We have a NEC3 ECC Option A contract (or a NEC3 based contract because of many amendments),
My question is: Are we obliged to show the employer our subcontractor offers (unit rates) in case the employer requests a change to the scope?
From my point of view, we are not obliged to show our subcontractors unit rates because we have a lump sum contract. This fact should also be applicable for compensation events (unless otherwise agreed). Furthermore, our subcontracts are not NEC subcontracts and we have also standard nondisclosure agreements with our subcontractors.
Nevertheless, all offers must be reasonable and in line with the market.
I assume the employer’s expectation will be that we have to show the subcontractor offer and we can only add the subcontractor fee.
Under Contract Data Part 2 the following is agreed:
The subcontracted fee percentage is the percentage to be added to the total cost, excluding tax, of any additional cost incurred by the Contractor from any subcontractor for additional items due to be paid for by the Employer. The subcontracted fee percentage is 12.5%.
-> The meaning of “from any subcontractor for additional items” is not clear for me (maybe only applicable for a specific CE - see below ***)
We have also to consider contract clause 63.7 and 63.14 (amended).
63.7 Assessments are based upon the assumptions that the Contractor reacts competently and promptly to the compensation event, that any Defined Cost and time due to the event are reasonably incurred and that the Accepted Programme can be changed.
-> costs must be reasonably, but no obligation to show the subcontractor offer
63.14 If the Project Manager and the Contractor agree, rates and lump sums may be used to assess a compensation event. If rates or lump sum fixed prices are used, then no fee, direct or subcontracted, applies to these rates or lump sum fixed prices.
-> What happens, if we cannot agree on lump sum for a compensation event? Do we have to show our subcontractor unit rates?
***Furthermore, under contract clause 61.1 (xx) we have one compensation event item (contractor encounters physical condition (e.g. buried foundations, hazardous substances, …)) where is clearly stated that the price has to be calculated by the provision of the subcontractor quotation plus the subcontractor fee. At all other compensation events there is no such agreement.
-> This means, that the disclosure of the subcontractor offer is not a general requirement. It is only applicable for a specific compensation event. Otherwise it has to be agreed in general.
I would appreciate you feedback very much.
With best regards,
Peter (from Germany)