Completion. There should then be a separate programme with CE02 quotation to show the extra over effects CE02 will have on the programme that already has CE01 in it (say a further week). Finally a quote and programme should then show the effects CE03 has had over and above that of CE01 and CE02(which is say one more week). Each programme issued with the quotation is NOT a programme issued for acceptance - it is issued to help the quotation by understood and agreed.
This also means that the accepted programme that in this case will show planned Completion moving by three weeks due to the affects of the CE's can be accepted before the CE's are agreed without compromising liability. In this case "planned Completion" will have moved three weeks beyond "Completion Date" (assuming they were the same date before), and then Completion Date can then move as and when the individual CE's are agreed and implemented.
At the end of the day the Contractor should be looking to be prove to you the effects of compensation events. If you don't understand when they are just shown altogether you are unlikely to agree so they should do anything in their control to present these in a way that you do understand and are more likely to agree.
Let's say in the period we have had CE01, CE02 and CE03. Cumulatively they have (say) a three week delay. CE01 should have its own quote issued with its own programme to show say a one week delay to planned Completion. There should then be a separate programme with CE02 quotation to show the extra over effects CE02 will have on the programme that already has CE01 in it (say a further week). Finally a quote and programme should then show the effects CE03 has had over and above that of CE01 and CE02(which is say one more week). Each programme issued with the quotation is NOT a programme issued for acceptance - it is issued to help the quotation by understood and agreed.
This also means that the accepted programme that in this case will show planned Completion moving by three weeks due to the affects of the CE's can be accepted before the CE's are agreed without compromising liability. In this case "planned Completion" will have moved three weeks beyond "Completion Date" (assuming they were the same date before), and then Completion Date can then move as and when the individual CE's are agreed and implemented.
At the end of the day the Contractor should be looking to be prove to you the effects of compensation events. If you don't understand when they are just shown altogether you are unlikely to agree so they should do anything in their control to present these in a way that you do understand and are more likely to agree.
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Answered: NEC ECC: Does the omission of an activity in an Option A contract result in a reduced programme?
No.
If the omitted works are on the critical path then it will bring forward planned Completion, and any "prelim" type savings be included within the CE quotation. However, it does not move Completion Date (as only Acceleration under clause 36 can do that). This will create terminal float which the Contractor then owns. The Employer has got the full cost savings in the CE quotation, but the protection of the Contractor against delay damages is against the original date not the automatically revised date.
If the omitted works are on the critical path then it will bring forward planned Completion, and any "prelim" type savings be included within the CE quotation. However, it does not move Completion Date (as only Acceleration under clause 36 can do that). This will create terminal float which the Contractor then owns. The Employer has got the full cost savings in the CE quotation, but the protection of the Contractor against delay damages is against the original date not the automatically revised date.
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Answered: NEC ECC: Any liability issued defining quantities within an Activity Schedule?
The risk of errors in the activity schedule remain with the Contractor. The activity schedule is not Works Information. Changes in the wording of quantity in the activity schedule on their own are not compensation events.
The contract does not expect the Employer to have written the activity schedule, so the Contractor needs to verify anything written as they will take responsibility. It would be useful if the Employer makes it clear that the Contractor should add/change anything in the activity schedule and break it into their own level of detail.
The contract does not expect the Employer to have written the activity schedule, so the Contractor needs to verify anything written as they will take responsibility. It would be useful if the Employer makes it clear that the Contractor should add/change anything in the activity schedule and break it into their own level of detail.
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Answered: NEC ECC: PM's reply to a programme re-submission
If a programme is rejected (and now under NEC4 it is very clear they have to state the reasons why in enough detail that allows the Contractor to correct the submission) the Contractor submits the revised programme within the period of reply (13.4) and then the PM has to respond to that one with acceptance/non-acceptance within two weeks (31.3).
Those are obviously the maximum timescales and given how important the Accepted Programme should be to both Parties, both sides should try to reduce those timescales as much as possible and once the revised programme is submitted get round the table to check the comments have been addressed so it can be accepted within days not weeks.
Those are obviously the maximum timescales and given how important the Accepted Programme should be to both Parties, both sides should try to reduce those timescales as much as possible and once the revised programme is submitted get round the table to check the comments have been addressed so it can be accepted within days not weeks.
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Answered: NEC ECC: Option A - Activity Schedule: Can quantities mentioned in Works Information (and described as approximate) be subject to a Contractor claim for, in this case, additional works completed over and above those quantities?
The activity schedule is not Works Information (or Scope now under NEC4) so a different description or quantity in the wording of the activity schedule does not itself give rise to a compensation event.
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