NEC ECC: What constitutes a forecast of cost for payment/valuation purpose?

Clause 11.2(29) under Option C defines the PWDD. As stated “The PWDD is the total Defined Cost the Project Manager forecasts will have been paid by the next assessment date, plus the Fee.”

The question is what does the word “paid” actually mean in this context. There are schools of thought that address this, favourably to a Contractor, as being work achieved on site via progress and then there is the belief it means monies physically paid out of a Contractor’s bank account. Clearly choosing one over another can lead to significant differences in payment to the Contractor in valuations. The whole concept behind Sir Michael Latham’s report (leading to the creation of the NEC) was to improve cash flow in the industry so I would be inclined to calculate a forecast of defined cost, in the following period to which the valuation relates, based upon work completed or expected (forecast) to be achieved.

Views appreciated, thank you.

1 Like

I do not get the school of thought that says it is “work achieved on site via progress” as this is not what the contract says. It is monies paid out from the Contractor’s account.

Likewise, the forecast is for monies paid out to the next assessment date. So if work is being done by Subbies on Site and they are on 60 day payment terms which the Contractor is following, then the monies will not be paid out by the next assessment date. And the Contractor should have to wait for another month to get paid, which includes their subcontract fee percentage. This encourages the Contractor to pay promptly.