Reach Back defined costs
Friday 22 January 2021
I would like to get clarification on the meaning and use of ‘define costs’ when calculating a quotation for a CE.
My understanding of clause 52 is that ‘defined costs’ = rates and fees that are stated in the CD. (Rates means SSCC rates.) Open market rates or Competitively tender rates inclusive of deduction etc.
To assess a CE we default to use the Define Costs procedure stated in the contract therefore the following can be used;
• BoQ rates (if both parties agree CE can be assessed using BoQ only) • SSCC Rates- to assess a CE inclusive of the fee • Other amount at open market rates • Competitively tendered price (BoQ rates?) • Calculated using both SSCC and BoQ to calculate the costs impact of the CE's?
Scenario; NEC 4 opt B
Contractor has been issued a Scope change Cl 60.1 (1). This CE has changed an element of works that was previous included in the BoQ. The CE has changed the element where by the original BOQ rates are not applicable I.e. Installation has increased in depth and width from original design.
The Contractor calculated the CE using both the BoQ rates and SSCC rates. SSCC was used to calculated the new design in totality and the BoQ rate was used to calculate the omission or credit for the original works.
Note; The BoQ rate could not be pro-rata to allow for the new works due to the changes in design, the BoQ rate is reflective of the value of the omitted works.
The PM has decided to pro rata the BoQ rate in assessing the CE. The PM is stating because the contractor has included BoQ rates in the quotation for the omission- this is consider agreement to assess the CE using BoQ rates only.
The Contractor has disagreed with the PM assessment using BoQ rates only. (See Note above)
The PM has then advised that if SSCC rates are going to be used to assess the CE- SSCC rates are also used for the omitted works. (The omitted works is already defined in BoQ- ‘Competitively tendered price’)
I do not believe the PM is correct in the calculation method proposed to assess this CE?
In general, can SSCC rates be used to assess omitted works when there is a BoQ rate already provided and when the BoQ rate is reflective of the value of the works to be omitted?
Clause 52 Competitively tenders rates can they be considered as BoQ rates?