NEC ECC - payment inspection

NEC3 and NEC4 Contracts Payment
1

If a Project Manager decides to undertake a detailed inspection of a Contractor’s accounts and finds the following areas of concern:

  1. Go-Karting team building event outside the Working Areas
  2. NEC training inside the Working Areas
  3. Pension contributions for on-Site staff
  4. Tea, coffee and sandwiches for Site meetings.

What are the powers of audit that can be exercised by the Project Manager? How should the above items be dealt with - are they payable or not?

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2

The Project Manager should be looking at all Defined Costs as stated in 11.1 (23) (Option C). Any costs which are not Defined Costs will be treated as included within the Fee (52.1)

So let’s have a look at what you’ve been applying, starting from the top.

  1. Go-Karting

I very much doubt you’ll get this one through as Defined Cost, although team building is very important to a Project, this isn’t something which has helped provide the subcontract works nor is entertainment an item within the SCC.

  1. NEC Training

This will not be considered as a Defined Cost as this is something which will be considered as included within the Fee %. You’ll find that the SSC will state the only training recoverable is safety training, so this is more your CSCS card, working at height etc…You could include training under meeting the requirement of the law also. NEC training doesn’t meet that criteria…

  1. Pension

Yes should be recovered. The PM will ask how this is calculated i’m sure (Remember GDPR!). See People, Payments in relation to people for;

Should be included in your Working Area overhead. If you haven’t made an allowance for this it will considered as included within the Fee %.

3

The Project Manager has the right to inspect accounts and records as provided by clause 52.3 of the cost reimbursable main options C, D and E, although the PM may also delegate this right under the contract to a QS or cost auditor.

Essentially the purpose is to ensure that the Defined Cost is in accordance with the contract requirements, including;

Incurred in order to Provide the Works,
Are in accordance with the component requirements of the SCC,
Whether they are a Disallowed Cost,
Are calculated in accordance with clause 52.1 (rates and percentages or open market rates),
Not duplicated across more than one cost category,
Are not deemed to be included in a percentage charge,

From your list I would suggest the following;

  1. Unlikely to be incurred in order to Provide the Works and the People are outside the Working Areas (certainly for NEC3) so would not be part of Defined Cost.
  2. This is often a contentious issue as the People are in the Working Areas but are they Providing the Works? It would probably depend on factors such as what type of NEC training (is it project specific) and who the attendees are.
  3. Pension contributions from the Employer are an allowable cost under SCC s13.
  4. I would suggest that this is included under NEC3 as part of the Working Areas charge and Catering supplies.
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