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NEC ECC: Amending a rate in BOQ due to inconsistency between BOQ and Works Information

0 votes
An interesting question for some of the advanced users of NEC3.

The contract is NEC3 Option B

It is common cause between the PM and contractor that a compensation event has arisen due to the following scenario.  The difficulty I'm facing is with the quantification thereof.

The scenario is as follows:

The BOQ item is for the procurement, installation and materials to install 80mm 25Mpa herringbone paving.  The Works Information requires 80mm BUT 40 Mpa paving.

The BOQ provided for  single rate for the various materials, i.e. paving; sand; as well as the installation being the labour component to install.

In getting to the rate in the BOQ, the contractor did not price for the paving as he already had excess stock from a previous project and he underpriced labour component by mistake.  Therefore it is impossible to work out how the rate is compiled.

It is clear that different paving is required however the rest of the process is identical.

How now does the contractor price for the 80mm 40Mpa paving?  Because this is the only item that has changed, does he add the actual cost of the paving onto his BOQ rate or is the entire rate relooked at based on the SSCC mechanisms?

Would he need to explain to the PM what his BOQ rate comprised of in that he never included the paving in this rate but now that a different paving is required he gets to add it on?

I look forward to the responses.
asked Jun 30 in Compensation Events by cameronstaude (740 points)  

2 Answers

0 votes
The principle of assessing a compensation event is to arrive at the additional cost (Defined Cost) + Fee that the Contractor incurs due to the change itself.

I would therefore suggest that the approach should be to examine the change in cost due to the difference in paving types. I don’t know but suspect excavating for, preparing for, laying and sealing the paving will be unchanged and therefore no additional cost. There will be a price differential in the “blocks” themselves and if the Contractor can demonstrate that 25Mpa blocks would not have cost anything then the change in cost is the price + fee of the 40 Mpa blocks. However the Contractor would be benefiting from retaining the 25Mpa blocks and so consideration should be made in the rate adjustment or the blocks become the property of the Employer.
answered Jun 30 by dave bates Panel Member (15,230 points)  
Thanks Dave.  yes the preparation, laying and sealing is identical for the two different types of paving.  

the 25Mpa blocks were never priced into the BOQ rate as this was surplus stock that the contractor had and so will not be retaining a benefit.

In this case, would you be in agreement that the contractor needs to demonstrate that he never priced for the 25 Mpa and hence it would simply be adding the cost of the 40Mpa to the existing rate?
0 votes
Cameron - sorry but I don't think it is as simple as proving that they had not priced them. The BofQ rates are not used to assess compensation events. What would the difference be if they forgot to price them, or did not need to price them? Certainly if they forgot to price them, they still need to price the new less what the old WOULD have cost them, so probably no real difference here. That otherwise would not be fair on the Client. If you already had the stock from previous I am not sure why you still wouldn't price for it within the tender as presumably at some point you paid for it and need to get recovery for that cost.

It would be an assessment at open market rates as to what the 25Mpa would have cost compared to what the 40Ppa will now cost and the difference is the value (as well as considering time).  Any cost you had already spent on the 25Mpa would be taken into account i.e. not form part of the saving.

I think this is a rare scenario that would happen (all be it clearly it has here). All you can do is put forward your best argument as to what the 25Mpa would have been considerable less and see if you can get them to see that it is true rather than fabricated to increase the value of the CE. I am guessing also that the cost of the material is the lesser amount, compared to the cost and time of resources and equipment to install it so only a proportion of the quote anyway.
answered Jul 1 by Glenn Hide Panel Member (87,260 points)