NEC4 Option A - Reduced Prelims

NEC3 and NEC4 Contracts
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Hi,

Contractor provided a breakdown of Prelim costs at tender stage.

It is noted that items within the breakdown (site office/mess room) have never materialised on site and unlikely to do so.

Can we, as NEC PM for the client decline any application for payment for the cost when no cost was bourne by the contractor?

Thanks

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@Neil_Earnshaw any thoughts on this Neil?

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@Rooze81 what the contractor provided at tender stage is irrelevant, NEC4 ECC Option A is based on an Activity Schedule which is incorporated into the contract via a reference in Contract Data part 2 - it is this document that governs payment, not a tender document.

Assuming that the Activity Schedule includes a breakdown of the prelims as lump sum items then payment is based on completion of a lump sum activity. The Contractor is entitled to be paid the Price for Work Done to Date (PWDD) which under Option A (clause 11.2(29) is defined as “the total of the Prices for … each completed activity …”, the definition goes on to state “a completed activity is one without notified Defects the correction of which will delay following work”.

So if an item in the activity schedule is not completed it cannot be paid. However, if the Contractor has changed a planned method of working e.g. decided that site office and mess rooms aren’t needed the can submit a revised Activity Schedule for acceptance under clause 55.3. This means the Contractor has the right to take the money for the prelim activities which it no longer requires and distribute it between other activities that it is intending to complete.

What the PM needs to remember is that Option A is a fixed price lump sum contract and the only method for the tendered total of the Prices to change is via a compensation event. There might be other adjustments (additions or deductions) outside of this however they will generally be as a result of the secondary options e.g. retention, delay damages etc or to give a couple of other examples, for not achieving Key Dates or correcting notified Defects.

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Thanks Neil.

One point to clarify if I could ask?

‘Distributing the prelim amounts not required across other activities’.

This would require ‘other activities’ to actually take place (and are required) and not just redistributed over activities already noted within the original AS?

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Rooze,
The Contractor would be entitled to allocate these amounts across existing Activity Schedule items or new items, either way they would be entitled to payment for them and for the entire original lump sum price.
The risk/opportunity sits with the Contractor in this instance, if they use less than anticipated they benefit but if they use more they do not. You would not pay anymore or less either way.
If the mess/offices were specifically required/specified within the Works Information, this may raise a separate question, but assuming they weren’t.

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In essence then, the ‘fixed price’ has to be paid, regardless if not used.

I will check the WI but I doubt it says ’ contractor MUST have site office and mess room on site’.

Thanks for the replies.