Calculation of Defined cost on Option A subcontract. SC Data Part 2 has no rates

NEC3 and NEC4 Contracts SOCC SSOCC
1

Is Holiday with Pay allowance a legitimate component of Defined cost, when technically it is an accrual, albeit not a random sum but calculated in accordance with rules agreed with employees negotiating bodies. It has been argued it is not a ‘cost’ until paid to the employee. However, I contend that as no hours worked would be recorded when the employee takes leave and they would be outside the Working Area this is not practical. Note Contractor is on Option C with Employer.

2

This question involves looking at quite a few parts of clauses. I will work upwards.

  1. Under People 12 (e), of the full Schedule of Cost Components “absence due to sickness and holidays” is an allowable cost.
  2. According to the first bullet point of People 1, people who’s “normal place of working is within the Working Areas” are an allowable cost. So providing the person or people satisfy this criteria, then they are entitled to holiday pay.
  3. Under option C, clause 11.2 (25), the first bullet puts the onus on the Contractor to justify what they have pay or will pay, but as this is a civil contract it is on “the balance of probability”, not “beyond reasonable doubt”. In considering any application, the judge said, in Costain vs Bechtel, that the PM has to be impartial in matters of certification and assessment. I.e. make a ‘reasonable / fair’ etc assessments given the information available to him and what the contract says.
  4. You are right it is not a ‘cost’ until paid by the Contractor, BUT under option C clause 11.2 (29) the PWDD is the total Defined Cost which the Project Manager FORECASTS will have been paid by the Contractor before the next assessment date plus the Fee. So to re-iterate point 3. this forecast has to reasonable / fair given the information presented and what the contract.
    It is highly unlikely that the Contractor will pay the employee nothing while he or she is on leave. It is most likely they will pay them their base wage, with no overtime etc. So it seems to me that, in the absence of any additional information from the Contractor, this is what the PM should forecast will be paid.