NEC3: Additional Off-site Storage Cost in Contractor's Quotation

NEC3 and NEC4 Contracts Compensation Events
1

I am a PM assessing a CE quotation from the Contractor in a NEC 3 Option A contract.

The CE delayed the installation process of a pre-fabricated unit fabricated “outside the Working Areas”

The Contractor included the additional cost for the storage of the concerned units outside the Working Areas.

  • Cl.63.1 Assessing CE by the actual Defined Cost + Forecast Defined Cost + Fee

  • Cl.11.2(22) Defined Cost is the cost of the components in the Shorter Schedule of Cost Components.

  • Cl.52.1 Defined Cost includes only amounts calculated using rates and percentages stated in the Contract Data and other amounts at open market or competitively tendered prices.

  • Our Activity Schedule do not have an item for storage of materials (inside or outside Working Areas).

  • The entire clause 5 and 51 in the Shorter Schedule of Cost Component “Manufacture and fabrication” is deleted in our contract. Which means the phases “manufactured or fabricated outside the Working Areas” and “Amounts paid by the contractor” are deleted.

In connection with the aforesaid contract conditions, am I correct to say the “Additional off-site storage cost” should not be in the quotation, or simply say it’s not compensable?

It seems not fair to the Contractor. But I don’t see a way within the contract to compensate.

Thank you.

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2

It is unclear to me whether the CE was specifically for the delay of the installation or whether a CE has had an impact on the project and is therefore delaying the installation.

If it is the former, then I would say the contractor is entitled to claim for additional storage costs, regardless of whether it is detailed in the schedule or not. It is an actual cost to the contractor and as long as they can demonstrate that, they can claim for it.

If it is the latter, I’d say it shouldn’t be in the CE but that a separate CE could be raised.

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3

The off site storage costs for the pre-fabricated unit could be a ‘specialist service’ under SSCC s45.

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4

Benny, it sounds like you want to find a way to pay something which clearly results from a compensation event but you’re not sure what to pin it against, I commend you for doing that.
I suggest that you could consider section 5 of the Shorter Schedule of Cost Components, if the units were wholly or partly designed for the works - 51 amounts paid by the Contractor in connection with the manufacturing and fabrication of Plant and Materials.
Otherwise perhaps you could either view the cost as part of the delivery charge under section 3, 31 or, view the storage charge as a form of cancellation charge, the delivery having been cancelled and incurring the storage charge as a result - section 4, 42.
Good luck.

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