We are working under an NEC4 Option C contract and have had to reattend site to correct a defect after completion of the work. The client has agreed to pay us for reattending site to correct the defect without adjustment to the target cost. The client has also stated that any costs associated with the Principal Contractor reattending site to provide supervision, welfare, Traffic Management etc. will be offset from our final assessment. As this is a shared risk contract, who bears the liability for the costs associated with the PC reattending site as a result of our defect and how should I approach this?
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Rob,
I am assuming this is an NEC4 ECS and your are with the Subcontractor.
The cost of correcting Defects after Completion is Disallowed Cost (see cl. 11.2(25)). Therefore these should not have been paid (not sure why you’re mentioning the Client paying; it should be the Contractor).
Regarding supervision, welfare etc., unless there is a provision to the contrary in your Subcontract, I don’t see how can those costs be deducted from your account. Normally, I would expect that since the Contractor and/or the Client provided you with access (see cl. 44.4), you would bear all associated costs as above; however, it sounds like they provided those things without informing you first, therefore I don’t think that they are entitled to deduct any sum from your account. If they insist, ask under which provision and we’ll take it from there.
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Thanks for your response, we are on a framework and the task order is under an NEC4 ECC contract.
We are the contractor for one of the lots, the other lots are covered by other contractors i.e. Traffic management, PC role, etc.
The employer has incurred cost from the other contractors for providing access for us to return to site to carry out the remedial works and they have said these costs will be passed to us.
For my better understanding can you please advise as if the remedial works had been carried out before the completion date and alternatively after the completion date.
Many thanks,
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No worries Rob,
if the Defects were corrected before Completion was achieved, then the relative costs should form part of the Defined Cost and would not be disallowed, unless they were caused by lack of compliance with a constraint on how you were to Provide the Works stated in the Scope.
All the above as per the standard drafting and subject to any amendments/additional provisions (Z-clauses) in your contract.
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Appreciate your help, assuming the defects were addressed before the completion date, would our employer have a contractual right to contra charge us for the costs they have incurred as a result of our defect or use cross contract setoff to reclaim the costs? We have been fully paid for this task order and there is a clause which allows cross contract setoff which is usually only used when the employer reclaims the pain share if we’ve been paid the full contract sum.
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Just be careful as the clause refers to “Completion” and not “Completion Date”. You might have achieved Completion before, on, or after the Completion Date.
Regarding your question about the contra-charge, unless you have expressly agreed otherwise, the answer is “no” they wouldn’t have such right according to the standard drafting; as I mentioned in the first reply, there is no such provision. However, there could be a Z-clause dealing with such an occurrence.
With that in mind, you need to read the set-off clause carefully and see if it also applies to this issue.
Feel free to get in touch.
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Hi Peter,
Thankful for your help with this previously, I was wondering what your thoughts would be in regard to the following:
I contacted the client in regards to this, they drew attention to cl 81.1 and 82, quoting the following:
“Claims and proceedings from others and compensation and costs payable to others which arise from or in connection with the Contractor providing the works.”
&
“82.1 Any cost which the Client has paid or will pay as a result of an event for which the Contractor is liable is paid by the Contractor.”
Please could you advise my best course of action.
Does clause 44.4 suggest that the client is responsible for providing access, and if so would they be able to claim this back via the aforementioned clause 82.1?
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Hi Rob,
Starting from your last query, clause 44.4 states that the Client has to provide access if the relevant part of the works has been taken over; I assume that is your case. However, you spoke about supervision, welfare and traffic management which do not seem to pertain 100% to access.
Based on the information so far, I do not agree with the Client’s view. Indeed, clause 81.1 states that the Contractor is liable for compensation and costs payable to Others (assuming that “Others” in this case is the contractor providing supervision etc. for the Client) but, according to the same clause, those costs should arise from or should be in connection with the Contractor Providing the Works (see definition in clause 11.2(15)).
Therefore, and unless there is an express provision in the Contract regarding this issue, for the Client to have such entitlement, it should be able to demonstrate a causal link between your Providing the Works (or failure to do so) and those costs incurred - by way of example, if you were obliged by the Contract to provide such supervision, welfare & traffic management in order to correct the Defect and, because of your failure to do so, the Client had to employ other resources, then the Clients claim could have merit.
By the same token, clause 82.1 refers to an event which the Contractor is liable for; that could only be something similar with the example above, and not the Defect itself, the correction of which and relevant cost (if not corrected) are covered by clauses 44 and 46 respectively.
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