NEC3 ECC: Can the PM exclude the retention of Suppliers in the Contractor's IPA?

NEC3 and NEC4 Contracts Payment
1

Can the PM exclude the retention of Suppliers (not classified as Subcontractor in clause 11.2 (17) in the Contractor’s IPA?
in clause 11.2 (23) “Defined Cost is - the amount of payments due to Subcontractors for work which is subcontracted WITHOUT taking account of amounts deducted for - retention”
PM’s opinion this is applicable only to Subcontractor (clause 11.2 (17)). But for the Suppliers with retention provision on their Supply agreement, retention can be excluded in the contractors IPA. This is consistent in Clause 50.2 - The amount due is
• the Price of Work Done to Date.
Clause 11.2 (29) The Price for Work Done to Date is the total Defined Cost which the Project Manager forecasts will have been PAID by the Contractor up to the end of a period three weeks after the next assessment date plus the Fee.
Thus, the PM argue that since the retention will not be Paid until completion of the contract, Contractors IPA should only include amount payable (cash out) up to next assessment plus fee.

1 Like
2

Yes, I think the PM is within his rights to exclude the Supplies retention if they are not due to be paid before the next assessment date.

In your question you refer to 11.2(29) stipulating “… up to the end of a period three weeks after the next assessment date plus the Fee.” This is not the standard definition, so must have been amended by a Z clause. The standard definition is " … will have been paid by the Contractor before the next assessment date plus the Fee,"

3

Based on the clauses you have referred to the answer is Yes, the PM can exclude retention until it is due to be paid out. But I would suggest some further checks before this can be confirmed as the correct decision:

  1. Check if the suppliers are Subcontractors under the contract- refer to clause 11.2(17)
  2. If they are not Subcontractors then clause 11.2(23) confirms that the Defined Cost is determined using the Schedule of Cost Components, so check what is included under the relevant category.

I hope this helps, but if you need further advice, please don’t hesitate to get in touch.