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NEC ECC: Are non-job specific items disallowable

0 votes
Currently working under an Option C

Are non job specific items allowable or disallowable costs?

Items such as purchasing NEC Contracts, Guidance Notes and the like

Clients Argument - Disallowable costs, not job specific, experienced contractor should be aware of NEC when taking up contract

Contractors Argument - Not disallowable under NEC, if so where, required to administer the NEC Option C Contract,
asked Apr 23, 2018 in Payment by Hrunner (310 points)  

2 Answers

+3 votes
Best answer
First, I absolutely agree it is not disallowable, it falls under no heading of disallowable cost. The problem is, and here I am going to disagree with Andrew, these items are clearly overhead items and therefore part of the Fee, they do not form part of Defined Cost so don't need to be disallowed.

The only two possible arguments you could make, and I agree with Neil you have to get back to the SCC, are that they are part of the working area overhead (but again if you are using the percentage you wont recover). Alternatively, as Neil suggests, you try and force it into Equipment. The trouble with 25 is obviously that the Contract, Guidance Notes etc are not consumed they are entirely reusable (subject to becoming obsolete). Equally, one could look mat the definition of Equipment which is that it is something the contractor provides, in order to Provide the Works. I don't think the guidance notes etc are provided by the contractor (unless they are made available on site for everyone to use) and neither are they needed to provide the works.

Whatever way you look at this I am afraid my view is it is overhead and therefore in the fee.
answered Apr 25, 2018 by Rob Horne Panel Member (19,700 points)  
selected May 10, 2018 by Glenn Hide
+1 vote
If they are used to Provide the Works they I don't see why they can't be a valid Defined Cost where the documentation is specific to the project, that is Main Option C, rather than the entire suite of documents.

Although the Contractor should have a level of understanding of NEC contracts, even an experienced and knowledgeable NEC practitioner needs to refer to contract documentation from time to time.
answered Apr 24, 2018 by Andrew W-I Panel Member (24,000 points)  
In determining if an item of cost is included in Defined Cost or not you need to refer to the Schedule of Cost Components. The right question to ask is under which item in the SoCC do we think covers the purchase of contracts? The only one I think that comes close is Equipment and possibly item 25 - payments for the purchase of Equipment which is consumed. I'd be interested to know if you both agree or not? I think it's a little tenuous and maybe hinges on the length of the contract?
Neil, I would say that it certainly could be classed as Equipment, taking account of the definition of Providing the Works, which includes ' ... actions which the contract requires', as this includes contract administration.  I would have thought that the Contractor would have a signed copy of the contract itself, but Guidance Notes would certainly be a useful aid.  How far you extend this I don't know, but on a larger project a couple of hundred quid shouldn't be a real issue, unless you are establishing clear principles on what is included as Defined Cost.