NEC ECC Option C - Equipment rates

The Employer has just entered into a contract with a Contractor which didn’t have an Equipment list included in Contract Data Part 2. The Contractor owns the majority of the Equipment to be used on the project so we now need to agree what rates will be paid as Defined Cost.

My reading of the Schedule of cost components is:

• Payments for the hire or rent of Equipment not owned by . . . the Contractor, at the hire or rental rate multiplied by the time for which the equipment is required (this would be demonstrated through purchase orders/ invoice).

• Payments for Equipment which is not listed in the Contract Data but is . . . owned by the Contractor, at open market rates, multiplied by the time for which the Equipment is required (this is what I believe we need to agree).

• Payments for the purchase price of Equipment which is consumed (I see fuel falling into this category demonstrated with delivery tickets and invoices)

The issue is that the Contractor is proposing rates that will be used for internal and external hire of Equipment and also include their assessment of fuel usage.

Had this been part of their tender submission there would arguably be no issue. However, post-contract I do not believe the ECC Project Manager has the authority to change the nature of Defined Cost, meaning that agreement of these composite rates would fall to the Employer and the Contractor.

The approach to be taken is becoming a bit of a sticking point and I’m wondering if I am overcomplicating things. Am I reading the Schedule of Cost Components correctly or is there a simpler viewpoint to take?

Firstly, published lists for Equipment are only used in ECC Option A when the Shorter Schedule of Cost Components (SSoCC) applies, the SSoCC can only be used in ECC Option C by agreement and only then for assessing compensation events and not for assessing the Price for Work Done to Date (PWDD). Note in particular the requirement for agreement to use the SSoCC, if there is no agreement then assessment will be based on the full Schedule of Cost Components (SoCC).

Your general interpretation of the SoCC is correct, the Employer should pay no more for plant hired by the Contractor internally than they would pay for plant hired externally. In my experience it is normal for the Contractor to provide fuel for externally hired plant and yes this would be paid for as a consumable item and not included in the rate. You would also pay for the driver / operative as people under component 1 (see item 28) although given you are trying to establish rates under item 22 I can see that it is possible to agree an open market rate that includes the cost of people if that is preferred.

Remember that the Employer has few actions in the contract so any agreement or assessment is not done between them and the Contractor. The assessment of PWDD and compensation events is an action allocated to the PM, see clauses 50.1, 50.2 and 11.2(29) in relation to payment and clauses 62.3 and 64.1 in relation to compensation events.

You are not overcomplicating things, the SoCC is a complicated beast and often the subject of much discussion and debate!