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NEC3 Option A - CE omission for activity already completed

0 votes
86 views
Hello - I’m working for a design and build consultancy under an Option A contract. One for the activities was to pay all planning and consenting fees relating to getting planning permission for the project. We priced all possible fees as individual activities in the activity schedule. For one of these fee activities, there was no charge from the relevant organisation so the client has asked us to omit this activity through a compensation event (change of scope).

As this activity has already been completed and priced at risk (could have been much higher than our AS cost) should the amount be due to us? In addition, if we were to omit this through a CE, would the reduction be what we know the fee would be now (£0) minus the fee in the AS? So our lump sum fee would not reduce either way? Thanks.
asked Aug 15 in Compensation Events by Arty Fufkin (150 points)  
edited Aug 15 by Elisa Afonso

2 Answers

+2 votes
The PM can change the Works Information. The Activity Schedule is not of the WI and therefore the PM cannot change the AS.

if the WI is changed to exclude the requirement to obtain the permission then this would be a CE and assessed, in simple terms, as Defined Cost + fee due to the CE less Defined Cost + Fee had the CE not occurred. it appears there was no Defined Cost for the permission and therefore there is no change in Defined Cost and the CE would be £0. it also appears from your question that the permission may already have been obtained in which case the CE to not obtain cannot be complied with and the PM will need to reconsider!!
answered Aug 16 by dave bates Panel Members (13,850 points)  
Thanks. The WI does not specify the item to be removed but the AS does. So the PM will need to quote the WI not the AS in the CE. The WI lumps the specific task in a wider activity that has been completed.
+1 vote
It would be worth clarifying this with the PM to explain that the work has already been completed. However in terms of assessing the cost of the CE - because you know that the cost is zero (even if you hadn't already completed the work) then yes your quotation for the CE should amount to zero.

It doesn't matter what amount is allocated to the activity on the activity schedule, the CE still is assessed in accordance with Clause 63.1 i.e. the effect on your defined cost. The activity schedule should not be used to assess compensation events.

Thereafter you would have to submit a revised activity schedule to the PM for acceptance and redistribute the values accordingly so that you still get paid the total of the prices.
answered Aug 16 by philjbrady (1,190 points)