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NEC ECS: Quotation Submitted for Fencing Works

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I am currently working on a substation using NEC3 Engineering and Construction Subcontract April 2013 - Option A which is a lump sum contract.

We have submitted a quotation to undertake some fencing works to the Contractor.

The Contractor has responded by stating that  this CEQ will be assessed using LPM allocation sheets. In addition he  introduced a pain/gain share mechanism and this has been set at 10%.

My query?

Is the PM correct in his decision and proposal?

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