We have a subcontractor who have been delayed and disrupted by having to work out of sequence on a section of work on an NEC 4 Option B.
They have issued a number of CEs for the delay and required out of sequence working which are accepted.
With their quotation they have submitted a total forecast labour value based on the number of days in their latest (accepted) Clause 32 programme and deducted their anticipated tender allowance days from their Clause 31 programme and then valued this on the SSOC.
Is this the correct approach - it seems to me it is the NEC equivalent of a JCT global claim?
On scrutiny it does not appear that the Clause 31 allowances were adequate and the increase in forecast labour appears incongruous - a 25% increase in time has resulted in a 60% uplift in labour value, but the Clause 31 programme was accepted as is the latest Clause 32 programme.
It seems to be an opportunistic quote, but presented in accordance with the contract conditions.
Hi Paul, firstly to say that the approach you describe is wrong but not necessarily entirely wrong. The NEC sets out the process for assessing the effect of a CE under clause 63.
63.1 assesses the effect of each individual CEon Defined Cost, which in most cases is likely to be a forecast due to the timing of the dividing date.
63.5 assesses the effect each individual CE has upon planned Completion, using the Accepted Programme and again refers to the one current at the dividing date.
Clause 63.1 identifies how to determine the dividing date, for certain CEs it is dependant upon what gave rise to it and in other cases, when the CE was notified.
Other clauses such as 63.8 and 63.9 must also be taken into account, so 63.8 requires risk allowances to be included and 63.9 states the basis on which the assessment is made.
When assessing a CE the first thing to bear in mind and keep at the forefront of your mind, is that the event entitles the Subcontractor to be compensated for the effects of an event on time and cost which does not arise from their fault, not to be penalised or punished for it.
However, following on from the last sentence, the assessment of a CE does not allow the Subcontractor to be compensated for mistakes it may have made when pricing or programming the original work, so that is why the approach you describe is wrong but may not be entirely wrong.
You refer to CEs being issued for delay and disruption, this might be just the way you have chosen to describe what has happened but it is not the way in which the NEC looks at delay and disruption. The events which give rise to compensation are listed in the contract, mainly under clause 60.1, only the events stated in the contract give rise to compensation, there is no mechanism for a global disruption or EOT type claim approach.
So, for each CE which has been properly notified the assessment must be in accordance with the rules of the contract, if the Subcontractor provides quotations they must adhere to clauses 62.2, 63.1 & 63.5 along with all other relevant clauses such as 63.8 & 63.9, 52.1, etc.
For those CEs which they claim they have been disrupted they must show how they forecast the effect upon the resources, if there was an effect before the diving date that must be taken into account otherwise it is likely to be a forecast from the dividing date. If from the dividing date resources have had to increase due only to the CE, they are entitled to the increase.
Lastly, the first Accepted Programme if compiled correctly in accordance with the subcontract, should be reflective of the resources and other things which the Subcontractor based its tender on, (provided there hasn’t already been a CE before it was submitted). That is useful for determining the effect upon the forecast Defined Cost, e.g. if any operation has 4 people assigned to it on the 1st AP, then presumably that was the tender forecast, if a subsequent clause 32 programme show the actual resources needed has increased to 6 people, then it might be reasonable to assume that the original forecast was wrong. If a CE then occurs and because of the CE the resources have to increase to 8 people, the effect due only to the CE is to increase the forecast Defined Cost by 2 people.