NEC3 ECC Option A.
Under a CE quotation to be submitted to the PM, which is back to back with our Subcontractor (ECS3 Option A) we (Contractor) have assessed the Subcontractors quote. The Subcontractor did not assess the prolongation component associated with the change (which they are entitled to) in the quote, so we as Contractor have been obliged to undertake a Contractor’s Assessment (equivalent to PMA under the head contract) as the SC stated the price was TBA at a later date. Notwithstanding this being outside the SC quotation rules, the CE has resulted in an assessed 1 week delay to the subcontract works (using the SC latest accepted programme) and which has been assessed using the SSOCC under the terms of their Subcontract.
We have subsequently used the whole of the Subcontractor’s costs (including the prolongation amount) as a cost component in our CE Quotation to the PM under the head contract quotation.
Using our head contract accepted programme,assessed at the dividing date (date of instruction), the impact on our works prolonged is zero (some terminal float has been used). We have however maintained our TRA.
Q - Is the whole of the Subcontractor’s costs claimed (including the CA for prolongation) included the quotation deemed an acceptable recoverable cost, even though there is no programme impact under the head contract.
We are attempting to do the right thing by the Subcontractor, but concerned the PM will deem the price of the 1 week SC prolongation to be our risk, and therefore not allowable.
If you can show how the Defined Cost of People, Equipment etc. (in relation to your Subcontract but based on the SSCC) increased as a result of the compensation event - regardless of your proposed alterations to the Accepted Programme for which I comment further below - I don’t see on what grounds could the PM refuse to allow that increase.
Having a delay in the critical path of your Subcontract does not automatically translate to a delay in your head Contract; you could have allowed more time in the latter for the same activities but that does not mean there is no increase in the Defined Cost of your Subcontractor (and yours by extension). Of course, you might need to refer to the terms of your Subcontract, however you have probably already done that if the Subcontractor’s appointment has been accepted by the PM (clause 26.3).
As a final note, you say that there is no programme impact but you also say that you have used some terminal float; if you have reduced your terminal float, it means that you have brought the date of your planned Completion closer to the Completion Date. If your planned Completion has moved due to the CE, then the Completion Date is also moved accordingly (see clause 63.3) - the terminal float is yours to keep or use for your own delays.
I hope I addressed your queries.
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Thanks Peter.
For clarity, the Main Contract planned Completion is ahead of the Subcontractors planned Completion. The SC has been delayed, but doesn’t impact on the Main Contract pl C. The question relates to whether the SC prolongation cost is acceptable in our CE QTE on the basis it is a cost we will incur and falls under the definition of a “Subcontractor” cost (as a cost component) in the Head contract SSoCC. Our view is it would, but we understand the Employer may have a different view point. No idea what that is until we submit the QTE.
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No worries. To be honest, I struggle to see how can the Subcontractor’s planned Completion can be later than the Main Contractor’s without affecting the latter. In such a scenario, you would be right to be concerned about the PM’s reaction.
As regards the “Subcontractors” cost component, that forms part of the “Short Schedule of Cost Components” of NEC4; you have advised that you are under an NEC3 contract (unless your SSCC is amended by a Z-clause or otherwise).
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No problem at all - I hope it works out!
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