The Employer has decided that the role / scope undertaken by one of the Contractor’s employees is not required (NEC3 TSC Option C), the Service Manager has requested via SMI/CE for a quotation to remove the scope from the Task Order.
23 days has now passed and it has transpired that the Contractor has not commenced the necessary 45 days consultation period with the affected employee. Can the Service Manager disallow the resulting additional costs that will be incurred as a result of the failure of the Contractor commencing the 45 days consultation period when the SMI was issued.
What we have here is a change to the Service Information an Instruction under clause 14.3 this gives the Service Manager the authority to give an instruction to change the Service Information. Clause 27.3 the Contractor obeys an instruction which is in accordance with the contract. It is a compensation event under clause 60.1.1 instruction given by the Service Manager to change the Service Information.
If we presume that the Contractor was to put the instruction into immediate affect then the provision of this service should have ceased as soon as reasonably possible.
Indeed in assessing a compensation event 63.8 the assumption is that the Contractor reacts competently and quickly.
So the above is one half of the equation on a target contract the other is the actual Defined Cost.
The definition of Defined Cost in the TSC is very simple with only four components. it is a requirement of the Contractor to meet the requirements of the law in terms of employing people so any redundancy payment made in relation to people on a contract is Defined Cost.
Not sure that this instance is a Disallowed Cost 11.2(6) as this has a very specific meaning. It is more the fact that the payments are not Defined Cost for Providing the Works.
it will be interesting to get others views on this
The problem here is that the issue of quotations and instructions has been mixed up. If the Service Manager wants the service to stop he should instruct that. If he/she wants a quotation, as here, he instructs that and the Contractor replies within 3 weeks. - hence the 23 days in the question above I guess. Because there has been no instruction to stop the service I don’t see any contractual hook on which to hang any disallowed cost or change to the target. Until the change is instructed the Contractor must not take any notice of the intention to reduce the service. The main problem here is that the Contractor has not provided a quotation within 21 days. The interesting question is whether or not the SM can assess the quotation himself because the Contractor has not provided a quotation - and I don’t think he can. He can assess a compensation event if the quotation is not forthcoming - but this isn’t a compensation event. So either the SM now instructs the reduction and if necessary states an assumption about the issues above because the Contractor cannot assess the cost in 21 days or doesn’t make an assumtion in which case the Contractor has to price that risk himself in his assessment. Disallowed costs for providing resources not needed may then apply if the person is not removed - perhaps? Ross