Under NEC3 Option C, how is the payment assessed when there is a compensation event that occurs between main Contractor and subcontractor ?
What the Contractor is paid for as a Defined Cost is what they pay their Subcontractors in accordance with the subcontract terms.
So, assuming the Subcontractor is on the Engineering & Construction Subcontract, a compensation event occurs at subcontract level which is mirrored at main contract level. The change in Defined Costs at subcontract level is calculated and the Subcontractor’s fee percentage is applied to this : this is the adjustment to the subcontract Prices and becomes the change in Defined Cost at main contract level.
To this is added the Contractor’s ‘subcontract fee percentage’ and this becomes the chanfe in Prices at main contract level i.e. (calculation of change in Subcontractor’s Defined Costs x (1+Subcontractor’s fee percentage)) x (1 + main Contractor’s subcontract fee percentage).