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NEC ECS: Can’t Agree a Target Cost under option C

+1 vote
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We have recently submitted a target price for additional works, which are identified in our scope, subject to agreeing the target price. We have used the same rates as detailed in the activity schedule. The main contractor has openly admitted he has under priced the section of works and is reluctant to issue a CE. We have been issued a site instruction to commence the work, target price to be agreed.?

Should we act on the instruction? Or wait until we have agreed the TP?
asked Jul 4 in NEC3 and NEC4 Contracts by Concrete King (130 points)  

1 Answer

+1 vote
Clause 27.3 of the NEC3 ECS requires the Subcontractor to obey an instruction which is in accordance with the subcontract and is given to him by the Contractor. The instruction you received is presumably a change to the Subcontract Works Information which is permitted under clause 14.3 and the trigger for the compensation event under clause 60.1(1).

You therefore have to carry out the additional work before the changes to the Prices and effect on Subcontract Completion Date are assessed. To fail to do so will put you in breach of contract and potentially make you liable for the cost of any associated delay e.g. delay damages.

This said, what the Contractor has allowed in his target is immaterial to you, you make your assessment based on Defined Cost plus Fee. If the Contractor loses out then it would erode any gain share or send him further into pain share.

I suggest you force the compensation event through the process - firstly notify the Contractor that the instruction is a compensation event under clause 60.1(1). They can't deny this which will lead you into the quotation part of the process. Ensure you make use of the reminders provided for at clauses 61.4, 62.6 and 64.4 if the Contractor fails to respond in time. By doing this you can ensure the notification, quotation or assessment are treated as accepted (deemed acceptance).

If the compensation event becomes implemented with a cost and time quotation that you don't like then your only recourse if to adjudication.

All of the above is equally true for the NEC4 ECS.
answered Jul 4 by Neil Earnshaw (18,060 points)