NEC ECC: People Defined Cost Rates

NEC3 ECC Option C

We have Defined Cost rates per hour that have been agreed by the Client and used to calculate amounts due in payment applications.

These hourly rates are based on a 50 hour working week within the Working Areas. The relevant people are being paid by us for 50 hours, although in some instances they do not actually work the 50 hours in the Working Areas (there is an element of an early finish on a Friday for example).

The client is now re-visiting historic payment applications and reducing the hours paid based on electronic clocking system that indicates that hours in the Working Areas were less than 50 in many instances.

Do we have any recourse to re-negotiate the hourly rates based on say 45 hours (i.e. our defined cost rate would go up but our cost to employ would not change because our personnel are still being paid for 50 hours)?

The rates for People should be assessed by calculating the total ‘cost to employ’ (as defined by the Schedule of Cost Components) and then dividing this sum by the number of hours worked to give an hourly rate.

People rates should also consider; the number of hours worked in a day, the times between which those hours are worked, times that constitute ‘overtime’ and what additional payments are likely to be paid accordingly.

I assume that you have undertaken the above exercise and then based the number of hours worked typically as a 50 hour working week, which is not actually correct in some instances and it should actually be an individual basis assessment.

Although you say that the hourly rates are ‘agreed’ with the Client, you are not necessarily bound by any such agreement, unless it has been formally implemented in some manner, such as a mechanism to facilitate inclusion of these rates in Contract Data Part 2.

As you are under a main option C, I would hope that you are in regular discussions and/or meetings with the Project Manager (QS), not least to discuss the collation and presentation of Defined Cost. This matter could sensibly be discussed and resolved in such meetings, although if it doesn’t then re-calculate the hourly rates and include them within the subsequent payment application, which should at least stimulate discussion.

Just to add to Andrews answer - I am always pointing out to a PM that if a Contractor has to pay their operatives a shift when a CE only took two hours and there was nothing else they could have done then they should pay for a full shift when assessing the CE!