NEC 4 accepting defect costs

We’re working under nec option A lump as a subcontractor with no design, the contractor is working under option C with design to their client.

We have caused a defect to the works by using an incorrect concrete mix to part of the works. After review of the concrete by the contractors designer (JV) it has been decided that concrete can stay in place, not requiring removal. Therefore works information has changed and no need to correct defect.

The contractor is trying to charge us for design costs/review and extended hire of shoring until the defect was accepted.

What costs would be allowable for accepting defect as is?
Contractor is working under option C with their client, defect costs are within defined cost in their contract? Do costs really apply?
The designer is actually JV partner with the construction company and named within contract. I’m arguing that checking and approving of defects is part of contract mgt throughout the lifecycle of the build.

Any recourse to reduce these costs?

I’m not sure that the process regarding the acceptance of the Defect was followed properly. Following the agreement in principle for the change in Scope, you should have submitted a quotation for reduced Prices (and/or earlier Subcontract Completion Date) for the Contractor’s acceptance; if the quotation was accepted, only then the Contractor could change the Subcontract Scope- see clause 45.2 of the NEC4 ESC.

The way this has been handled, is not even compliant with the provisions for an uncorrected Defect, whereas the Contractor would assess the cost of correcting it by others (if access was given) OR the cost of the Subcontractor correcting it (if no access was given) and would then make the deduction (see clauses 46.1 & 46.2).

I’m not privy to the details, but you might have a strong case against these deductions.

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Hi Peter,

Thanks for response and advice. Ourselves and the contractor have a very good working relationship. We both know the proper process hasn’t been followed. In good faith I believe we should pay something towards the defect cost as we caused it. I’m trying to understand what would be allowable costs in this scenario. I don’t believe design fees are applicable and they can recover the costs in their option c contract with client?

I see where you’re coming from.

They way you put it, they might as well get paid these design costs as part of the Defined Cost, although the Contractor’s gain share would be reduced (albeit probably marginally); that is because the cost of correcting Defects before Completion is not disallowed.

However, it could be the case that the Project Manager in the main contract disallows these design costs by virtue of clause 11.2 (26) (I assume NEC4), as cost for “correcting Defects caused by the Contractor not complying with a constraint on how it is to Provide the Works stated in the Scope”, if applicable of course.

Based on your good working relationship, I would therefore suggest that you discuss the above scenarios and see if the design costs will be/have been indeed disallowed or not; if not, I think it would be fair to compensate them for the loss of the (expected) gain share which, as I mentioned above, might be trivial.

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