We are the Contractor working under an NEC4 ECC Option A and the PM is stipulating that because a piece of equipment is already on site that should not form part of the CE Quotation. The premise being that because the piece of equipment (scissor lift) is on site already to complete contracted works and is subject to a weekly hire charge, there is no effect on actual or forecast Defined Cost (63.1). There is no time delay apportioned to this event so I can see the logic of the argument as technically that piece of equipment will be on site for the same duration as it would have been regardless of this event and therefore there is no cost impact. Our contention being that they should not benefit from free use of our hired equipment, regardless of whether it is on site already or not, and the SSoCC (item 27) states that equipment which is not in the published list or listed in CD shall be at competitively tendered or open market rates, multiplied by the time for which the equipment is required.
Further, depending on the dividing date, I would argue that it would be reasonable for the Contractor to forecast an effect on Defined Cost and price an additional scissor lift being brought to site to undertake the works as there is no guarantee that the existing scissor lift would be available for use at the time of undertaking the CE works as it could be allocated to contract works, this could be checked against the programme of course.
I am interested in peoples thoughts on this as it’s not an argument we have been faced with before.
Thanks.
So the scissor lift is on site and fully paid for, but only used part time? You don’t need it for any longer or anything like that, you are just using time it would otherwise be idle?
If that is correct I think the PM has a point. This would not appear to have any impact on Defined Cost; you were paying for it anyway. I understand your point about free use at one level, but the intention of a CE is to put you back in the financial position you were in before. Before you were paying for the scissor lift. You still are; no change.
Bear in mind these things tend to work themselves out over time. There will probably be something where you can derive an advantage from a CE because some additional equipment, or a specialist skill, is needed, and you use it for something other than the work in the CE.
Bernie
This is a lump sum Option A with activity schedule. In that case, the PM only pays for an activity, when it is complete, at the rates in the activity schedule.
Each compensation event is to be assessed on its own merits. Essentially it is a new activity to be added to the activity schedule. That being the case, it must be assessed on its merits.
The reason you haven’t heard the argument before is because the PM is thinking like its an Option C, where he gets a share in the Contractors good management of his resources. That just isn’t the deal with Option A.
In Option A, he has to pay for the time multiplied by the rate. If the contractor is then able to manage his resources to avoid mobilising a second sizzors lift, then that’s his good management and he is entitled to make money on that good management.
If it was an Option C the client would be entitled to share in the contractors good management. But that is not the deal between the parties on your project.