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NEC ECC: Under option A - Pricing the SC element of a Quotation

+1 vote
I have received a quote for additional works instructed under a CE from the main Contractor.  The quote includes for works to be carried out by a sub-contractor.  Upon reviewing the SC quote to the MC I noticed they had allowed 15% for risk.  
My opinion is that under option A the SC quote should be defined cost + the appropriate fees and that I as the employer should not be paying the SC risk.

The MC has also made an allowance for risk which I happy to agree.

Is this the correct way to assess this quote?
asked May 26 in NEC3 Compensation Events by chris.hulse (130 points)  

1 Answer

+1 vote
If there is forecast, then there is risk and under the ECC and ECSC, the (Sub)contractor is allowed to include for time and cost risk allowances - see clause 63.6 of the ECC.

The question is whether the 15% risk allowance is reasonable. I don't like standard percentages. I prefer :
- a discussion about the nature of the works being undertaken, critical dependencies etc. and, without over-sciencifying it as the risk management profession tend to do :
- identify the most likely risks (say top 5),
- what you (plural : Employer, Contractor, Subcontractor) can and will do to mitigate,
- price up the actions C / SubC will do as Defined Cost, and
- then sum of guess'estimates of residual probability x impact = £risk allowance.
answered May 26 by Jon Broome (25,100 points)