NEC ECC: Item in Scope but not in BofQ for an option B contract

NEC3 and NEC4 Contracts Compensation Events
1

An item of work is in the Scope but not on the BofQ. The Contractor had not noticed that item at tender stage, they clearly have NOT allowed for that within their first Accepted Programme, and there was no where in the BofQ for the Contractor to price for it.

Two months into the job and the Project Manager has agreed that omissions in the BofQ are a Client risk and has agreed this item is a compensation event and has requested a quote. This will involve an extra week on the critical path works that is unavoidable. Whilst they agree this is a CE for an increase to Prices, they are saying that we should have allowed for the time element within our original programme as 20.1 states the Contractor provides the works in accordance with the Works Information, and 31.2 states that the programme should show ‘the order and timing of the operations which the Contractor plans to do in order to Provide the Works.

As a Contractor I see no other area in the contract where a CE can attract cost only not time, and I think we should be able to claim an additional weeks prelims for the planned Completion moving unavoidably by one week for something that was not in the original programme.

Thoughts?

2

I suggest you have a look at clause 60.7 (NEC4). It is clear that in assessing a compensation event due to an inconsistency between the BoQ and the other documents (which is the case here), the Contractor is assumed to have taken the BoQ as correct. If the BoQ was 0 then the Contractor is assumed to have based on 0.

3

Once a compensation event is triggered, the assessment always includes consideration of time and cost based on the change due to the compensation event.

Clauses 60.4 and 60.5 give the threshold for a compensation event. In the context of a non-existent BoQ item for something which is in the Scope (and is covered in another item in the BoQ), both could be triggered.

Clause 60.7 gives a specific rule which applies to the circumstance. It says “In assessing a compensation event which results from an inconsistency between the BoQ and another document,” - i.e. work that is in the Scope, but not covered in the BoQ - “the Contractor is assumed to have taken the BoQ as correct”.

An important thing to remember is that the BoQ referred to is the priced up BoQ, not the one sent out for pricing with the tender.

So let’s consider a number of scenarios:

  1. the item is in the Scope, but not in the BoQ and the Contractor’s programme and, when added in, is off the critical path: so there would be no effect on time-related preliminaries and the Contractor would get the change in direct Defined Costs (DCs);

  2. the item is in the Scope, but not in the BoQ, but is in the Contractor’s programme and is OFF the critical path: I think the result would be the same, as according to clause 60.7, while the programme shows it, there is no effect on time, but the Contractor has not priced it.

  3. the item is in the Scope, but not the BoQ or the Accepted Programme and when added in, is ON the critical path: clearly here the Contractor has not priced or allowed for it anywhere, so time and cost are part of its effect and clearly should be part of the assessment.

  4. the item is in the Scope, but is in the Contractor’s programme and is ON the critical path and as part of a lump sum, the Contractor has clearly allowed for those time related prelim costs in the BoQ, but there is no item covering the direct costs: again, the Contractor definitely gets the direct costs, but I would argue as the C has already allowed for it in their programme and added in a corresponding sum to the priced BoQ, there is no change in their indirect Defined Costs … but I say “I would argue”, so not definitive.

  5. the item is in the Scope, but not in the BoQ, but is in the Contractor’s programme and is ON the critical path: here the Contractor is still definitely entitled to the additional direct costs. On the one hand, the PM.Client could argue that, under clause 63.5, the Contractor has allowed for it in their programme and consequently there is no entitlement to additional time. As a result there is no entitlement to additional time-related prelims. On the other hand, the Contractor could argue that there is no allowance within their Prices, as represented by the BoQ, for these time related costs and therefore there is a change in Defined Costs under clause 63.1. Hmmm … !?! (I would probably err towards the PM/Client view)

You situation seems to be point 3, so that would be answer.