We are working on NEC3 Option C form of contract. The subcontract WI states “Contractor to provide fuel and recharged to the subcontract”.
Contractor is providing the fuel as per WI. Contractor wants to issue a change to WI under 14.3 reduce scope - Reduce target and won’t recharge. Because they can clearly see we have allowance in for fuel in target price.
Can they do that?
We consider there should be no reduction in target price as fuel is provided by Contractor as per WI. There is no change in WI.
But then it takes us to the second part of recharging to the subcontract. Does the NEC3 contract allow? Under what clause?
How is that applied
• Can they recover the fuel cost from the payment due? Or
• Are we entitled to apply for fee on the recharge amount in the AfP?
A review of the actual contract would be required to give a full answer. In simple terms if the Contractor issues an instruction changing the WI then (in the circumstances described) it would be a CE. The assessment of the CE would be the change in Defined Cost due to the event + fee. The argument would be what is the Defined Cost of fuel provided by the Contractor and I think it would be reasonable to consider it as the amount to be contra charged.
On the basis that you can buy fuel at the same rate as the Contractor, the change in Defined Cost would therefore be zero. You will however need to check the actual wording of the contract as to what the contra charge was for eg is it just the cost of fuel or is it for storage and distribution etc. You may be able to demonstrated a positive assessment.
Subject to checking the actual wording, the assessment of the CE would be £0 and the Target unaltered. The cost of you providing the fuel would be Defined Cost and would have the Direct Fee applied.
Regarding contra charges, the NEC uses different terminology and at clause 50.2 allows the Contractor to deduct amounts to be paid by the Subcontractor. So if the Subcontract is clear what is to be paid then yes the fuel cost can be recovered. It would have been better for the principle to have been captured as a Z clause instead of in the WI.