NEC ECC: Missed KPI - What happens to the incentive payment?

NEC3 and NEC4 Contracts Secondary X, W and Y options
1

We have a situation whereby the contractor has missed the date to achieve a milestone in the programme (project is time driven). Also the contractor has failed to provide the updates in the intervals provided in the contract data (X20.2) and therefore failed to provide any proposed improvements as per X20.3.

X20.4 states that payments are made when the contractor has achieved the milestone or improved upon it. If the contractor has not proposed any improvements then how can we measure that?
On the face of it they are not entitled to be paid this money. The problem we have is that due to the terms and conditions of the framework the contractor is to place a set %age of their Fee at risk which is then placed in to the incentive schedule payments list.

Due to the intention of the framework and X20, this is to incentivise the contractor and not punish them, so can we take that money and move it to the next milestone? Or are we permitted to allow the contractor to provide a forecast after the date in the incentive schedule and have them make proposals for improvement?

The reason I ask is because X20.5 states we cannot remove or reduce a payment stated in the incentive schedule.

2

From what you have said it looks like a part of the Fee is paid as an incentive for meeting the requirements in the Incentive Schedule, which has not happened due to the Contractor’s performance.

The procedure is clearly collaborative and so the Contractor should have participated and carried out their stated obligations, which you say they haven’t, that is to report on performance and to submit proposals for improvement where necessary.

Payment is due when a target has been achieved, which it hasn’t, so the corresponding payment, therefore, does not become due. The amount is not removed from the Incentive Schedule, it is simply not actually due for payment. The budget, however, can be used, if the Client so desires, to ‘fund’ an additional Key Performance Indicator which may be added to the Incentive Schedule.

Perhaps any further KPIs could be described so as to include compliance with the requirements of option X20, possibly even linked to part of the incentive amount. That might focus attention and ‘drive’ the collaborative approach required to administer the procedure correctly.