Compensation Events Quotations

A sub-contractor has provided a number of quotations under NEC on a forecast actual cost basis. The works were complete before he submitted the quotations, but the work was after the dividing date.

I have requested that he price them on actual cost, but he says he is not obliged to. Looking at the contract I think he is correct (Clause 63.1). His forecasts way exceed his actual cost value (which is easily worked out from labour records - his) so he is being opportunistic at best.

I have said that as many of his quotations were submitted late I can assess them in accordance with 64.1 and intend to do that at actual cost.

I realised that I hadn’t actually asked question.

Is the sub-contractor correct in that he can issue forecasts although the works are already complete and can I then assess them if they are submitted late?

Can I assess them if they are patently way in excess of actual cost given that they were quoted after the works were complete?

I am assuming you are using NEC3 in this response.

In my view the Subcontractor is correct as that’s what the contract states. Any work completed after the dividing date is forecast, any work done prior is actual Defined Cost. The Contract does not tell the Subcontractor what to do in the event that the work is completed whilst in the quotation period.

I find it easier sometimes to flip the question around and ask, if the Subcontractor had got their forecast wrong, and were not fully recovering their entitlement would it be permitted for them to use actual defined cost and change their quotation ? I think the answer would be the same as the Subcontractor’s one is now… I do appreciate the frustrations however given that the cost is known.

That said, you mention that the Subcontractor had submitted the quotation late. As per 64.1 you are able to assess the quotation within the time allowed. Perhaps you may make that assessment.

If you do choose this route, the Subcontractor’s recourse would be Adjudication unless there are escalation procedures in your contract.

Agree with the Subcontractors response too. This is determined by “the dividing date”, forecast of Defined Cost to the right, actual Defined Cost incurred to the left of that date. Dividing date is the date of the PMI from the PM, or NCE from the Contractor.

The PM can instruct the works, contractor completes work and quote comes in after the event, this will often happen for short duration works (hrs/days). The Contractor has 3 weeks to prepare the quote under an unamended contract. Even if the works were completed before the quotation is submitted it would still be a forecast of Defined Cost. You can avoid overpaying by applying a set of “Project Managers Assumptions” to the original instruction and correcting them later via a sperate CE.