NEC ECS: How are incurred costs recoverable due to subcontractor fault

NEC3 and NEC4 Contracts General
1

NEC3 - ESC Option B

Whilst carrying out works a Subcontractor struck a previously located buried service and was working without necessary permit. The Contractor instructed the repair to another subcontractor and wishes to pass on the costs. Furthermore, the Contractor anticipates further costs to be imposed by the Client due to the cable strike for an increase in overnight security (power outage).

What is the correct way of notifying/ imposing the costs to the subcontractor at fault.?

1 Like
2

There are a number of potential ways which will depend on the circumstances :

  • if the Contractor is now taking work out of the original defaulting Subcontractor’s work, then then that would be a negative compensation event. Be careful about giving it to the other subcontractor though as this could lead to legal arguments.
  • otherwise, there is no direct contractual way of contra-charging under NEC (except if Key Dates are stated in the Contract Data and missed, but that’s different circumstance). Consequently, you are saying that the Subcontractor is in breach of contract and you therefore have a legal claim on them in contract law. You then deduct this money from them under the contract. Make sure you state why in any assessment.
3

Hi,

Not sure I agree with Jon here.

First, you cannot take work out of a package of contracted work to give it to someone else, for any reason, unless there is a precise and explicit agreement to do so. Such an action will usually amount to a repudiatory breach of contract. The contract makes clear the right to correct defects and damage to the subcontract works at 82.1. Arguably however this is not damage to the subcontract works.

Second, this sounds to me like a subcontractor risk has occurred. To the extent a relevant insurance does not cover the cost arising from that risk occurring then the subcontractor bears the cost (clause 85.4). That cost is met by the subcontractor firstly through a deduction to the account (50.2 amounts to be paid by or retained from the subcontractor) or, at law, as an abatement to the value of the work. Either way will end up in the same position of a payless notice being issued against the subcontract account explaining the reason for and calculation of the deduction.

4

You seem to be agreeing, but are being far more specific than I was (which is good).