NEC 4 Option B - Cl60.4

NEC3 and NEC4 Contracts
1

Hello - A question regarding the remeasure on an Option B.

Assuming the original Bill of Quantities stated:

Item Quantity Rate
C20 Concrete 10m3 £150/m3

In a scenario where the Contractor ended up pouring 15m3, they would have been paid according to the bill rate up to the point the line item was completed i.e. £2,250. Assuming they notify a Compensation Event correctly under Cl60.4, would the remeasure apply only to the extra over (Cl.60.4 references "a different between the final quantity of work and the quantity stated in the bill) in this case the 5m3 ? Assuming the unit rate for the additional 5m3 increased to £200/m3, the CE quote is effectively £250 (having already been paid the bill rate of £150m3 for the extra over 5m3). Would this be the correct remeasure CE quotation provided by the Contractor ?

In addition, assuming the final quantity is significantly less than the stated amount in the bill, can the PM notify a Compensation Event (assuming the lower quantity lowered the unit rate stated in the bill, for example if the Contractor were able to cancel the remaining order and save on transport cost, thereby reducing the overall unit rate) ? Assuming the Contractor is unlikely to notify in this scenario as it reduces their potential profit margin.

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2

In clause 60.4 there are 3 stated ‘conditions’ that must be met for the matter to be a compensation event. The opening paragraph refers to the ‘difference’, which is the assessment part for a compensation event, as you have noted.

As you have been paid for the work then I assume it has been done and so the last part of clause 63.15 would apply where the assessment would be a ‘new lump sum item’.

Although you have been paid quantities in excess of those stated in the BoQ, this does not change the BoQ and the change would be when the new lump sum item is added when the CE is implemented, which would be for the full price of the ‘difference’ quantity.

The next interim payment assessment NETT value would essentially be for the difference in the assessed rate for the ‘difference’ quantity, that is the 5m3. This would effectively be 5m3 x £100, as per your example.

If the final quantity is significantly less, then it would unlikely be a CE as it probably would not meet the 3rd stated condition.

3

Thanks Andrew, I was hoping you were going to answer this one. Appreciate the clear and detailed response. I had not considered the third bullet point of Cl.60.4 for a reduced quantity, it’s very unlikely to ever actually occur (the unit rate reduction in cost being >0.5% of the original contract value).