Under ECC Option C, should the Employer pay the Contractor for CE’s they have incurred for not providing their sub-contractors access to working areas by the agreed access dates in the programme? I agree that this is a legitimate compensation event but does the Employer have grounds to disallow these costs?
Two issues here :
- If the events satisfy the definitions of a compensation event - which from what you say they do - then it is a compensation event and you can proceed to assess the effect by the criteria stated in clause 63. That adjusts the target Prices.
- The Project Manager - not the Employer - only has grounds to disallow costs i.e. what the Contractor is actually paid and only if the costs are firstly Defined Costs and then, secondly, not Disallowed Costs. So you need to check the definition of Disallowed Cost to see if there is anything the Contractor has or has not done which disallowed. Otherwise, the Contractor is entitled to the full Defined Costs + Fee for the Employer not doing what they said they would do … which is fair enough !!
Thanks for your prompt response.
I just want clarify my question as I could have worded it better - I agree that this is a legitimate CE for the Subcontractor to the Contractor as it was the Contractor who did not allow site access as per the Accepted Programme but I’m unsure as to whether the Contractor can recover these costs from the Employer.
Could the fact that the Contractor did not provide site access as per the Accepted Programme be deemed ‘not following the contract procedures’ and therefore disallowable by The Project Manager?
I would say this falls under the first bullet point of Clause 61.4 “arises from a fault of the Contractor” so, even if it satisfies the definition of a CE, then the Prices are not changed (ie. the target is not increased).
Whilst disallowed cost includes failure to follow an acceptance or procurement procedure stated in the WI, I can’t see that it includes ‘not following the contract procedures’ so I think in this instance the Contractor is probably entitled to be paid the Defined Cost incurred, and shares any ‘pain’ with the Employer in accordance with the stated share percentages.
This is the downside of Option C for Employers, in that they share the cost of correcting defects (before Completion) and the cost of the Contractor’s inefficiencies.