NEC4 Option C Payments

NEC3 and NEC4 Contracts
1

I understand pain/gain objection under NEC4 Option C. Hence 11.2 (32) makes sense, and the prices in the AS are not used to determine the PWDD. The total of Prices is used as a target in determining the final Contractors share (pain/gain).

However in relation to interim payments, the contractor will make the request of actual costs in relation to the defined costs and fees (use of SCC and what’s stated in Contract Data P2). But what does 11.2 (31) mean then? I’m not sure what the Project Manager is to forecast?

I thought the contractor submits the intermin payment application, and the PM completes assessment and can disallow certain costs if applicable? I have more experience with Option A for interim payments, but I’m still a bit at bay with Option C.

Thanks All

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2

The Contractor is not paid Defined Cost plus Fee, they are paid forecast Defined Cost plus Fee. The purpose of this is to make Option C effectively cashflow neutral for the Contractor so they aren’t funding the works, without this the Contractor’s payments would be a month in arrears. The forecast element will be for Defined Cost that has been invoiced but not yet paid at the current assessment date, but is Defined Cost which the Contractor knows they will have paid before the next assessment date. Other examples would be for Subcontractor costs that have been certified but not yet paid and possibly management / workforce costs (provided they will be paid before the next assessment date).

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3

Thanks Neil, I will give a quick example:

A contract is executed on the 31st January 2020.

  • A application is made from the Contractor (which is effectively their view of the PM’s assessment) for the first payment application. This is requesting their forecast Defined Cost plus Fee. I presume this application (as long as the dates are agreed with PM) should be done as soon as the contract is executed/signed to make it cash flow neutral e.g. first week of Feb 2020 and the contractor is forecasting £100.

  • Therefore once the next month arrives (early March 2020), another application is made by the Contractor forecasting Defined Cost plus Fee for upcoming March. This is for £100, however the PWDD for previous month was £90 as admitted by Contractor. Is this £10 subtracted, or is it fixed from the early forecast.

Thanks

4

Answering the question at the end of the second bullet: The strict answer is neither. You pay the new PWDD value, less whatever you paid last month - the ‘change in the amount due’ per 51.1. In your example you have calculated PWDD as £190 in your second payment application. You had paid them £100 in the first application. So payment is £90. That isn’t a ‘subtraction’, its the new assessment.

I’d also say that in Option C, you should be looking at the Contractor’s Records in arriving at the assessment of PWDD - it’s not a question of a Contractor admitting things.

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