I’m currently working for a Contractor, and we have engaged a Subcontractor to undertake works on an Option A (NEC3). We agreed People rates for valuing compensation events (CEs) however there is a z clause stating that all People should be PAYE. There is also a z clause which allows the Contractor to audit the Subcontractor. On inspection of the Subcontractor records, it transpires that a significant number of People are not PAYE. The Contractor assessed CEs using the People rates, in good faith, on the premise the Subcontractor was compliant with the express condition for PAYE status. As a result, when assessing the amount due, the Contractor has made a deduction citing cl50.2, “…less amounts to be paid by or retained from the Subcontractor…” because the rates for non-PAYE People were not agreed and on inspection, are typically 15-20% less than PAYE rates. The Subcontractor is arguing that CEs can only be reopened on limited grounds and advised the Contractor to adjudicate. In this scenario, does cl50.2 provide the Contractor a valid reason to reduce the amount due without the need to reopen the CEs, or will the Contractor need to pursue a reduction in the Prices through adjudication (W2 in this scenario) for the breach, as the CEs have been implemented?
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Clause 50.2 is not appropriate. The quotations have been implied and the scenario you have set out is not a standard reason for a revised quotation unless you have a Z clause to say so. What you have is a technical breach by the Contractor not complying with the Z clause
Sorry to clarify, a breach by the Subcontractor