NEC ECC: Can Implemented CE's under NEC3 be changed for calculation errors

NEC3 and NEC4 Contracts
1

We are working on an ECC option A and I have a query concerning implemented CE’s.

The PM has implemented a CE and subsequently says there were errors in it, one of which was that the fee percentage was wrongly applied.

As the CE was implemented the PM has not re-opened it, rather they have deducted the difference from another unimplemented CE and implemented that one, as a PM’s assessment, at a lower value than that previously agreed - Which I do not agree is correct, as this CE should be valued on it’s own merits and should not be reduced for a previous error.

However would the PM be within their rights to adjusted the previously implemented CE for a calculation error and re-implemented it at a lower value, as clause 65.2 only refers to it not being changed if the forecast is wrong?

Is there also any guidance on when an option A contract should be used, as I thought it’s preferred use was when the project was fairly well designed and it was thought there would be minimal change.

The project we are working on has had in excess of 300 CE’s that are likely to increase the final value by 50% and we are being disallowed additional staff costs in dealing/pricing the CE’s.

Your thoughts on this would also be appreciated.

2

The Project Manager has no authority to do this either contractually or morally :

  • contractually, there is simply no clause in the contract which entitles them to do this;
  • morally, if you had under-calculated this, then you would have no authority as the Contractor to increase a subsequent CE assessment, so it does not work the other way around and there is no clause.

From a contract strategy perspective, you are right : research, experience and hence guidance on lump-sum contracts going back decades demonstrates that using them when there is a high degree of change is not where you get the best from them.

3

With regard to the additional staff issue, you assess the effect of a compensation event using the schedule of cost components which includes people. Main Option A specifically excludes the cost of preparing quotations but does not exclude other commercial activities associated with the CE, including; procurement, managing subcontracts, reporting requirements, payments etc. When the allocated commercial staff reach a ‘saturation point’ you will need to bring in additional people but their allocation must be spread across all CE’s, even if you make an appropriate risk allowance assessment.