NEC ECC: Option A - Prelims due over Christmas

We are working on an Option A form of contract which had an original planned Completion date of November 2018, due to access constraints the planned completion date has moved to May 2019, an agreed CE which the client is culpable. Where a difference of opinion exists however in terms of quantum is staff time related costs during the Christmas break. We are required to pay our staff during this time period and should be placed in the same position should the event have not occurred, however they also would not have been in the Working Area during this time period, is the client correct in omitting these costs from his assessment.

The answer would depend upon how you have calculated your people rate.

Under the (Short/Shorter) Schedule of Cost Components a people day rate is calculated as the ‘cost to employ’ divided by the number of working days, which takes into account any ‘absence due to sickness and holidays’ see 12 (e).

The number of ‘working days’ is calculated as follows;

365 days in a year
104 days at weekends
8 Bank or Public holidays
25 days annual leave
5 days sick leave

This equates to 223 working days so you would divide the overall cost by 223 to give an applicable day rate, Every time a person works one day they accrue an amount towards when they are not at work, which would include the Christmas break period.

The calculation may be adjusted for particular circumstances, including regular overtime working, working at weekends or night shifts etc, but the same principle would apply.

If the Project duration is less than one year, for example say 2 months, the would it not be more accurate to base it on the number of weekends, public holidays within that time period and a reduced pro rata annual leave/sick leave to get a more accurate daily rate ?

David, I don’t see why you couldn’t, as the assessment is based on the ‘time worked on the contract’.

Having said this, however, the main argument against this would be that each person has already accrued an amount for sick leave and annual leave whilst they have been working on the project undertaking the contract scope. If you isolate a specific time period then there could be an element of ‘double accounting’.

Not a simple issue to prove or disprove under Option A, although if Option C, D or E then there would be greater transparency of costs.

Under item 11 in the SSoC the Contractor recovers “amounts paid”, so provided the Contractor can demonstrate that they have paid their staff over the Christmas period then they can include that amount in the CE assessment provided of course that the normal place of working for those people is within the Working Areas.

I don’t agree with this answer for the following reasons.

A compensation event is assessed as the effect upon actual and forecast Defined Cost.

Defined Cost is defined as the cost of the components in the Shorter Schedule of Cost Components.

The types of ‘people’ under item 1 all require them to be in the Working Areas and Item 11 is effectively equivalent to item 13 in the ‘full’ SCC, that is ‘associated costs’.

This means that ‘people’ can only be charged according to the time they are working in the Working Areas.

This is why an adjusted hourly or daily rate is calculated to account for time not working in the Working Areas, or you would not recover the true cost of employment.

If someone is Providing the Works but not working in the Working Areas then the cost of their time would be deemed to be included in the Fee, as it does not satisfy the definition of Defined Cost under the SSCC.