NEC ECS: Defined cost and Compensation events

I have come across a situation where the subcontractor claims defined cost and the compensation event for the loss of shift. It is based on Option C defined cost mechanism with a Pain/Gain option.

Initially the works were programmed to carry out for 2 shifts but due to the TM issues the key subcontractor couldn’t get the full output so they had to revisit to complete the works on an additional shift now the revised programme is 3 shifts.

Now the subcontractor applying the full shift on the day lost which I agree as it is their defined cost but they claim a CE on the same event to adjust the target. Therefore the net effect to subcontractor pain/gain is zero. Is this a correct way of approach? Please give your valuable answers. Many Thanks

It sounds as though your Subcontractor has turned up to site and been prevented from carrying out their works as they would expect. There is a number of CE’s which could be raised such as 2, 3 and 19 within the NEC 3 un-amended contract.

With regards to Defined Cost, providing they can substantiate their time spent onsite, they would be entitled to the time worked as your rightly point out.

I believe they would also be able to raise a CE using the reasons as stated above thus increasing the Target Cost.

I’d be interested to hear more about what compensation event was raised by your Subcontractor and also who the TM contractor was i.e. a Subsubcontractor to the key sub or a Subcontractor to your contract.

If the reason for the TM issues are not the Subcontractors fault and is a reason for being a compensation event then yes the extra day will be assessed in terms of the Defined Cost incurred and the target should raise by the same amount agreed. It would not be fair if through no fault of the Subcontractor this ate into their own gainshare.

Hi Thank you for your response. We could charged back this cost if this was our key subcontractor but unfortunately we provide as they are our partner!!

Much appreciated Glenn, Got your point.

Many Thanks