NEC ECC: Can the Project Manager issue a pay less notice in the form of a PMI

The Employer is issuing Project Manager Instructions stating they will be taking money from us because in their opinion we have done something (it varies) wrong. We obviously do not agree with this.

Each month our application is docked a certain amount that they decide is the right number. We have not received a pay less letter. Just a one off PMI and no discussion around the figure for nearly all of them.

Where do we stand?

I am not sure why the Employer is issuing Project Manager Instructions, but essentially this could be considered to be a ‘pay less’ notice, provided it complies with s111 of the ‘Construction Act’ in that it must;

  • specify the sum considered to be due,
  • specify the basis on which that sum is calculated,
  • be given not later than the ‘prescribed period’ before the final date for payment,
  • given in accordance with the contract requirements for serving such a notice.

The sum considered to be due is fairly straightforward, although the requirement is for it to apply 'on the date the notice is served.

The basis on which that sum is calculated should allow you to understand the reasons both why and how the amount has been calculated. Remember that this could apply to both contractual and common law entitlements to ‘set off’ although this should reasonably be explained as part of the ‘basis’.

Finally the notice does not have to be in any particular form, although I can understand that the Employer using a PMI form could be confusing. Provided the ‘notice’ complies with the stated requirements, however, it would likely be valid.

The biggest problem I can see, from what you have said, is where such a ‘notice’ is given almost indiscriminately, every time an issue arises, with the Employer informing you that they will be ‘taking money’ from you.

This does not comply with the requirements for a ‘pay less’ notice as it should firstly relate specifically to a ‘notified sum’ and further state the amount considered to be due on the date the notice is served. The amount considered to be due must also relate to the entire ‘payable amount’ not just to an isolated matter.

I would take particular advice on this issue because if the Employer has ‘withheld’ money without applying the correct procedure then you have certain rights, such as suspending performance (following notice) or at the very least payment of interest on the sum ‘withheld’ if found to have been done incorrectly.