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NEC ECS: Option A (Subcontract) - Main Contractor refusing to pay the Labour Element of shifts as number of activuty/shift was reduced in number from 5 to 3 Activity shifts.

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Subcontractor was issued with an order to deliver recycling works. The labour element of recycling surfacing works was let on activity schedule based on 5 shifts but subcontractor delivered works in 3 shifts.

The material element of work were lump sum price as well but that was paid in full.

The dispute: the subcontract is paid by the main contactor on only the 3 activity shifts delivered. The subcontractor is challenging this decision to be paid for the full 5 activity shifts and threatening to proceed to Adjudication.

The Main Contractor believes  the subcontractor has not lost in any way at all .

Under NEC3, Can the Main Contractor refuse full payment on the grounds that 3 shifts were only delivered? Could you please advise.
asked Jan 12 in Payment by albiebaah (120 points)  

2 Answers

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Main option A under the NEC forms is based on a 'lump sum' arrangement with an Activity Schedule which is used to determine the amount that is paid (Price for Work Done to Date - PWDD).

The PWDD is the total of the lump sum prices for each of the activities in the Activity Schedule which are completed, that is are without Defects which would either delay or be covered up by immediately following work.  

In direct answer to your question, it depends on how the Activity Schedule is structured as to what would actually be paid.  If the 'recycling surfacing works' have an activity for each shift then you could argue that only 3 out of 5 of the activities have actually been completed.  Conversely, if an activity describes a specific item of work, then the time taken to complete that work would not be relevant, if the description of that activity means it is complete.

As the contract form is based upon a 'lump sum' arrangement, then any risks which are carried by the Subcontractor should be priced within the activities.

Note that Option A is not 're-measurable' and I am sure the Contractor would not be paying for an additional 2 shifts if the activity was based on 3 shifts and 5 shifts were actually delivered.
answered Jan 14 by Andrew W-I Panel Member (27,560 points)  
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Flip it round the other way - had it taken 7 shifts, would the Contractor have paid for an extra two shifts for contract works? The answer is obviously no, which is why they cant expect only to pay for three shifts.

Even if this had been a compensation event - it is still based on a reasonable forecast not actual, so the actuals would never come into play anyway (clause 63.1)
answered Jan 14 by Glenn Hide Panel Member (87,180 points)