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NEC ECC: Option B rates or Defined Cost for CE with a difference

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We are currently on a Framework Agreement using an amended ECCC Op B and a schedule of cost components for People, Equipment etc to value change. At Tender stage it was agreed that for CE's we would price the works using -100% fee percentages on the applied people & equipment rates in the schedule effectively only being paid for materials. A situation has arisen whereby a bill item for removing a stockpile of material has increased in quantity from what was in the BoQ and the PM has requested a CE under Cl 60.4 (rate in BoQ for item multiplied by final total...). We have requested that this be valued using the existing BoQ rate x increased quantity but the PM is stating that he doesn't agree and wants to use Defined cost plus fee i.e. as all work done is by people & equipment, CE is zero after negative fee percentages applied.

We are disputing this but have been pointed to the fact that rates are only used if both PM & Contractor agree to do so. As the Contractor does not recover his actual cost using defined cost plus fee we think this goes against the fair and reasonable mantra of the NEC but again this could be a function of the Contract amendments (use of negative fee percentages). Thoughts?
asked Jul 2 in NEC3 Compensation Events by Ozi (150 points)  

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It is worth noting that, in order for there to be a compensation event, all three bullet points in 60.4 need to apply.  I would ask whether the difference in quantity has caused the defined cost per unit of quantity to change (bullet point 2).  If this is not the case, there is no CE.
answered Jul 9 by dave meller (1,690 points)  
selected Jul 12 by Ozi
+1 vote
Ozi, I may be missing the point here, the value of the CE and therefore the change in rate will be £0 thus the original rate will still apply.
answered Jul 6 by dave bates (10,500 points)  
Dave, due to Cl 60.4 the Client is saying that the additional quantity needs to be re-rated via the CE process. Our argument is that we wish to defer to the original bill rate this item x the increased quantity to measure it. They wish to use Defined Cost plus fee. However, as we have negative 100% fee percentages on people & equipment rates in our Contract, valuing the change on Defined Cost plus fee will effectively be £0. I want to know which is the correct method. It difficult as one method (defined cost plus fee) clearly leaves the Contractor in a worse position that if the Work has not been carried out and goes against the fair and reasonable mantra of the NEC.
Unfortunately the principle of 'fair and reasonable' does not apply and you have to do what it says in the contract.  As you rightly state, the BoQ rates could be used, where agreed by both the PM and Contractor, otherwise Defined Cost principles would apply. This, unfortunately means that both People and Equipment are valued at £0 (due to the applicable percentages adjustment), although this is what has been entered into the Contract Data so is used to assess CE's.

All you can do is appeal to the PM's sense of reasonableness and try to agree the use of BoQ rates, which are probably most fair valuation, although the PM is within their right to not agree to this.
is the compensation event not intended to assess the change in rate necessary due to the increased quantity. The change in rate is £0 and therefore the original rate applies to the whole quantity.
If this is a specific re-measure on the quantity then dave bates is correct in that the BoQ rate would apply with no change of rate value added.