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NEC ECC: Option A Lump Sum - Cost Transparency

+2 votes
We have a contract that has both elements: Option A Lump Sum and Target Cost.
During a final account reconciliation of the contract the client has requested our costs for a reconciliation for the Lump Sum element of the contract.
As this is Contractors Risk are we obliged to offer this back up?
asked Apr 12 in NEC3 General by Darren  

1 Answer

+2 votes
This old chestnut where you have a cost-based contract running alongside a priced-based one !

With the best will in the world, the Contractor naturally wants 'grey' costs to be allocated to cost-based one which are paid partly by the Employer (in accordance with the pain / gain shares) and therefore the savings on the price-based one are profit.


With the best will in the world, the Employer naturally wants 'grey' costs to be allocated to price-based one which fall entirely on the Contractor and to get more gain / less pain from the cost-based one.

But that does not answer your question. The answer is 'No' you are not obliged to do so under the Price-based contract / option A. However, there are provisions within the target cost contract which allow for this sort of thing where the PM can instruct you to demonstrate and it is up to the Contractor to demonstrate their costs, not for the PM to disprove. Remember, the test is 'balance of probability' as it is a civil contract, not 'proof beyond all reasonable doubt' as the Contractor is not a criminal !
answered Apr 13 by Jon Broome (25,060 points)