I am currently working on a substation using NEC3 Engineering and Construction Subcontract April 2013 - Option A which is a lump sum contract.
We have submitted a quotation to undertake some fencing works to the Contractor.
The Contractor has responded by stating that this CEQ will be assessed using LPM allocation sheets. In addition he introduced a pain/gain share mechanism and this has been set at 10%.
Is the PM correct in his decision and proposal?
unless the Contractor has included some clever (or not so clever) z clauses in the subcontract then no it isn’t. I assume by PM you mean the Contractor’s PM.
The quotation needs to be on a lump sum basis.
The additional works should be assessed as a compensation event in accordance with the rules of your contract. Clause 63.1 states it should be a forecast as to what the Defined Cost would be at the point the instruction was given. There is no mechanism for stating it has to be at actual cost - and in most cases that is not what the Client would want anyway if the works took longer than they think they should have done. Certainly no mechanism to agree a mini pain/gain mechanism for a single event.
Practically speaking, by agreement anything is possible, but it still needs to be in accordance with the contractual rules of the contract. It doesn’t mean the PM just because they are the PM can do what ever they want.
The ultimate test is to consider if it went to adjudication (which obviously no one wants to do) what would the adjudicator say - as they would have to assess strictly in accordance with the rules.