NEC ECS: Assessing a compensation event

Included within data part 2 of the subcontract agreement, under data for the Shorter Schedule of Cost Components, is a reference to schedule of rates to be used for assessing People costs in compensation events. It is our assessment that the use of this schedule is by agreement only despite them being included within the subcontract agreement. Is this correct?

Also within the schedule there is a clear error in calculating the rates as in effect they have been double counted in certain elements however the Subcontractor is refusing to agree that they should be corrected and is demanding to be paid as per the schedule. We have instructed under clause 17.1 that this is an ambiguity and provided options to resolve however again the Subcontractor refuses to accept it as an ambiguity. Can you advise a way forward?

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The published version of the Schedule and Shorter Schedules of Cost Components only requires rates for categories of employee carrying out design and manufacture and fabrication outside Working Areas, not people per se.

All of the main Options allow rates and lump sums to be used to assess a compensation event but only by agreement between the Contractor and the Subcontractor (e.g. clause 63.14 in Option A).

So the rates you have in Contract Data part two are erroneous, even if it states that they will be used, this contradicts clause 63.14 which leaves you with an ambiguity or inconsistency which can be resolved under clause 17.1. Unfortunately it’s likely the Contractor will attempt to resolve it in his favour.

Thanks, that concurs with our beliefs and how we have been operating the agreement to date. One question - when they refer to the schedule of rates included within Data Part 2 they have included the statement ‘the defined cost for People within the Working Areas’ - I take it this has no real significance given your statement above i.e. the rates are only there for those outside the working area?