NEC4 Option C QS Time in Compensation Events

Contractors QS has applied QS and PM time within a Compensation event for NEC4 Option C contract. from my understanding QS time is a defined cost and within the prelims, hence its not applicable, need some advise on this point .

The level of inclusion of Contractor’s staff time in a compensation event quotation, including QS and PM, is dependent upon the effect that a compensation event has on the Scope of works and the consequential impact upon the resources used to Provide the Works. This is a principle which applies to any main option, including option C…

Essentially the compensation event quotation should represent the difference between the total Defined Cost which includes the compensation event and the total Defined Cost which does not include the compensation event.

When it comes to staff time in a compensation event quotation the main question raised is the inclusion of staff where 100% of their time is booked to a single project. In this instance the assessment considers what effect the compensation event is likely to have on future staffing levels.

When a QS, working full time on a project, needs help because there is simply too much work to do, then additional resources are required. If the additional workload is due to compensation events then the additional resource(s) time should be priced in quotations, accordingly.

This is not easy or simple to assess, however, as the need for additional resources doesn’t arise until the workload reaches a ‘saturation point’ and numerous compensation events have already been notified and possibly also implemented.

Consequently an ‘increasing assessment’ should be included within a quotation to account for this, either by pricing hours for existing staff or with the inclusion of an appropriate risk allowance.

This assessment is made more complicated by such issues as;

  • was the original allowance of staff sufficient to manage the contracted Scope of works,
  • the effort of individual staff roles fluctuates during a project’s lifetime, through different stages,
  • efficiency naturally improves with familiarity of regular tasks, such as payment assessments, progress reporting, earned value reports, etc,
  • changes to staff in specific roles due to ‘natural turnover’ (staff leaving or promoted) disrupts the ‘familiarity’ process,
  • changes in the project senior management team (Client or Contractor) can have either a positive or negative effect on general and/or individual productivity,
  • general level of morale and enthusiasm of staff, due to a range of internal and external factors.

As the pricing of staff is based largely on the effect of future staffing requirements then it would represent a forecast. Provided that, on the balance of probabilities, the forecast represents a likely cost, then it should be accepted, either as a calculated cost, a risk allowance, or possibly both.