NEC4 Option A CE assessment

When providing our quotations to the PM we include direct costs of the team for activities such as compiling a quotation, raising requisitions or liaising with the supply chain. The PM is rejecting these costs stating that these tasks are not effecting our defined costs (people) i.e. we are doing these tasks within our day job and are therefore not incurring any additional defined costs such as payment of overtime or weekend working etc. Is this correct or are we entitled to these costs even if say the CE work is 100% subcontracted?

Ryman, the problem you have here is that you have to demonstrate how these costs were/will be incurred - the PM’s view that you are undertaking these tasks “within you day job” is not necessarily correct, in my view; it implies that people in the Working Areas are filling gaps in their daily schedule by working on CE quotations.

What you need to do is show how this time was or will be spent, over and above the time allowed for the daily tasks of the people in question (e.g. the PM or the QS), provided that they would be working on the job anyway (e.g. as part of the prelims in the AS).

Regarding subcontracting - I guess you mean outsourcing (for Subcontracting you would have to follow the process set out in section 26) - it depends on what you have allowed for in terms of prelims in the AS; if you have allowed for a full time QS, you would have to explain why you need to outsource for the additional time rather than pay overtime. It all depends on the context.

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Thanks for your response Peter. What would be the best way to demonstrate that we have incurred these extra costs if for example we (PM/QS etc.) are 100% to the project and haven’t worked overtime or weekends but have been doing this extra CE related work within are normal working hours?

Apologies, with regards to subcontracting I meant that the work associated with this CE is being undertaken by a subcontractor but that we (the Contractor) have added extra direct costs for preparing the quote, liaising with the subcontractor etc. It is these extra direct costs that are being questioned by the PM.

Sounds like you’ve answered your own question in the first paragraph. If you’re unable to demonstrate entitlement because you’re already 100% assigned to the project & haven’t had to do overtime or weekends, then where does the additional cost come from?

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Ryan, you would need to show how the Defined Cost increased - if as you say this was done without causing any delay or overtime, it will be an uphill battle. Unfortunately this is how the NEC works - the next time you see the PM sitting around give him a chore and don’t take no for an answer but ask him to demonstrate how his Defined Cost increased (only joking and my view - not necessarily correct).

If you have timesheets showing the time spent and how that delayed your planned Completion (e.g. by half a day) by delaying another activity the PM or QS had to undertake, then you might have a case - you will probably need to show that in an impacted programme!

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Thanks Peter! Have a great weekend.

You too Jon, take care.

In my view Peter is correct. The only way to demonstrate the additional cost is by providing a programme with your CEQ that demonstrates the impact to your programme as a result of the additional works being undertaken. If you can demonstrate the impact, the Prelim element should be an allowable inclusion.

I.e. you have a full time QS, PM and Planner and the additional work on the CE elongates your programme by a week, you should be entitles to claim the costs of the people as part of the forecast costs of the CE.