NEC ECC: Interpretation of NEC4 SOCC

We are engaged as the Client on an NEC4 Option C contract. On their latest payment application, the Contractor has applied for IT costs related to equipment (e.g. laptops) and software (e.g. Microsoft Office, various site applications).

We are intending to certify payment for IT equipment, as we believe this falls within the schedule of cost components as equipment. However, we intend to disallow costs related to IT software, on the basis that this does not fall within the schedule of cost components and is therefore deemed to be included within the Contractor’s fee percentage.

The Contractor has since claimed that because ‘computing’ (deemed to include software) formed part of the WAO% under NEC3, this would now be payable under NEC4 as a defined cost.

Are we correct to disallow costs related to software?

Computer software (as well as the laptops themselves) fall within the definition of Equipment. Assuming the software (and laptops) are required in order to Provide the Works and are used within the Working Areas the costs will be part of Defined Cost (SCC item 2).

For a cost to be disallowed it would need to be part of Defined Cost. A cost that is not part of Defined Cost is treated as being part of the Fee. In order to disallow the costs of the software it would need to be for one of the reasons stated in clause 11.2(26).