NEC ECS: Separate Activity for Management cost in an Option A Activity SChedule

NEC3 and NEC4 Contracts Payment
1

We are in contract on an NEC4 Option A ECS.

We have completed Stage 1 (Design) which has enabled our client to release funding for Stage 2 (Construction). We are currently in the process of putting the Activity Schedule together for Stage 2.

To enable a stable cash-flow (which did not happen on Stage 1) we have expressed a desire to have separate Activities for our Management Costs (Prelims) i.e.

  1. Jan 2020 Management Cost
  2. Feb 2020 Management Cost
  3. March 2020 Management Cost

The Client is telling us that the NEC Contract says we can not do this. We disagree, we don’t believe it says we can’t. We have now reached a stalemate. We backed down when this issue came up on Stage1 and it caused us horrendous cash flow on the project. We do not want to back down now.

The client has sought impartial advice and have subsequently involved us in discussions with their impartial person who has stated the following:-

“The contract or the Activity Schedule does not recognise separate allowances for preliminaries, management costs, overheads, profit, risks, or contingencies. Any such allowances must be included within each item on the Activity Schedule”

We believe this is his own interpretation and his own advice to the client but it does not a give clear clarification of what the contract says we can or can not do. We challenged him and he was unable to convince us we were wrong.

We are more than happy to be put right but we can not see where in the contract it says we can not have a separate activity for Management Cost in the Activity Schedule.

All advice or even a case example where it’s been discussed would be greatly received.

2

If you are preparing the Activity Schedule, it can have whatever you want in it. The practical question is, ‘can you clearly identify when it has been completed?’ so you get paid for it.

In the case of itemised preliminary and management costs, the answer is ‘Yes’, although as a tip I would suggest you put in minimal requirements that you know will be on-Site, even if the sums attached to the individual monthly activity is more in line with what you expect to have within the Working Areas.

Overheads, profits, risks and contingencies are much more difficult to assess, so the normal and sensible practice is to spread them across other activities.