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NEC ECC: Actual Defined Cost

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With regard to for example an NEC 3 Option C Target Cost Contract, what happens to  Actual Defined Costs ? :

E.G. The Cost of a Construction Manager working for a Contractor via a  Limited Company /  PSC on a Day Rate of £500 comes through as an Actual Defined Cost evidenced by an Invoice.

Post IR35, if the Construction Manager is forced to go down the IR35 Route and his rate via an Umbrella Company is increased to £750 Per Day to facilitate the same take home pay for the Construction Manager, the £750 will presumably be submitted by the Contractor as Actual Defined Cost

Without an increase to the Target Cost this will be reducing the Contractor's Gain Share?

Or will this have to be managed under a Compensation Event with Target Cost increase?

Also as it is a change to Government Legislation do individual NEC 3 Contracts need to be checked e.g. for Additional Clauses to see which Party bears the Risk of IR35 Legislation ?
related to an answer for: NEC ECC: Effects of IR35 Legislation
asked Nov 29, 2019 in Risk and Insurance by David W (190 points)  

1 Answer

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The only reason why the target Prices might increase that I can think of are if one or a number of secondary options are specified. For example:
X1: Price adjustment for inflation might, albeit minimally, take account of price increases especially if one of the referenced indices is to with people costs.
X2: change in the law, if specified in its pure form without any exclusions or limits on its application might well allow the Contractor to link the change in law to increased costs.
answered Nov 29, 2019 by Jon Broome Panel Member (64,230 points)  
selected Dec 2, 2019 by David W