Change in scope pricing

NEC3 and NEC4 Contracts
1

Good morning,

we have a subcontract NEC3 Option B, where subcontractor priced up the works to be completed in 2019.

Unfortunately, the works have been delayed by a year and the scope has changed to include additional works.

I have issued instruction for the subcontractor to price up additional works asking to clearly demonstrate original works pricing and additional works to allow for “like to like” comparison.

The subcontractor returned the quotation, but repriced original and additional works using different rates.

I have assessed the works using the rates in original bill of quantitates and where the rates were absent, I have used rates provided in quotation.

The subcontractor disagrees, stating that rates in original works should not be used for assessment, because the access to site has been delayed by a year and they deem that those works never took place, even though the scope has increase about twice and original scope forms about half of the full scope of works issued later.

I would have thought that if the subcontract has not been terminated by the subcontractor due to delay, then the rates would still be applicable.

There is no rates in shorter schedule of cost components.

My question is, can I use rates in original bill of quantities for assessment or is the subcontractor entitled to new rates due to delay of works?

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2

The default for all assessments of compensation events is clause 63.1 i.e. using the relevant Schedule of Cost Components to calculate the CHANGE in Defined Costs + Fee.

Consequently:

  • the Subcontractor is wrong to re-price from scratch the original work. It might, however, be entitled to additional or reduced DC+Fee because costs have changed because of the years delay e.g. due to inflation, exchange rates, time of year when doing work etc as well as increased preliminaries; and
  • the new work, even if it is of the same type as the original work, but there is just more of it, is built-up from scratch using DC (and the SoCC) +Fee. While the original rates can be used to ‘sense-check’ these new prices, contractually the original rates have no relevance on this calculation.

However, by agreement, the Parties can agree to use rates and lump sums to shorten this process. But it is by agreement only under option B clause 63.13.

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