NEC ECC: Who pays cost of preparing a Contractor's proposal?

If a PMI is raised requesting a Contractor’s Proposal, is the Employer liable to pay the costs for the contractor to produce the proposal. (Contract is NEC3 ECC with standard SCAPE amendments)

The Contractor is claiming for design costs in developing a Contractor’s Proposal.

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Under clause 61.2 the PM may instruct the Contractor to submit a quotation for a compensation event for a proposed instruction. Depending on which main Option the delivery agreement is based on will depend on if the Contractor will be reimbursed for preparing the quotation (A & B = no, C, D, E & F = yes). Also if the proposed instruction is not given, the compensation event will not be implemented and the Contractor will receive no payment for his efforts. Although under Options C, D, E & F he will be paid the Defined Cost plus Fee as part of the Price for Work Done to Date.

If in order to quote for the proposed instruction the Contractor will need to do a lot of work at risk, e.g. design then he should request that the PM instructs the design work as a change to the Works Information and pays for this as a CE. The Contractor can then quote for this as described above.

Just to add to Neil’s (very good) answer if you look at the guidance notes it says the Project Manager MAY decide to pay for either a large quotation or lots of smaller ones. The very fact they wrote this must suggest that there are situations where they should consider paying.

I think NEC contracts generally are about encouraging good behaviors. To not pay for such quotations would certainly encourage the wrong Contractor behaviors where they would not put the effort in with quotes if they have done so previously and not been paid.

Just to add two comments to the previous two (excellent) responses, who’s sentiments I agree with :

  1. under NEC3 options A & B, where the cost of preparing a quotation is explicitly excluded from being Defined Cost, a literal integration of “preparing a quotation” is the cost of the QS compiling it in a spreadsheet and presenting it for acceptance. I.e. any additional cost of planning it, designing it, doing a cost plan etc. are part of the compensation event assessment.

  2. Under NEC4, one of the new compensation events is the for a proposed compensation event which is not instructed.

Just to confirm what I always say though : there has to be a change in Defined Cost so, for example, the Contractor’s QS working a few hours extra for no overtime means there is no change effect on Defined Cost.

This is why it was changed in NEC4, unscrupulous Employers / Project Managers getting free cost advice from their contractors and sending them off on lots of fishing trips!