NEC ECSC - omission of works

NEC3 and NEC4 Contracts Compensation Events
1

We tendered for window replacement scheme (design/build) with local housing authority. We fortunately were successful and our tender was accepted by the Client and the contract signed (NEC short form ). The tender was based on a Project Price list (PPL) provided by the Client.

We undertook the surveys and prepared the precontract documentation incl drawings and estimates/PPL (BQs) as required.

The scheme was given regional approval but when it went to central office for approval they would not approve as they considered one of our rates was excessively high. The Client now wishes for us to omit this work (which is essential to fulfill the contract)

The rate could be considered high but this has been offset by the other rates in the PPL been reduced to allow for this

They have indicated that they may give this out to another Contractor after we complete the works and have instructed us to omit this element of works and revise the PPL - to date we have not done this

The Client is insisting we proceed with the works but we have not complied with this as we cannot agree the costs for the construction phase.

Can the Client just omit works because they believe rates are too high after the Contractors tender was accepted? Please note this work is essential to fulfil the obligations of the contract.

Can anyone advise on a way forward?

2

Yes the client may omit parts of the works. Not sure which version NEC3 or 4 you are working with, but it is in essence a change in Scope (4) / Works Information (3), which is a CE.

3

Firstly you need to be careful if not complying with the Client’s instruction as this could place you in breach of contract at clause 14.1. If the instruction was either a change to the Scope (clause 14.2) or to stop or not start any work (clause 30.4) then it was in accordance with the contract and you have a duty to obey it.

Depending on the nature and magnitude of the instruction your rights will be affected differently. You may simply have the right to a compensation event which could allow you to effectively increase rates in the Price List to recover the indirect / preliminary costs etc that were included in the rate for omitted work. Alternatively you may have the right terminate the contract at clause 90.4 however it’s not clear if the instruction would allow this. It might be possible to argue that the Client is in repudiatory breach and therefore the contract is effectively terminated, the case for this is strengthened by the fact the Client has indicated they want to get another contractor to complete the works instead of you.