NEC3 PSC: What is the usage of Time Charge in PSC Option A contract?

In PSC Option A, only 2 places mentioned about the Time Charge: 11.2(13) and 63.12. I am not sure about the usage of Time Charge in Option A where all the payments should be assessed based on the Activity Schedule. Only in a compensation event situation, when the Quotation is accepted by the Employer, I understand that the payment amount of the CE should be the same as the accepted Quotation (assuming the assumptions given by the Employer were later found to be correct). Then again, what is the point of having a defined term of Time Charge in Option A?


In the PSC Time Charge is used in 2 ways:

  1. To assess compensation events for all options and;
  2. to determine the amount due for Options C&E and if relevant for Option G.
    For Option A then, it is used to assess compensation events.

Compensation events are assessed on the basis of clause 63.1. “The changes to the Prices are assessed as the effect of the compensation event upon the actual Time Charge of the work already done and the forecast Time charge of the work not yet done.”

The Contractor uses his stated staff rates in the Contract Data multiplied by forecast time (= Time Charge (11.2(13)) to compile his quotation for the compensation event. Once the Employer accepts the quotation, the activity schedule is updated by the amount (63.14) and once the CE work is completed, payment becomes due (11.2(15)).

Care should be taken not to misinterpret clause 61.6 regarding assumptions. The aim of this clause is not for the Employer to “constantly” state assumptions for each CE that occurs. It is the Contractor’s responsibility to asses the CE first, based on his forecast calculations. If the Employer is satisfied with this quotation, accept, proceed and pay.
If the Employer is not in agreement, then the Employer should make his own assessment per clause 64.1. The same criteria applies for the Employer on how to make the assessment (Time Charge).
Only when the effects of the event are too uncertain to be forecast reasonably, do the Employer state assumptions (61.6) for the Contractor to base his assessment on. This can really only be related to the type of staff required and the amount of time required. In general, who but the Contractor, should know better what these requirements would be anyway? So, in principle assumptions should be used sparingly and wisely. Otherwise the whole exercise changes to the old “retrospective evaluation” principles.
What is important to note is that only if 61.6 were “invoked” at the time of instructing the Contractor to quote, will it apply later regarding a correction to the assumptions. This becomes a new compensation event under 60.1(9). The “increase or decrease” as a result of the correction is formulated in a new compensation event quotation. The original is not changed. In other words the new quotation will be followed by an adjustment of the activity schedule (prices).