I have a contractor claiming for legal support costs in reviewing a framework level pain/gain mechanism. I have disallowed this cost saying 1) the work has not been completed within the Working Areas and 2) there is no SoCC item covering this therefore it should be part of the Fee.
Does anyone have the same issue?
I agree with your assessment - the Contract supports your position.
Under the Schedule of Cost Components (SCC), an amount is only included if it is incurred in order to Provide the Works. “Provide the Works” is a defined term in clause 11.2(15), and it refers specifically to the physical and management activities required to deliver the Scope stated in Contract Data Part One.
Legal support to review a framework-level pain/gain mechanism is unlikely to relate directly to the defined scope of this individual contract. If it does not support the actual delivery of the works under this contract, then it does not meet the test of Defined Cost.
As you rightly pointed out, such corporate-level or strategic input is typically part of the Contractor’s overheads and therefore recovered through the Fee under clause 52.1, not reimbursed as Defined Cost.
Timing also matters:
- If the legal review took place after contract execution, it is not necessary to Provide the Works and should not be paid as Defined Cost.
- If it took place before contract execution, then no compensation is due since no obligation to pay Defined Cost exists before the contract starts.
In both cases, the cost falls outside the recoverable provisions of the contract and is not payable.
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If the legal fees are incurred because the implementation of the mechanism is a change to the original scope, then they are allowable, as the legal advice is needed to qoute for the effect of the change.