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NEC3 ECC : Should the Project Completion Bonus be paid as part of Defined Cost

0 votes
55 views
We are the Contractor using NEC3 ECC (Option C) and the project was completed on Oct 2017 and the defect date will become expired in Nov 2018.

According to our company directive, a project completion bonus will be calculated and be paid to the project staff based on some criteria and formula laid down in the said directive. We reckon that such project completion bonus can be reimbursed as part of Defeined Cost under SOCC Item 12 (a) bonuses and incentives.  However, the Project Manager's Delegate considered that this project completion bonus should not be reimbursed under the Defined Cost and should be included in Fee.

Please advise (i) such project completion bonus should be paid under the Defined Cost or should it be included in the Fee; (ii) if the project completion bonus is included in the Fee, what is the contract clause(s) should be relied on?
asked Oct 10 in SOCC SSOCC by acheung (250 points)  

2 Answers

+1 vote
The opening paragraph of the Schedule of Cost Components finishes with the sentence "An amount is included ... only if it is incurred to Provide the Works." So any bonus has to be due to the performance on the specific contract, not of the overall company.

So from what you say a bonus under People 12 (a) would fall within this category. However, you do say "according to our company directive" which is unusual phraseology. If the bonus is part of the employees terms and conditions, then I would not be in doubt that this should be phrased, but not sure what status a 'company directive' has !
answered Oct 10 by Jon Broome (49,260 points)  
0 votes
From what you have said it looks like the bonus payments can be treated as Defined Cost under the SCC People item 12 (a).   Provided also that the cost was incurred in order to Provide the Works, that is the bonus is specifically related to this project.

It looks like the PM's delegate is questioning this because it was not apparent earlier and will, therefore, impact upon cost reporting for the project.  Ideally all such costs would be considered and agreed in advance to allow payments to be made appropriately and transparently.  However, unless the cost can be decided by the PM to be Disallowed Cost, then it should be treated as Defined Cost.
answered Oct 10 by Andrew WI (13,110 points)