Justifying submitted CE costs

Operating under an NEC3 ECSC

Have received a quotation from the Contractor to undertake additional works under a CE as a result of conditions being worse than being initially expected (hoped for).

The cost quoted bears no relation to what could reasonably be expected to represent value for money, however, if proper process has been followed then this will have to be absorbed.

There are four parts which cause concern and are therefore questionable:

People costs have been included, Site Manager, Contract Manager, H&S representative. The hourly rates given for these staff members would make an American lawyer blush. As there is no SSCC in the short form, these rates were not included at tender stage. Can I request justification for these costs?

The work itself has been sub-contracted, so the cost has been presented with the relevant percentage added. Is it fair to ask for a copy and breakdown of the quote instead of a lump sum? (It also raises concerns about why so much management costs are needed above.)

A separate sum for delay has been included, there is no indication of how this has been derived. With no SSSC, and no rates fixed, can this be requested? It may be based on preliminary costs but it is impossible to tell. Further to this, if works are completed by a subcontractor, would the main contractor be entitled to the same level of recompense?

The last part is the inclusion of a risk allowance, under clause 63.6, to the total. This seems to been included merely to add profit and it is not apparent as to its justification. Although additional works are required, establishing its quantum is entirely achievable.

To summarise:
can hourly rates be questioned?
Can subcontractor quotes be questioned?
To what extent should delay costs be broken down?
When is the risk allowance included?

Has a CE been recognised for the conditions being worse then could have been expected (in accordance with cl 60.1(9)).

The short answer to your questions is yes you are within you rights to request reasonable justification to the additional cost (the quote being the additional cost not the full cost). Refer to clause 63.3.

People cost – the rates used should be auditable

Subcontract cost – it is reasonable to request a full breakdown of times, rates etc etc

Delay – any delay (time) should be demonstrated against a programme with the corresponding additional cost being set out. You will have to refer to the Contract Data for the programme requirements.

Risk – the Contractor needs to include for its risks that have a significant chance of occurring due to the CE. Again this needs to be justified in the context of reasonableness.

Your reply is appreciated.

Yes, the PM has recognised that the current condition is worse than expected although this is more in the spirit of good relations as the Works Information states to “replace all”.

Assuming the Contractor submits a refreshed offer that does not fully encompass your recommended requirements, therefore the PM decides to self-assess; what requirement is there for the PM to prove his rates are reasonable? Should they obtain quotes etc. for subcontracted works; for people costs how would his assessment be justified?

Your response indicates that your reply was the short answer, where can the long answer be sought?