A quote for a CE has been produced by the Contractor under NEC3 Option A. Elements of the changed work require procurement of specialist subcontracts. Quote includes staff time for the procurement and administration of the subcontract.
The Client struck out all staff costs and stated that “there had been no extension of time/delay to the completion date therefore no increase to this resource.”
My view is that the Contractor has made a reasonable and prospective assessment of the staff cost which it believes will be expended as a result of this event, as required by the contract at Clause 63.1, second bullet “the forecast Defined Cost of the work not yet done”.
For a fuller description of the term Defined Cost, the Contractor refers to the Guidance Notes for Clause 11.2 (22) which states;
“The only use of Defined Cost in Option A is as the basis of the assessment of compensation events. Defined cost is the cost of the components listed in the Shorter Schedule of Cost Components for work done by the Contractor and his Subcontractors”.
In this event, the work to be done is as forecasted by the Contractor for his staff who have had to be involved in inter alia, the procurement and supervision of the subcontracted works, the administration of the subcontractor’s account including the final account process, the addition of the work into the Contractor’s programme and progress updates and safety administration such as checking and processing risk assessments and method statements and carrying out safety inductions.
As this is an Option A contract, the decision as to the level of staffing is entirely at the discretion of the Contractor in order to fulfil his obligations. This also means that the Contractor is entitled through his own efficiencies to expend less staff cost and therefore increase his profitability. He also bears the risk of overspending. If the Contractor does operate efficiently and expends less staff time during the contract, this does not generate a spare pot of money which the Employer is entitled to utilise for the management of the Employers changes. Any benefit generated in this regard is for the Contractor to utilise these staff on improving his performance further on this project, or to utilise these staff in other parts of his business to the benefit of the Contractor.