NEC3 ECC: Under recovery

Can it still be fought that we are under recovering if the total of the Prices has increased through additional instructed works as CEs under Cl 60.1?

The Project Manager is arguing that we have exceeded the tender price by some margin and thus these items should be remeasured as £0 as we have more than recovered what would have been lost. We were arguing that we should be paid at least the direct fee percentage of these items.

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From what you have said, the short answer is ‘No’. Ignoring the contract for a few moments (which is what the PM seems to be doing), would the PM have any truck with an argument by you that you have overspent on the tendered Prices and therefore, even if there was no compensation events, were entitled to additional monies ?

There are two seperate questions to ask wrt compensation events :

  1. Is it a compensation event ? It appears ‘Yes’.
  2. For money, what is the effect of the compensation event on (forecast) Defined Cost to which your tendered Fee is added ? See clause 63.1. It does not matter whether the you have over or underspent the Prices, it is the isolated effect of the CE on Defined Costs + Fee that adjusts the Prices.

I hope this answers your question, but do give more details if my answer has not quite hit the mark.

Going back a step for a second. If the BoQ says say “100m of Drain £100/m = £10,000” and then no drain is in fact needed the Defined Cost (ie what the contractor is paid in cash for work carried out) will reduce, that is the essence of a re-measure contract. The re-meausre is not upwards only. What you will create is a situation where the Defined Cost will be below the Prices (the Prices being rate multiplies by measure as stated in the BoQ) and thus a gain share would follow.

Your recovery against the tender is not, to my mind, relevant. A CE does not give the Contractor cash, only a change in the prices, here we are not looking at a change in the Prices but rather a change in Defined Cost which will now be below the Prices.