NEC ECC: Overtime payments on CE

The Client is considering instructing additional works not covered by the original Works Information and has requested quotations from the Contractor before deciding if they will proceed. The additional works are not similar to any Bill Items (option B has been used), and therefore, the quotation is based on defined costs.
His quotation includes for materials, plant and labour all with the applicable percentages added. The rates proposed for the material and plant are as expected. The issue arises for the labour element.

By way of further background, the Schedule of Cost Components (SCC) has been adjusted at tender stage to include a list of people with an hourly rate against each, site manager, foreman … labourer and so on.

It would be beneficial, although not vital, to carry the works out outside of working hours and the Contractor has given two options: to complete the works during normal working hours at the rates as per the schedule, or to complete the works after 17:00 (outside of the given site working hours).

To complete the works outside of working hours he has increased the schedule rate to include overtime (time and a quarter). He employs and pays his labourers according to the Working Rules Agreement and states that overtime payments attract a premium and therefore this would be payable.

This proposal seems reasonable but the Contract appears to be silent on the matter. The Client does not think that overtime is payable as it is not mentioned and considers that his people costs should cover everything at all times; therefore, should overtime be included if the out of hours option is chosen?

If the quote is reasonable and the out of hours working is beneficial to the Employer then I suggest it should be accepted. The alternative is presumably for the work to be carried out during normal working hours.

Regarding the contract, others may not agree with me on this, but it depends upon which version of NEC you are working on.

If its NEC3 then the quotation requested under clause 61.2 does not have to be assessed as per the compensation event process and is more along the lines of offer and acceptance. Therefore if the quote is reasonable and the out of hours working is beneficial to the Employer then I suggest it should be accepted.

If its NEC4 then the quotation requested under clause 65.2 is to be assessed as per the compensation event process. There is however provision for the PM and Contractor to agree lump sums for a quotation. Again if the quote is reasonable and the out of hours working is beneficial to the Employer then I suggest it should be accepted.

Dave - you are right I do not agree with you on this point about NEC3. I agree NEC4 wording is better and clearer now as to how a proposed CE becomes implemented, but under NEC3 the process was still there. If the PM did not agree with the quote under NEC3, they could still instruct it and then follow the normal CE process where they could ask for an alternative quote or just at that point assess it themselves. It is not quite the same “offer/acceptance” like acceleration, where the PM has no right to assess it themselves

It is the NEC 3 form.
In terms of reasonableness, it is reasonable to pay a Contractor what they are due, however, this technically works both ways, namely, if overtime is not due then it is unreasonable and a little unfair to the Employer to expect them to pay it.
If there is only one list of rates, and no information on overtime, is it not fair to presume that when pricing his tender the Contractor would have made sensible allowances for extra works to be completed out of sequence, and in less productive situations than the main body of the works?
Conversely, what is the point of stating working hours if working outside of these hours does not mean something other than you may subject your neighbours to nuisance?

From your last comment Declan, the Contractor would have made no allowance within his tender for any ‘extra works’ that is compensation events.

Although the Contract Data does not appear to provide rates for overtime or working outside ‘normal working hours’ (NWH), this may not actually be the case as the definition under the Working Rule Agreement of NWH is 39 hours (8 hours Mon to Thurs and 7 hours on a Friday). Most Sites operate on at least 45 hours per week as a ‘normal working week’ thereby including an element of ‘overtime’ within the rates.

This leads to the matter of calculating an ‘overtime’ rate as an uplift of 25% on the CD stated rates is not a correct application. You would need to break the rates down into component parts and then apply the uplift to the appropriate component(s), before adding back the other amounts. For instance pension contributions are based on the ‘base rate’ and are not generally affected by other payments.

It is not how the overtime rate is calculated that I am unsure of; it is whether, based solely on the Contract, it is due in the first place.
So if the Contractor submits his quote, it is rejected by PM and revised to standard hourly rates, the Contractor is unhappy with this and therefore he takes it to adjudication. What is the likely outcome?

Declan, I would think that if the Contract is aware (in advance) that no premium is to be included then he will do the work during normal hours.