NEC ECC: Re-measurement under an Option D form of contract

NEC3 and NEC4 Contracts Compensation Events
1

I am currently working with an ECC Option D contract where the contractor is also carrying out the detailed design. Could someone offer some affirmation or correction of my understanding of the remeasurement and the subsequent changes to the Total of the Prices (below is a conscious deviation from the NEC3 wording):

  1. Errors in the bill of quantities (including quantum) are corrected as a compensation event under cl. 60.6 and 60.7. The issue of re-rating an item is dealt with by clauses 60.4 – 60.7. This effectively allows the tendered Bill of Quantities to be adjusted to align with the original Works Information.

  2. Any subsequent changes made by the Employer to the Works Information (i.e. increase or decrease in scope) are compensation events under cl 60.1(1).

In addition, I’d also like to ask how changes to quantities resulting from the contractor developing the detailed design; and, encountering contractor held risks should be treated?
The two scenarios I have in mind are:

  1. Value Engineering (a reduction in quantum or a reduction in cost by developing a different solution) – should an item of work that has changed during the contractor’s development of detailed design result in a full remeasure of the actual work carried out?

  2. Physical conditions – If a Z clause deletes clause 60.1(12) and the contractor finds himself having to deal with an obstruction or soft spot in the ground, should this change be remeasured to reflect the actual work carried out?

I trust the above is clear and would welcome your thoughts.

1 Like
2

My first reaction to this question is : why on earth are you having the Contractor do detailed design under a BoQ option as their motivation is to do design which increases quantities.

However, you are right in what you say.

With regard to your two specific scenarios, for the first :

  • a reduction in quantum of rates defined in the would potentially trigger a reduction in the target Prices at Defined Cost + Fee, but a Works Information compliant different solution wouldn’t necessarily. Having said this, it may mean none of the original BoQs cover what the Contractor is now planning to build, so new rates or lump sums would be needed (why a BoQ for C design !!!). This could get very complicated to calculate distracting from the whole point of using a target cost contract.
  • you are right for the second scenario.
3

Using Option D in conjunction with Contractor design is a debatable procurement strategy for the scenarios you have set out.

Regarding your queries, my view is that:

  1. Yes, the original Works Information should be remeasured and the quantities adjusted if necessary including correcting of any mistakes under 60.7. Compensation events may come out of this exercise under 60.4.

  2. Yes, provided that the Contractor has not provided any WI that needs changing to align with the Employer’s WI.

  3. In accordance with 63.11 that type of value engineering would not reduce the Target – it would be a change in WI which the Contractor proposed and the Project Manager has accepted.

  4. Soft spots would generally be outside of the design line. If the soft spots, and how to treat them, was not identified in the WI then an instruction is required to confirm how to treat them which is a change in the WI and hence a CE. If the obstructions are encountered within the design outline then arguably there is a mistake in the BoQ which needs correcting as a CE.