NEC3 Option C Insurance Premium Cost Recovery

We are administering an NEC 3 Option C Contract. Application has been made for a site insurance fee of £350k as Defined Cost. This is a lump sum payment to cover all-risk exposure and the basis of the application is that there is a specific section nr 7 in the Schedule of Cost Components for insurance.

There are no Z Clauses which would affect or amend the Schedule of Cost Components.

Our question is whether the cost of this insurance is recoverable as Defined Cost or if it is included in the Contractor’s fee percentage.

Hi Mark, the cost of providing insurance is not a Defined Cost. Section 7 of the Schedule of Cost Components is entitled ‘Insurance’ but it is not for the recovery of the cost of providing it, it is a credit for matters covered by insurance and payment received from insurers.
Clause 52.1 - Defined Cost, clearly states that costs not included in Defined Cost are treated as included within the Fee, therefore the Contractor is not entitled to recover the cost. Hope that helps.

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Hi Steve,

Thanks for your comments. Your explanation is helpful and clarifies the points in the guidance notes around the insurance items being deductions to avoid the Employer paying for items which the Contractor should have insured against.

Kind regards,