For one of the NEC3 ECC Option B project, the contractor found that the final measured quantities were substantially decrease comparing of the original BQ quantities (approx. 50% of quantity reduced). Due to such decrease in quantities, the Contractor considered that this should be a CE to compensate the loss of overhead / fixed cost. However, no contract provisions can be found to cater for this situation? How can the Contractor do this?
There are contract provisions -see option B clause 60.4.provided the reduction satisfies the criteria stated in the clause. In this case, from what you have said
- there is no instruction changing the Works Information (tick)
- “the Defined Cost per unit of quantity” will change as the rate contains fixed overheads so the per unit of quantity costs will change (tick), and
- the unfair one is if the FINAL total quantity of work done (not the CHANGE in quantity) x original rate is less than 0.5% of the Prices at the Contract Date.
Why is the last one unfair ? Because even if it was not a reasonably major quantity, then if the ORIGINAL quantities reduce so much that the FINAL quantity x rate is less that 0.5%, the Contractor only gets the FINAL rate x quantity and hence NOT the recovery for overheads planned for. In your circumstances, this potentially means you miss out on recovering your overhead / fixed costs.
Jon - refer to your above explanation, can I say that both substantial increase / decrease in quantities can be a compensation event once the amount difference is more than 0.5% of the Prices at the Contract Date.
I have slightly tweaked my reply above (because the grammar and explanation was not as good as it could have been … I did it in a hurry, apologies). Hopefully, this makes it clearer.
Regardless, the FINAL quantity x original rate has to be more than 0.5% of the Prices at the Contract Date. It is not the CHANGE in quantities that counts.
Jon - I see no contract provision(s) for the Contractor to compensate the loss due to the substantial decrease in quantity (not the CHANGE in quantity).
A change in quantity can be a substantial decrease in quantity !