Hi All,
We are a Subcontractor working under an NEC3 contract and following a recent instruction changing access dates, our original planned Completion has now moved into the New Year.
A revised programme was prepared and Accepted, showing that the works now extend over the Christmas shutdown period, which was not included in the previous Accepted Programme. The shutdown period is non-productive, as all staff will be on holiday. This is shown on the Accepted Programme,
In our compensation event quotation, we are assessing entitlement to time and time-related costs arising from this instruction. The delay caused by the change in access dates has made the Christmas shutdown unavoidable, and therefore it forms part of the overall time impact.
As the delay caused by the instruction results in the project extending over a non-working Christmas period, can the people costs for the project specific site team (such as PM and QS) be recovered as Defined Cost as part of the CE under NEC3 despite the fact they are not working or within the working area?
The extension of the project duration caused by the Contractor’s instruction increases the total period of staff engagement and associated cost. Should this be included within the compensation event assessment?
Many thanks,
@MylesScrancher or @stevebrownassociates is this something that you would be able to advise on?
Hi,
yes, all Defined Cost associated with the delay can be recovered and should be assessed within the quotation for the CE.
Check which main Option you are working under because Defined Cost is defined differently; A & B it is the Shorter Schedule of Cost Components, C, D, E, if the Schedule of Cost Components.
Hope that helps.
Hello @jjakala
The simple answer here is yes all Defined Cost incurred as a result of the compensation event is recoverable.
Assuming the contract is one of the cost reimbursable options (Option C, D or E) the Schedule of cost components sets this out at People 1 bullet 1:
“The following components of the cost of
- People who are directly employed by the Contractor and whose normal place of working is within the Working Areas and
Assuming the People you are referring to “normally” work in the working areas just because they aren’t working in the working area because its the Christmas holidays doesn’t mean their cost isn’t recoverable.
Component 12 (e) is the component of cost that says these specific holiday costs are recoverable
- Payments to people for (e) absence due to sickness and holidays
I hope this helps
Just to add to the comments, if you have main option C, D or E then Defined Cost is assessed using the Schedule of Cost Components (SoCC), which is used for both payments and assessment of a CE quotation.
Component 11 of the SoCC states that the amount paid is related to the time worked within the Working Areas. This would mean that the total costs for components 11, 12 and 13 would be divided by the number of working days to give a rate which ‘accrues’ an amount for when that person is not working in the Working Areas. This would include; sickness, training, annual leave etc, which should also cover Christmas and New Year leave.
If you have main option A or B then Defined Cost is assessed using the Shorter Schedule of Cost Components (SSoCC). This is less prescriptive and component 11 simply states that you include amounts paid, so does not include the ‘qualification’ of time worked within the Working Areas, so could include time on leave as Defined Cost, . Changes made in NEC4 include this ‘qualification’ for the SSoCC but this does not apply to NEC3.
Thank you very much for all the responses. It seems there are some differing views on this subject based on discussions with various people. We are working under NEC3 Option A.
@Andrew_W-I , based on your explanation, since the SSoCC does not require qualification of time worked in the Working Areas, it sounds like our project-specific staff costs during the Christmas shutdown can be included as Defined Cost in our CE quotation, even though they are not actively working on site.
Is it correct to apply it this way though, and how should we justify it? I understand it’s not prohibited under NEC3, but I want to confirm the proper approach.
I see no reason why you could not include People Cost for the time relating to the compensation event. You would need to be clear as to how the people costs are calculated, which would likely be the total ‘amounts paid’ divided by 365 to give a daily rate that can be used for a quotation assessment.
Of course these people would need to be those that relate to the 1st bullet of s1 People and whose ‘normal place of working is within the Working Areas’, but unlike NEC4 where the wording changed (and then changed again with the January 2023 amendments), the cost at s11 of the SSoCC does not relate to the time ‘spent in the Working Areas’.