NEC ECC: When is a defined cost a defined cost

Background: Option C contract each project is a CE, each with sectional completion.

Project (CE) value was agreed with client and an approx 2 1/2 month duration into project before project was stopped and withdrawn.

On agreement of CE (project) the work was issued to our sub-contractor as an Option A contract, which would require a number of items of specialist plant, with an agreed start and finish date.

Our client then required some additional surveys done before works could proceed and we issued a EWN advising this could delay time and the risk of extra cost.

As we had a completion date that the client needed us to meet, we advised our sub-contractor to stop but advised this should be only a short delay.

Meetings were held with the client to discuss the delay which at the initial time was expected to be days and turned into weeks. However, neither us or the client talked around any costs or how to mitigate them.

Eventually the job was pulled and we have been requested to put costs to date in. We then had a claim from our sub-contractor for the plant he had stood waiting to start. We had not asked them to hold it but they were aware that we need a quick start, so we agreed in principle that we would except 50% charge as long as the client agreed.

As we felt we had a good working relationship with our client and to avoid paying our sub- contractor and then getting it disallowed I approached them with the breakdown of charges, but have not applied for them on any application.

Initially the client showed interest and we agreed a format and date range, subject to some evidence being provided. (This we feel we have now done).

However, the client has now a new cost consultant, and his take is that we did not inform them we were holding the plant and the potential cost. In addition as we have not applied for it, it cannot be a defined cost and therefore can not be viewed as one. Should we apply for it now it will be disallowed.

My view is we issued an early warning, but were not asked to provide costs to mitigate them, we have made them aware of a defined cost but not applied as we wanted to work with the client before applying.

Should our client pay for these charges due to them stopping the CE (project)

I would really welcome some help here, with NEC3 clauses that I could use.

If viewed as disallowable I would like to understand why.

Thanks for any help provided.

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This seems similar to a previous, recent question, although highlights the need for compliant contract administration, which is effectively what clause 10.1 is requiring you to do anyway. Not wanting to spoil a ‘good working relationship’ is often a reason given for not applying the contract procedures correctly, but over time it actually makes the relationship worse as one party invariably seeks to protect their position when things don’t go according to plan and it creates a dispute.

Although you state that each project is a compensation event with a sectional completion date, this can only be done correctly by a supplemental agreement under the contract. If implemented as a compensation event then it is unlikely that the Employer can insist on Completion by the stated dates, unless these are just monitored according to the dates the Employer has advised, rather than as a formal sectional completion date.

With regard to the fact that because you have not applied for the costs means they can’t be treated as Defined Cost, I am not aware of any clause under the ECC which states this. What it does highlight, however, is that people often change through the life of a project and informal agreements made with a particular person disappear once they walk out the door.