Bank Holiday Cost Recovery

Under an NEC3 Main Option B subcontract, the subcontractor has notified and had accepted a compensation event which impacts the planned completion (i.e. delayed programme). This programme extension includes 2 bank holidays, for which if there was not a delay to planned completion, would not have been encountered.

In the compensation event quotation, the subcontractor has applied for an extension of time, the associated project prelim costs (agreed rate) and direct costs associated with the additional works. In addition, they have also applied for all their supervision, labour, plant and equipment for a period of two days, to cover the bank holiday period. Stating that people costs need to be recovered for these extra days and that the hire period of all plant and equipment has now been extended by 2 days.
The Contractor disagrees with this position, they believe that these two days should be recovered via the prelim rate, with subcontractor rates for labour and equipment already including allowances for resource holidays, bank holidays, sickness and training (notwithstanding labour is not in the working areas over the bank holidays).

There is an acknowledgement between parties of the BH impact, but the correct method of assessment is disputed.

Hi Matthew,

I’m not sure if I picked up the issue correctly, but I think that there is a fundamental misunderstanding regarding the period to which the additional prelims apply, which is not the period at the end of your updated programme; those prelims stay as they were, and if there are now 2 additional bank holidays, they should be added as time impact only because the Contractor will not be able to work on those days.

The cost impact - including any additional prelims if applicable, which are essentially part of the Defined Cost during the delay - would therefore relate to the time the CE lasts, and not to the “extended” period.