Working under an Option B Subcontract and the main Contractor has issued an instruction to carry out works on an ‘Emerging Cost plus fee’ basis. The main Contractor has queried the level of productivity being achieved, which has been identified as being attributed to various types of disruption events. If these have not been notified within the given timescales under clause 61.3 in the contract are these costs at risk of not being recoverable? Or as this is effectively Reimbursable is the Subcontractor simply due costs incurred plus fee?
The level of substantiation required to be provided by the Subcontractor will also invariably be impacted by the requirement to demonstrate ‘value for money’ should this be the case.
Firstly, I am not sure what ‘emerging cost + Fee’ is. I assume it means at actual Defined Cost incurred + Fee, but I would check to ensure.
As it is the Contractor who should notify the compensation event in this case, the time bar for the Subcontractor to notify under clause 61.3 does not apply, so the Subcontractor can carry on incurring additional Defined Cost plus Fee before notifying as a compensation event. However, under the rules for assessing compensation events, the date which divides forecasts from records is the date of the instruction - see clause 63.1. So it should be assessed using a forecast, even though (a lot of) the work will have been done by the it is notified as a compensation event.
My worry for you commercially is that the Contractor will only allow you a poor assessment ignoring the disruption events. In response :
- some of these disruption events might be additional compensation events;
- if not, you are entitled risk allowances in your forecast which would wholly or partly cover these disruption events - see clause 63.6;
- regardless, assessment is based upon you acting competently and promptly etc under clause 63.7. The protects both parties : the contracting party from being screwed down and the employing party from taken for a ride.