NEC ECS: Option A Subcontract - Negative CE and Fee Percentages

The Contractor has 2 Subcontractors under NEC3 Option A Subcontracts. Subcontractor A has included all craneage to offload their materials on site. However, they have requested to use Subcontractor B’s cranes and used them to offload their materials.

This has resulted in a CE to Subcontractor B for additional use of their cranes and a negative CE to Subcontractor A to remove the cranes from their scope.

The Contractor has received the quotation from Subcontractor B for use of their cranes and added some people time of their own for reviewing additional RAMS etc.

My question is, what fee percentages would the Contractor put on the negative CE quotation as they have used some of their own people? Would this be the fees on the Subcontract with Subcontractor A or the fees the Contractor has on the Option A contract with the Client?

If the Contractor has instructed a change to the Subcontract Works Information (Scope) under Subcontract A to remove the requirement to provide craneage, then the assessment of Defined Cost would not include any Contractor’s People.

If the matter was administered under clause 25.2 then any assessment could reasonably include the Contractor’s ‘cost incurred’, which would be the CE under Subcontract B plus a reasonable assessment of any other direct cost.

If an instruction was given to remove the craneage from the Subcontract Works Information under Subcontract A, then clause 25.2 is not applicable.

In your case it looks as though the matter has been dealt with as a CE, so the Contractor cannot then implement a ‘hybrid’ procedure not relevant to the NEC contracts. Consequently the ‘fee percentage’ issue is not applicable.

Thank you for your reply.

Having never encountered this how would clause 25.2 be administered?

I think it’s also worth questioning whether the Contractor has actually incurred any additional people cost. If the staff involved were working on the project full time in any case, aren’t going to be there any longer than would otherwise have been the case and aren’t paid any overtime for doing this additional work, what additional cost has the Contractor incurred?

Under clause 25.2 the Contractor would assess the cost incurred and then this amount would be deducted from the subsequent payment (see the 3rd bullet point under clause 50.2). It doesn’t say how the amount is calculated although as it says incurred ‘cost’ it appears that this points towards a compensatory amount so profit should not be included. This similarly occurs at clauses 25.3, 40.6, 45.1, 45.2 and 86.1.

Cant help thinking that would have been for Subcontractor A to come to their own agreement with Subcontractor B without you the Contractor getting involved. The contract does not specifically legislate for this hence the difficulty you found.