Contra charging fuel provided to Subcontractor - NEC4 Option A

NEC3 and NEC4 Contracts Compensation Events
1

Under an NEC4 Option A, the Subcontractor was due to provide all fuel for undertaking the works. Instead, the Contractor has provided all of the fuel, following agreement between both parties post Subcontract award. An instruction was issued to the Subcontractor detailing that the Contractor will be providing all fuel to the Subcontractor, and recovering the cost.

The Subcontractor has now applied for a negative Compensation Event to their forecast of fuel costs for the works. Is this the correct methodology, or should the Contractor be contra-charging their incurred fuel costs under Clause 25.2? If the latter, which fee percentage is applied to the contra-charge - the Subcontract fee %, or the Contractor’s fee % with the client?

2

Welcome to the community.

The answer will depend upon what was agreed and if the agreement covered how it would be dealt with financially.

If the agreement only concerned the principle then I would suggest the matter is a change in Scope (not clause 25.2). Effectively a negative compensation event and the assessment is based on the Defined Cost + (subcontract) fee that the subcontractor would have incurred.