Is a Contractor's failure to forecast costs on an NEC3 ECC contract grounds for not paying their costs/payment application?

Is a Contractor’s failure to forecast costs on an NEC3 ECC Option C contract grounds for not paying their Costs and rejecting their payment application?

The costs relate to a subcontractor and the Contractor is unlikely to pay the subcontractor’s costs.

First of all, my answer will - and your response should - only apply to the part of the payment application you believe that they will not have paid out.

So … …

  • under clause 11.2 (29), “the Price for Work Done to Date is the total Defined Cost which the Project Manager forecasts will have been paid by the Contractor before the next assessment date plus the Fee.”

  • under clause 11.2 (23), “Defined Cost is - the amount due to Subcontractors for work which is subcontracted” etc etc. “less Disallowed Cost.”

with Disallowed Cost, under clause 11.2 (25) being “cost which the Project Manager decides - is not justified by the accounts and records - etc etc.”.

I am assuming that you are either the PM or the QS responsible for payment on his or her behalf and therefore that you have “reasonable” grounds to believe that they will not pay out before the next assessment date. Guessing - but correct me if wrong - this is because they have not paid out in previous months. Seeing as we have two clauses where the decision is down to the PM and the Contractor has a history of not paying out by the next assessment date, then it seems reasonable (unless you receive reassurances otherwise) that they will not pay out by the following month’s assessment date next month.

However, if they do pay out within 60 days, then next month you would have to certify it. If, like one well known contractor, they have lengthened their payment timescales to 120 days, then it would 3 months before you certify !

Lastly, you do have to consider the Contractor’s application and ‘detail’ any deductions. If the contract came into existence after October 2011, then you have to state the reason per detail. I.e. £X has not been paid because … ; £Y has not been paid because.