Does the NEC (option C) have any mechanism in place to allow a client to make an accurate assessment of costs that have been incurred against specific CEs?
For example, assume a CE is priced post-event (so is therefore to be based on actual cost incurred). Let’s assume in the Contractor’s assessment, he (for instance) states a staff member worked 300 hours on a particular item. However, the way the contractor’s records are maintained, it is impossible to extract and therefore verify that the 300 hours is accurate as the staff member’s hours total 1000 to date as a whole and have not been broken down.
Is there anything in the NEC that imposes on the Contractor to split his costs and allocate them to work items (and therefore to any CEs) so the client can have peace of mind that the Contractor is not over-claiming?
If not, how is the Client to work out if the hours applied for against a CE are accurate and not over-exaggerated?
Just because a CE is priced post event DOES NOT mean that it therefore SHOULD be based upon actual cost incurred. Clause 63.1 states that a CE will be assessed using actual Defined Cost of work already done, forecast Defined Cost of work not yet done plus the fee. It then goes on to verify the switch point between actual and forecast Defined Cost is when the PM gave the original instruction that led to the compensation event, or for other cases when the CE is notified. Therefore CE’s should primarily be based upon forecast cost.
The Target should be increased by the forecast cost, and then the Contractor will be paid the actuals. Any difference under option C will fall out in the gainshare calculation. In this case it should help both Parties that you do not have to go into infinite detail as to what the Contractor actually spent specifically on that individual compensation event.
On main Option C the Contractor is required to keep records. Clause (52.2) has a basic list but the Works Information may have requirements for other records to be kept by the Contractor. It is worth checking the Works Information for any additional requirements for the Contractor to keep records.
In regard to the compensation event in the absence of records to verify the exact hours the PM will need to assess the quotation and consider whether the hours included within the quotation for the compensation event seem reasonable or not.
If the PM believes that the hours claimed are not reasonable and can give specific reasons then you can instruct the Contractor to resubmit a quotation (Clause 62.4). In this instance the reason being that you require substantiation/explanation of the hours expended. Alternatively you could decide to make a PMs assessment (64.1)
In the absence of substantiation and records from the Contractor it is a judgement call by the PM on the appropriateness of the hours included in the quotation.