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NEC PSC Time Charge - Removal of Scope item not yet started

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As the Employer, I need to remove a scope item under PSC option A contract as it is no longer required. The work on this item has not started. The guidance notes imply that whilst the scope can be omitted, this does not automatically lead to the associated cost being deleted. The guidance notes then go on to say that the forecast Time Charge ought to be used to assess the value which the consultant is entitled to retain, and the value which can be taken out of their contract through a negative CE; however, this Time Charge assessment is not very well explained. What costs is the consultant entitled to if the work on this scope item has not commenced and how is this value assessed. I am also struggling with the definition of Time Charge, as again, this does not appear to be fully explained in the notes.
asked Jul 31 in Compensation Events by Kingfellow (230 points)  

1 Answer

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Best answer
It is a feature of NEC contracts that the starting point for the evaluation of compensation events is cost rather than rates and prices, even where the contract is one based on rates and prices.

So, when you remove work (whether under the PSC or the ECC) you value that as a compensation event, albeit a negative one. The valuation is based on the Time Charge principle of hours incurred (or here would have been incurred) at the relevant rates. If the Consultant had included more or less allowance against this items in the Activity Schedule is irrelevant, it is the Time Charge which is deducted, and under 63.12, removed from the Prices.

The question then is how much time should properly be spent, at what rates, to deliver the service now being omitted. Once calculated that is the value of the negative compensation event and the reduction in the total of the prices. If a value other than the amount in the Activity Schedule is generated you will end up with a balancing payment, one way or the other, once the services have been fully delivered, as interim payments will be based on completed Activity Schedule item values.
answered Aug 8 by Rob Horne Panel Member (19,700 points)  
selected Aug 8 by Neil Earnshaw