Under ECC option C, where the currency of the contract is specified in GBP Sterling and a payment is due in euros how is defined cost calculated? Clause 50.6 specifies such payments are converted to the currency of this contract in order to calculate fee and any contractor’s share using the exchange rates in CD1. Should the Employer pay all defined cost based on these exchange rates or only fee?
Under an Option C contract the first sentence of 50.6 solves your query. This clause requires that if the contractor applies for payment (say of a supplier’s invoice) in a currency other than the currency of the contract (i.e. in Euros rather than Sterling) then the Employer must pay that cost in that currency. However, payment of the associated Fee is on the basis of converting the currency to the currency of the contract using the exchange rates in the Contract Data and using that sum to calculate the Fee for that element.
Currency of the contract = Sterling
Exchange rate Euro to Sterling = 1.10
fee percentage = 10%
Invoice received = Euro 1,000
Convert to Sterling = 1,000 / 1.1 = 909.09
Fee @ 10% = Sterling 90.91
Amount paid to contractor = Euro 1,000 + Sterling 90.91
I.e. the Employer takes the exchange rate risk on the Euro 1000 cost