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Paying of Subcontractors under NEC3 Option B Bill of Quantities

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Under NEC3 Option B Bill of Quantities, I have a rate of 5,000 for a 4 week period for a team of labour only subcontractors to work 5 days a week for the period. If they work the full period I charge the 5,000 as per the BOQ. However, if they are only required for 1 week of the period I am charging the Employer my defined cost plus fee. The Employer has rejected this stating they will only pay the monthly rate divided by 4 (pro rata basis) but in my subcontract with my subcontractor we have already a set of agreed rates which include daily, weekly and monthly rates where a weekly rate is slight higher than the monthly rate divided by 4 due to management costs etc. Under the Contract what is the correct way to charge the Employer in this senario when we don't have a rate which defines the amount of work carried out?
asked May 8, 2013 in NEC3 and NEC4 Contracts by Tom Scott (290 points)  
edited Oct 9, 2013 by Chris Corr

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In simple terms you are stuck with the bill of quantities rate unless it is to be assessed as a compensation event, in which case you get to assess it in terms of defined cost. The test as to whether it is a compensation event is answered in clause 60.4, which is specific to option B. In summary, it says that it is a compensation event if the line item changes by more than 0.5% of the contract value, I.e. £5000 for a £1million contract (pro rata for larger projects).

The intention the contract is that for small changes you use the bill rates, for bigger changes you assess as defined cost, so that neither party significantly benefits from either an over or under priced bill item.

It sounds in this case like you are stuck with the B of Q rates unless it is a very low value contract.
answered May 8, 2013 by Glenn Hide Panel Members (74,800 points)  
selected May 8, 2013 by Chris Corr
Thanks Glenn, so when you say we are stuck with the B of Q rates, do you mean I can charge the £5k a month regardless of the amount of work carried out as there is no rate for any other qty of work or is the Employer entitled to pro rata the rate and if so under which Clause?

My intention would be to go down the Clause 60.4 route as this is not a one off occurrence and the total value I'm looking at is £400k throughout the course of the Project which is valued at £6m. If the Employer is entitled to pro rata the rate then we will be getting paid less than our defined cost for our Subcontractors works.
Tom – it sounds a little as though the BofQ item (not having read it) has not been put together with much thought or recognition of the actual amount of work required. You would expect the Bill to describe the work involved, and the approximate quantity of that work required. This could have been a rate per week, and the approximate number of weeks that it would be required for. It certainly sounds as though it would be the defined cost route under 60.4 so that neither party massively benefits or dis-benefits from the change in perceived quantity.

If it is a £6mil contract then it suggests that an individual bill item has to change by more than £30k before it constitutes a compensation event and hence can be assessed as defined cost.