NEC ECC: Disallowed Costs for stand down at Contractor's fault

NEC3 ECS Main Option C, with specific reference to 11.2(25)

The Contractor has disallowed the Subcontractor’s costs for standing time, referencing the above clause and referring to resources and Plant & Materials not used to Provide the Works.

The stand down of 1 week resulted from the Subcontractor not procuring its resources on time.

The Contractor believes that during the 1 week stand down, all attendances should not be payable and be disallowed instead.

The Subcontractor believes the Contractor’s approach is not in line with the Main Option C sharing of efficiencies and inefficiencies and that demobilising and re-mobilising attendances for the purposes of 1 week may have lost valuable resources and knowledge as a result.

What are your thoughts?

Looking at the wording of the clause, it refers to ‘resources not used to Provide the Works’, so the first test is to demonstrate that these reources are not actually Providing the Works. There may have been a 1 week ‘stand down’ but does that mean they were all sitting around doing nothing for a week?

The next part is ‘reasonable availability and utilisation’ which suggests that you can’t bring in the required resources for the required times to exactly mirror the programme operations and that you have to be sensible about procuring resources for a continuous period or they may not be available when you need them.

Also you say that the Subcontractor did not procure the resources on time, but is that something that is apparent after the event or would have been reasonably apparent beforehand?

The Main Option C does change the payment mechanism and there is sharing of efficiencies and inefficiencies. The Disallowed Cost clauses essentially provide for where the Contractor / Subcontractor has either defaulted in some way by not following a procedure or requirement, or where costs are not incurred to Provide the Works. Often circumstances do not provide a ‘clear cut’ decsion of whether costs are Disallowed or not but the clause should be applied clinically and free from subjective opinion. Note that in NEC3 it stated that ‘the PM decides’ but in NEC4 this wording was omitted.

From the Subcontractor’s point of view I would ask the Contractor to provide a detailed explanation of why they believe the costs should be Disallowed and formally communicate this. At least this allows the disputed matter to be established.