NEC ECC: Hiring or Purchasing

A temporary works solution the Contractor has employed on my schemes has had significant issues and is ultimately being scrapped.

The temporary works are a bespoke design that they have chosen to adopt and has been designed by one sub-contractor and delivered and installed by another. The structure is also very large and has a significant amount of steel tonnage in it.

My query is whether the Client has to purchase the temporary works as it is provided by a sub-contract (as defined cost). What if they don’t want it? It has failed and cant be used again. Can they not look at hiring only for the period it was actually used? If they have to purchase they will just scrap the material to recover some costs but I am not sure as to whether they have to.

It is a defined cost as is it being provided by a sub-contractor but it doesn’t seem correct that they are left with a massive cost to breakdown and dispose of this system that the Contractor has chosen to purchase. Not sure what NEC argument I have to enforce it being hired.

You don’t say what option you are working under, but I presume it is C?

Many Employer’s overlook the fact that in choosing Option C they not only share the gains that the Contractor makes, but also share the losses.

If the Contractor has entered into a contract with a sub-contractor to purchase the equipment, then I don’t think it will be possible to retrospectively change to a hire contract.

Your ways out of having to pay this cost may be that you can disallow costs under Clause 11.2(25), possibilities being that the Contractor didn’t follow an acceptance or procurement procedure stated in the WI, give early warning, or comply with a constraint stated in the WI.

Another possibility, if the equipment is really as bad as you suggest, would be a claim against the PI insurance of the design sub-contractor, but that would depend on the details of the various contracts and sub-contracts.

I assume this is under a cost-based contract. I.e. options C to F.

The answer depends upon two things :

  • under what terms were these subcontracts (plural) procured, because Defined Cost is “the amounts of payments due to Subcontractors for work which is subcontracted”; and
  • does some or all of this Defined Cost count as Disallowed Cost because the above definition finishes with the words “less Disallowed Cost”.

Hello David,

I should have been clearer, it is Option C.

My approach to date has been to work with the Contractor in that I am helping them with the PI claim against the sub-contractor (they have confirmed they will be pursuing it). However, interestingly their position is that any PI claim will take years (which it may or may not) and that the final account will be settled by this time.

My position is that the account will remain open until all sub-contractor accounts are settled and this will include the PI claim.

Regardless, as you say “If the Contractor has entered into a contract with a sub-contractor to purchase the equipment, then I don’t think it will be possible to retrospectively change to a hire contract.” but this is the contract between them. They could purchase and hire to the Client? Why does the Client have to purchase it?

Ultimately, I think they do but I am trying to determine what in the NEC says that they categorically have to.

Hello Jon

The sub-contractor is procured under NEC and they are selling the product (its not a hire agreement). I have looked into whether I can disallow and because the temporary works have done some of the work (I would say no more than 10% of what they were supposed to) I don’t think it is dis-allowable as it has been used.

If it wasn’t used at all it would be a different matter.