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NEC PSC: What is the risk to Consultants under option E for defects i.e. can costs be disallowed?

+1 vote
NEC3: Under option A, having to do work twice or correct a defect would be a Consultant risk. Under option C, presumably this would be a shared risk under the pain gain mechanism.

My specific question however is how this is dealt with under option E. Consultant is under a cost reimbursable basis, and there are no "disallowed cost provisions" under the PSC or not at least under NEC3 (they have been now introduced along with SCC in NEC4).

If the Consultant has to do a piece of design twice for a reason that is not a compensation event, will they get paid twice for doing it? Very specifically, what contract clause do you believe allows the Employer NOT to pay for the second design?
asked Mar 6 in Payment by anonymous (2,400 points)  

1 Answer

+2 votes
Best answer
In NEC3 PSC the concept of Time Charge is used instead of Defined Cost, Fee and Disallowed Cost. Time Charge is a defined term at clause 11.2(13), the part of this relevant to this discussion is "... total staff time ... properly spent on work in this contract".

Use of the term "properly spent" introduces some subjectivity. Using your example of having to do a piece of design twice, the question to ask is why was it necessary to do it twice, i.e. who's fault was it? The Consultant's obligation at clause 21.2 " to use the skill and care normally used by professionals providing services similar to the services". So I'd suggest that a failure to supervise staff properly, or to follow QA procedures to check calculations, or to check that the design complied with the required standards etc would all fall below the standard required and not be paid. A member of staff taking twice as long to do something as is reasonable would also fall below the standard required. This doesn't mean that the Employer does pay for some level of inefficiency, however they are protected from incompetence and unprofessional behaviour.

Interpreting the meaning of these clauses is by no means simple and straightforward, and will vary from contract to contract. The Parties should try to apply some common sense to resolve the matter. If the design had to be done twice , and the reason wasn't a compensation event, what was the real reason behind this and how reasonable was it? What was the scale of re-designed element in the context of the whole design? The right answer will hinge on the specific facts and circumstances.
answered Mar 8 by Neil Earnshaw (20,440 points)  
selected Apr 4 by Neil Earnshaw