NEC3 ECC Option A.
As Contractor under the above arrangement, we were required to delay the start dates on a number of our Subcontractors, even though the procurement process proceeded with no impact in providing the Works as planned (I.e. day job continued unhindered). The delay arose from an Employer’s funding constraint causing the SC start date deferments.
However, the deferred start on these subcontracts has resulted in our planned completion being pushed out. The delay period was not contested. As part our the CE quotation, we forecast our future PM team costs based on the full time head count at the time of the Instruction (switch date) and excluded any PM team thickening, which we may probably incur.
The Employer is insisting we demonstrate our forecast PM team costs using defined costs over the period when the delay happened (I.e up to the switch date). We have already stated our defined cost is zero in the quotation (the delay was caused by deferring the SC starting dates only) and as the PM team continued to work unhindered up to the switch date/instruction. The only costs submitted in our quote are therefore forecast costs.
The Employer has rejected our quotation and wants us to submit actual costs to demonstrate our future EOT entitlement. Our company has a policy not to open our books on an Option A contract. If it was Option C or E it would be no issue at all.
Q - As part of the revised quotation, do we have any obligation under Option A to provide our actual costs/timesheets to demonstrate future entitlement, when the impact is way into the future.
Clause 62.2 requires you to provide “details of your assessment” and nothing more, therefore I believe you are correct in principle. I guess what the Employer is trying to do is to establish a baseline of your already incurred prelim/PM costs in order to satisfy itself that your forecast is reasonable. If that is not the case, then they have probably misunderstood what you are claiming for and you will have to spend time explaining.
As regards the submission of actual costs (for the purpose assumed above), it might be worth seeking a compromise - e.g. by submitting the timesheets only - for the sake of resolving this and moving on.
Lastly, I wouldn’t give up on the thickening of resources as long as you can demonstrate the expected impact.
Thanks Peter for taking time to respond - this is how we interpret 62.2 as well. A comprehensive build up of details of our QTE assessment is contained in our submission and all the people claimed are visible to the PM in regular Progress Reports where a team named organogramme is provided. We consider the PM’s CE assessment suggests some degree of appraisal or judgement rather than the necessity to be spoon fed information (by providing timesheets etc).
However, the ongoing issue is the PM seems hung up on Cl 63.1 compliance believing we have an obligation to provide defined cost to demonstrate our forecast defined cost ? Our view is this is irrelevant as there is no DC associated with the CE as our works continued unhindered before the event.
It sounds that you have done the right thing here, as there is no actual Defined Cost associated with the CE (or that equals to “£nil”).
Also, from what you say, you have substantiated your forecast prelims (just make sure that references to your sources are clearly mentioned within your quotation), so I don’t see what else can you do.
If the PM insists and this ends up in an unfavourable PM assessment, your only recourse would be adjudication, preferably preceded by a settlement attempt.
Perhaps I am reading this incorrectly, but if it’s accepted as a CE, the roles and likely headcount are not disputed (as identified in records and organograms) and it’s substantiation of the forecast costs that are the sticking point, then why wouldn’t you want to demonstrate actual costs by role (adjusted for any forecast likely cost increases / risk)? I don’t understand why you would want to run the risk of a PM assessment being implemented that assess forecasted costs at being less than actual with the only recourse then being to adjudicate?
It is our Company Policy not to provide actual costs on fixed priced contracts when there is no obligation to do so. On an Option C or E we would have no issue doing this.
However, and to avoid escalation, we have shown the PM our bookings (on screen - Cl 10.1) to demonstrate legitimacy of what is being claimed under the forecast of defined costs in the QTE.
Yes, I noted the reference to policy. My thoughts reflected an approach that would protect your interests whilst offering a satisfactory level of substantiation to the PM to effect the swiftest and most likely risk free solution to get the assessment over the line. I don’t believe there was any challenge as to what you may / or may not be obligated to provide.
Thanks MJD. The forecast costs are not disputed by the PM either as they are in accordance with the SSCC.
I suppose my point is why would a PM want actual bookings for unrelated works in the past which has no significance nor relevance to what will happen in the future and which, we as Contractor, need to take all the risk on. Some degree of reasonable judgement is therefore required by the PM. Opening up our books on every CE is not a option to us (when not required) which we think is the way the PM is wants to go.
I came across this the exact same issue on a previous project. Company policy to not open books on option a. We provided ssoc breakdowns by role, hours x rates agreed based on forecasted costs for the bulk of the ce we encountered. The client thought he could use actual costs (their version of actual costs via unverified records) to chip away at entitlements at payment notice phase.
We stated continously that we took the risk on future work and were under no obligations to revalue them to actual costs. In many cases, actuals ended up more than forecast but it was swings and roundabouts.
The client just could never use objectivity or professional judgement when valuing and lacked the experience required to value and we resisted spoon feeding. Some people just use this to delay payment with the ultimate end goal to try and get you to take the claims off the table via “not properly substantiating”. In our case, we often found out their position by one liners on payment notices often issued late with no descriptions and also late payments. Given the lack of client transperency, this only made us enforce our company policy and less likely to deviate or show willing to provide timesheets etc.
In the end, a global settlement was needed and we debated actuals vs forecasts right to the end.