What is the exact meaning of the second bullet of ECC Clause 60.4?
i.e. the difference causes the Defined Cost per unit of quantity to change
Does it mean by considering the Defined Cost of the difference, it changes the BQ rate?
I believe the intention is to address the situation where you may have a fixed cost that has been spread across the quantities for example a mobilisation cost. For example the BoQ had a 1,000 X, mobilisation cost of ÂŁ5,000 had been allowed in the rates, ÂŁ5/X, full rate = ÂŁ15/X.
If the final quantity of the work was 900 then the change in Defined Cost is ÂŁ0.56/X to recover the fixed element. Obviously the other bullet points would need to be satisfied.
Thank you Dave.
First of all, I assume the requirements of the first and second bullets of ECC Clause 60.4 are satisfied.
I have considered your advice before. However, for some items the costs may be directly proportion to the quantities. In such situation, second bullet cannot be satisfied. Clause 60.4 may not be able to help the Contractor/Employer from the loss due to the incorrect BQ quantity.
I would like to clarify the “Defined Cost” stated in second bullet of Clause 60.4 is for what.
I did try to consider whether “the change of Defined Cost per unit of quantity” shall mean there is difference between the BQ rate and the Defined Cost of the additional quantity. Under such situation, the second bullet is more easy to understand and reasonable.
Because if the BQ rate is same as the Defined Cost of the additional quantity then it is obviously meaningless for compensation event. In other hand, if there is difference, it could be more easy to trigger a compensation event and the Contractor/Employer could be easily escape from the loss due to the incorrect BQ quantity.
Please help.
An interesting question, especially as this sub-clause applies to main options B and D and the term Defined Cost has a different meaning for each of these options, potentially causing an issue with the application to a main option B.
I am now working on NEC3 Option B
Dear Andrew
Could you please help and provide your point of view on the second bullet of Clause 60.4 for NEC3 Option B
regards
The term Defined Cost under main option D forms part of the definition of Price for Work Done to Date (PWDD), however under main option B it doesn’t, whereby PWDD is assessed using the quantities and rates in the BoQ (not Defined Cost).
This could mean that Defined Cost can only effectively relate to the assessment of a compensation event under main option B and not to the contract scope of works. Taking this one step further, does this mean that clause 60.4 under main option B can only apply to quantities which relate to a compensation event, which are assessed in the form of changes to the BoQ?
The NEC Guidance Notes don’t really help as they say the same thing for both main options B and D.
Dear Andrew
Thank you for your prompt response.
I agree with your point of view. The mechanism of trigger the second bullet is confusing.
In addition, the assessment of the CE under Clause 60.4 is also confusing too. Clause 63.1 just simply says the effect of the compensation event upon the Defined Cost. However, it does not really states how to assess. Such as
- is only the effect of the additional quantity (other than BQ quantity) on the Prices shall be taken into account?
- should the BoQ rate be taken into account for assessment? Somebody say the assessment shall be the net effect (between the Defined Costs of BoQ qty and total qty) plus/minus BoQ rate.
regards
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