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NEC PSC: Compensation events only for budget purposes under option E?

0 votes
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can you please explain the comment "CEs are there only for budgeting and monitoring purposes" which i have seen in another answer on the platform. Are you suggesting that the Consultant doesn't need to raise a CE is the Scope changes?


PSC Option E, the Consultant has submitted hundreds of CE's to try to justify the additional time spent on Services over and above the forecast.
asked Jul 1, 2019 in Compensation Events by NM1976 (130 points)  
In my view it is good practice to notify CEs just so that both the Client and Consultant can keep track of changes during the lifetime of a project.  I'm the Consultant's project lead on an Option E that's been going on for over 4 years now and there has been considerable change which can be tracked back in future if/when the Client's auditors ask why the cost has increased several-fold.

1 Answer

+5 votes
What the other question/answer would have been pointing out is that under option E, as the Consultant is paid actual defined cost anyway, that the compensation event quotations are only really to give the Employer/Client an idea where their cost liability is going. What ever the quotation amount of the CE is, is the Consultant will end up being paid the cost they can prove they have incurred. This might end up being more or less than the quotation. The only financial risk to the Consultant will be falling foul of any cost that would be considered "dis-allowable" under the disallowed cost definition.

What the CE quotation does define however is any time entitlement in moving the Completion Date and or any Sectional Completion (or Key Dates). This is agreed as part of the quotation and the Consultant can still be liable for delay damages if they miss the Completion Date or Sectional Completion Date so important that this element is considered in each quotation.
answered Jul 1, 2019 by Glenn Hide Panel Member (82,630 points)  
Just a bit of minor knit-picking of Glenn's otherwise spot-on response and a foible of mine : wrt  Defined Cost, "prove"ing is too strong a word.

In contract law, as this is civil law, the Consultant (or Contractor under ECC) has to demonstrate it "on the balance of probability" that it is Defined Cost.

For a Defined Cost to become a Disallowed Cost, it has to be "- not justified by the Consultant's accounts and records".
Thanks Jon, I think you would still class that as a burden of 'proof' and that burden sits with the Consultant. Even on a balance of probabilities, the cost must be 'proven' or demonstrated. I see very little difference (if any) between the two terms.