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NEC ECC: Project Manager instructs a change to the Works Information

+1 vote
On an asset refurbishment contract under the ECC using Option A, the Project Manager instructs a change to the Works Information. The change is for some additional works. These works are likely to be carried out in January and the Contractor has allowed for night-time working. The Contractor submits a quotation for £27,000 which is inclusive of an allowance for anticipated poor weather, night-time working, together with his Fee. The Project Manager accepts the quotation.
In fact the work is carried out in March, during the day and also during a spell of fine weather. From records the approximate Defined Cost plus Fee for this work was approximately £20,000.
a. How much is the Contractor paid for the work and what are the relevant clauses covering this?
b. How much would the Contractor be paid for this work if it were an Option D contract instead?
c. If the additional works are carried out before the compensation event is agreed, is the Contractor paid a reasonable sum in the next assessment?
During the construction of these additional works and before Completion, the Supervisor discovered a Defect and notified this to the Contractor who corrected it immediately.
d. Is the correcting of the Defect a recoverable cost in Option A?
e. If the Defect was not corrected by an assessment date before Completion, how much would the Contractor be paid for the work?
asked Jul 18 in NEC3 General by anonymous  

2 Answers

+2 votes
a. If the PM has accepted the quotation of £27K, the CE has been implemented, so the Contractor is paid £27K - Clause 65.2 is the relevant clause.

b. The situation is the same under all main options A to E - the assessment of the CE is based on change in defined cost and is not changed if the forecast turns out to have been incorrect.

c. Under Clause 63.1, the fact that the CE has not been 'agreed' is irrelevant - the assessment is based on actual Defined Cost of work carried out before the 'dividing date' and the forecast Defined Cost of work to be carried out after that date.  In this case the dividing date is the date of the PM's instruction to change the WI - this is the same across all main options.

d. No.

e. Not sure what you mean here.

Note that if you don't like the answer to the first part of the question, ask yourself how you would have felt if the CE had been implemented at a value of £20K and the actual cost had turned out to be £27K.
answered Jul 18 by dave meller (840 points)  
+1 vote
A. See Under option A, the Contractor is paid the change in the Prices in accordance with the contract i.e. £27,000. See clause 63 generally, but in particular clause 63.1 for how it is assessed. This assumes that the switch date means that it is a forecast. See 65.2 which expressly outlaws forecasts being re-opened.

B. Under an option D target cost contract, the target Prices are adjusted in exactly the same way using the same clauses. However, the Contractor is paid Defined Cost plus Fee i.e. £20,000 so the £7,000 saving is split in accordance with the pain / gain formula.

C. See Dave Meller's answer below (I've just become aware of this as I was typing).

D. No (as Dave Meller's answer)

E. See option A clause 11.2 (27) whereby to be considered a completed activity for payment purposes, an activity has to be completed without Defects which delay or are covered by immediately following work.
answered Jul 18 by Jon Broome (23,720 points)