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NEC ECC: Payment under Option C where defined cost is greater than the ToTP

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On an ECC Option C contract when assessing the amount due and making payments to a Contractor who is forecasting that at Completion their defined cost will be significantly more than the total of the prices, should payments to the Contractor be capped/limited to the total of the prices or should payments of defined cost continue, exceeding the total of the prices, until completion at which point the Contractor's share is calculated and any overpayment is then repaid by the Contractor?

In my experience it seems to be commonly understood that payments stop once defined cost reaches the ToTP although I can't see that the contract explicitly says that.
asked Sep 3 in Payment by philjbrady (190 points)  

1 Answer

+2 votes
I would agree it would be logical that it should be taken into account but that is NOT what the contract says, and I think you mean payments take into account the "pain" share rather than just stop. Contract states that you still pay the Contractor the money and the Client/Employer recovers their share back at the end in the final pain/gain calculation. That does not seem logical to me and I did expect that to be changed in NEC4 but it hasn't.

It is fairly common for a Client/Employer to introduce a Z clause that says once the Prices have been reached then any Client share forecast will be withheld from future payments until the final calculation can be made.  I can fully understand why a Client would include that Z clause, and if I was a Contractor I would not object that was unfair.

For some Clients it may be difficult to recover that some back from the Contractor at that stage so sensible to have withheld it in the first place - but I emphasise it is only the Clients forecast share they are withholding - not all payment.
answered Sep 3 by Glenn Hide (66,350 points)