We are operating under an option C contract with pain provision, which have been applied to the sub-contractor agreement. Can you advise if the costs we apply for our sub-contractors are gross or nett as the client makes the deduction to our account then we do the se to our supply chain?
If I have read the question correctly you are on a NEC3 ECC main Option C Target Contract with an activity schedule which has within it a contractor’s share mechanism for savings below and excess above the target?
You do not state what subcontract form the Subcontractor is on? The Subcontractors share is only relevant if it is the Engineering and Construction Subcontract ECS target options C or D. It is not part of ECS options A, B or E.
If the Subcontractor is on ECS option C or D the Subcontractors share is assessed by the Contractor on the Subcontract using the PWDD C&D11.2.29 and Prices C11.2.30 or D 11.2(31). The assessment is on the individual Subcontract. Therefore it is quite feasible for a Subcontractor to be paid savings whilst the main contractor pays an excess. The Subcontract share is assessed by the Contractor at Completion of the whole of the subcontract works and the final assessment. (assuming an unamended ECS).
It therefore does not necessarily flow that if the Contractor is in excess that this will flow to the Subcontracts.
Adding to Barry’s answer, the order that you ask about in terms of assessment is this :
you assess the Subcontractor’s share of pain / gain on that subcontract only i.e. completely independently of what has happened under your main contract;
under the cost based options, Defined Cost is, in simpe terms for subcontracted work, what you pay your subcontractors in accordance with their subcontracts. Consequently, any pain / gain under those subcontractors is part of your Defined Cost at main contract level and hence included in the pain / gain calculations at that level.