NEC ECC: Option A - Scrap Value (negative CE)

Contract: Option A (amended)

Scenario: The Project Manager has instructed the Contractor to remove and scrap a piece of equipment which contains a lot of copper and therefore has a high scrap value.

The cost of carrying out the works will be less than the scrap value i.e. £25k to remove £75k scrap value.

From this instruction it would appear that when pricing this work you would be £50k negative plus fee % and subcontractor % as a deduction. This seems an odd situation to myself as the cost with the fee on top puts the Contractor in a worst position than he would have been due to a scrap value which was never in the original scope.

I would think that a fairer way to assess this would be to give the credit note for scrap without fee % however I don’t believe the contract allows for this. Has anyone had any similar situations? I am going to predict that contractually the correct way to do this is to give back the scrap value with the fee % on top, but as I have said this does not feel correct to me for scrap value situations.

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Very interesting point/question. It is difficult for even NEC contracts to cover off every eventuality. Bearing in mind that any CE is meant to put the Contractor back to a point that they are no worse or no better off (apart from earning fee on extra work).

It doesn’t sound like at tender stage they would have known about scrapping the equipment so would not have had a chance to include scrap cost and assess fee as part of their tender. In this instance therefore, I believe you are correct that the removal of the works should include fee, but the scrap value added back should not include fee as they never had a chance to price for the fee in the first place now to have it removed. If this is explained clearly I struggle to see any PM pursuing the fee on omitted work just because with the wording of the contract (that does not cover this eventuality) suggests they can.

Another example of this is 63.8 when dealing with ambiguities. If there is an ambiguity between two elements of Employer Works Information then the Contractor (it says) is deemed to have allowed for the cheaper/quicker one. Even if it is known they have priced the more expensive one(which is the one the PM then instructs), they could claim the difference between the two as though they had priced the cheaper. In this situation I advise a Contractor not to do this as they contractually would win this battle but is not good for relationship and they will never win the war!