Is a PQS firm a Subcontractor or people

NEC3 and NEC4 Contracts Payment
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ECC Option C.

The Contractor has engaged a PQS firm to compile a Bill of Quantities for works arising from a change to the WI.

The firm is not an associated company.

Explanatory note for cl 11.2(17) offers guidance in relation to a designer being a Subcontractor.

For the purpose of assessing Defined Cost is the PQS firm a Subcontractor or people?

The PQS firms offices if necessary will be added to the Working Areas.

It is not known yet if the PQS firm will be paid for according to the time worked or whether it will be on a lump sum price.

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This is where, in my opinion, the authors of the NEC added in a bit of ambiguity into the third edition and I have had a number of contractual discussions over this. So before I go on, there is no definitive answer to this.

  1. They could be a Subcontractor if they are providing “a service necessary to Provide the Works” (second bullet of the definition of a Subcontractor under clause 11.2 (17). Note the word “necessary”, which is quite a strong word, as opposed to ‘desirable’ or just not going a descriptive adjective.

  2. However, if they are working on a time charge basis, then they could also be a person “not directly employed by the Contractor but are paid for by him according to the time worked while within the Working Areas” as per People 14 in the full Schedule of Cost Components. Contractors generally prefer this option as they get the percentage for Working Area overheads applied on top of this and then the subcontract fee percentage as well.

To decide which we need to look at the definition of Defined Cost in clause 11.2 (23) which says "Defined Cost is

  • the amount of payments due to Subcontractors for work which is subcontracted " and then some sub-bullet points
    "and
  • the cost of components in the Schedule of Cost Components for other work".

So there is no doubt that the Contractor is subcontracting the services. The key question is whether the party is a Subcontractor and to decide that the work is “necessary” to Provide the Works and if it is then they they are a Subcontractor. If it is not “necessary” then they MAY become a People cost under 14 of the SCC.

I say ‘MAY’ because they have to be paid for on a time basis to satisfy People 14. A fixed fee basis sways the argument back towards them being a Subcontractor.