Relatively minor Defects have arisen on a design and build (cost-reimbursable NEC3) contract:
Clause 11.2(25) states that “the cost of correcting Defects caused by the Contractor not complying with a constraint on how he is to Provide the Works stated in the Works Information” is a Disallowed Cost.
In discussing with the Contractor which corrective actions should/ should not constitute Disallowed Cost, the meaning of ‘constraint’ is being debated. The Contractor’s view is that a constraint is something imposed by the Employer i.e. access routes, hours of work etc.
My view is rather wider and I believe that any requirement contained within the Employer’s Works Information is effectively a constraint. Also, as the Contractor’s design once accepted, forms part of the Works Information this imposes additional/ more detailed constraints.
For example, the drawings/ specification produced by the Contractor states that something is to be constructed in a particular location and out of a particular material. If it is constructed in the wrong location (due to setting out error) or out of a different material (in error) then the correction of the Defect would be a Disallowed Cost.
In terms of Defect correction being an allowable cost, I believe this is limited to situations such as concrete being poured and vibrated to the specification but upon striking of the formwork honeycombing/ voids are present needing to be ‘made good’.
I’d be grateful to know if anyone fundamentally disagrees with this view.
I would slightly modify your comment above to be “I believe that any requirement contained within the Employer’s Works Information COULD BE a constraint” but disagree with the statement that “the Contractor’s design once accepted, forms part of the Works Information this imposes additional/ more detailed constraints.” as I cannot find any sentence that says that !
However, I think your end point is correct as a Defect, as well as being “a part of the works not in accordance with the Works Information” is also “a part of the works designed by the Contractor which is not in accordance with the applicable law or the Contractor’s design which the PM has accepted.” Consequently, I agree that the examples you give in your 4th & 5th paras are valid.
I agree in respect of them being Defects but I do not agree that Defects corrected before completion are automatically disallowed cost. The particular circumstances of each matter needs to be considered to determine if it is disallowed cost.
It seems that the main point of contention is the relative definitions of what constitutes a ‘constraint’ in the Works Information. As is often the case, definitions have been applied by the respective parties to suit the circumstances and to determine whether the criteria falls under the definition of Disallowed Cost or not.
Although the word ‘constraint’ can have a wide meaning, the first port of call would be the Works Information document WI200. It is clear, however, that other parts of the Works Information may contain requirements which could be determined to be a ‘constraint’ as well.
Notwithstanding the above, however, perhaps try breaking the matter down into more manageable component parts as follows;
- Does the matter actually constitute a Defect,
- What is the constraint in the Works Information,
- Does it specifically relate to Providing the Works,
- Can you determine a causal link between the constraint and the Defect,
- Can you prove that the Contractor did not comply with the constraint.
Once you have considered all of the above and conclude with an appropriate outcome, you can then make an assessment of Disallowed Cost.