On an Option E Contract, the Employer has disallowed cost from our Subcontractor for working outside of the working area stated within the head contract. The Subcontractor has listed their premises as working area within the subcontract they have with us.
Am I right in saying these costs cannot be disallowed as it is a cost that should have been paid to a Subcontractor? We could not have listed all subcontractors premises in the head contract as many of them were not known at the time, although I appreciate some people just state “Subcontractor premises” as a working area.
The Subcontractor does not have to be working in the ‘head contract’ Working Areas for their cost to be treated as Defined Cost.
Depending upon which main option applies to the Subcontract also decides whether the Subcontract Working Areas is actually relevant to the payment assessment procedure under the Subcontract, as under a ‘lump sum’ form (A and B) it isn’t,
The Working Areas under the ‘head contract’ applies to the Schedule of Cost Components under the head contract only. Although this includes Subcontractors under NEC4, the Working Areas test only applies to the Contractor’s People and Equipment.