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?
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.
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.
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.
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.
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.