NEC3 Option B - Payment against rates for holidays

NEC3 Option B - If I have a monthly rate for a project manager at £5k a month, can the Project Manager multiply that rate x 12 months and then divide it into days (excluding weekends) and then not pay when the pm is on Holidays or off Sick etc? I would of thought that they would have to pay the monthly rate unless the pm is off for a significant amount of time.

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Is this on a specific method of measurement or is this for valuing a compensation event?

Just to be clear, are you employing a Project Manager under another form of contract e.g. the Professional Services Contract to administrate and manage an ECC option B contract, or is a Contractor’s project manager / site agent who is somehow contracted for under option B ?

If it is the former, it would depend upon the terms of that contract.

If it is the latter, is a bill rate stated for this person ?

Hi, this is an item in the Bill of Quantities (Engineering and Construction Contract Core Clauses with Option B). We have a monthly rate for our project manager of say £5000 in our BOQ.

At the end of the month we apply for the £5000. However if our pm is on holidays or sick for 2 days for example, the Project Manager is not paying us the £5000, he is dividing the £5000 into days and then paying us for days our pm is in the Working Area.

It was my belief that the rate should be paid in full unless there was significant absence?

Firstly, as a comment, it is unusual for the Employer to specify a rate for an input i.e. the contractor’s project manager (small p & m, so not the Employer’s PM) under an option B contract which is for ‘goods’ i.e. outputs.

Something to clarify : is the rate x final quantity (likely to be) more than 0.5% of the total of the Prices at the Contract Date. If ‘Yes’ then any change in costs may ultimately be assessed using change in Defined Cost plus Fee. See option B clause 60.4.

In addition, to determine this one, you would probably need to look at how having a Contractor’s pm was expressed in the BoQ with it being a ‘reasonable’ interpretation (lawyer’s delight) of what was said. Having said this, ambiguity within the BoQ - should we say the spread of ‘reasonables’ is interpreted - is, under contract law, interpreted in the light least favourable to the person who put forward that description, which in this case is the Employer (correct if wrong). So if a reasonable reading of the item is your interpretation (at the lower end of cost), but the E’s PM is insisting on a gold plated interpretation, then in accordance with 60.6, he should “correct” the mistake and you get paid thechange in your Defined Costs to meet the higher higher standard.

Hope this helps in some way, but without seeing the item description, not sure what more I can add.

Jon thanks for your time. I’m a bit confused by your answer. We have a BOQ with a rate item

[b]Description                  Nr          Unit           Rate            Total[/b]

Project Manager         200      months       £5000        £1,000,000

This is for our project manager to run the Project.

At the end of the month we apply for £5000 for this item. If our pm is absent through sickness or holiday are we still entilted to claim the £5000 as our pm was not inside the working area for the full working month.

Our client has made the following calculation £5000x12(months) / 52(weeks) / 5(days) to work out the cost per day as £230.77.

He then says there is 21.67 working days in a month. You have missed 2 days through sickness / holiday therefore you are been paid 21.67 - 2 = 19.67 days x £230.77 = £4539.24.

My query is - Are they entitled to do that or should they pay our £5000 as in calculation this figure we would of taken holidays and sickness into account. Therefore the daily rate would be 365 (days) - 104 (weekend days) - 8 (bank holidays) - 25 (holidays) - 5 (sick days on average) = 223 working days in a year.

Therefore I would calculate the daily rate at £5000 x 12 (months) / 223 (working days per year) = £269.06 per day

Therefore over the course of the year the client will pay a maximun of 5000 x 12 (months) = £60,000 or 223 x £269.06 = £60,000