NEC4 PSC Option C, ambiguity in fee percentages between framework agreement and call off contract. Which takes precedence?

NEC3 and NEC4 Contracts
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I’m currently trying to unravel an issue I have discovered in one of the contracts I am working on which is an NEC4 PSC Option C.

The framework that the contract has been called off against sets out the maximum fee and overhead percentage to be used in PSC Option C contracts. It also sets out the maximum ceiling rates to be used for PSC Option A contracts.

The contract has been executed as an Option C, however the tendered total of the prices has been calculated using PSC Option A rates, the activity schedule reflects these rates also. In Contract data part 2 of the call-off, the fee percentage has a sentence written into it say essentially “Fee percentage is included in the the people rates” referencing the Option A ceiling rates. Ditto for the overhead percentages.

There isn’t a hierarchy of documents clause inserted into the framework.

The fee and overhead percentages in the call-off clearly contradict the framework, however both parties have signed the contract under those terms.

My belief is that the call-off contract takes precedence over the rules set out in the framework agreement as both parties have signed up to these terms, the total of the prices and therefore activity schedule has been calculated using these rates, and the client budget has been developed with these rates in mind.

I’ve created a model to understand the commercial risk depending on the outcome but I need to firm up my evidence and logic path to reach my position.

My questions to you are:

  1. Do you agree with my logic? Why/Why not?
  2. How can I prove my belief in the call-off taking precedence and therefore the logic that follows it?
  3. If I am wrong, does this mean that the tendered total of the prices needs to be recalculated?

Thanks for taking the time to read my post!

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@jordan.tully10 the answer here will depend on the exact terms of the call-off contract as it’s relatively common to see terms from frameworks flowed-down to their call-off contracts.

Generally speaking how the total of the Prices has been arrived at is irrelevant however the entry in CD part 2 casts some doubt. It’s intent seems clear however as you point out it contradicts how Defined Cost is calculated in the Schedule of Cost Components. You wouldn’t automatically be entitled to recalculate the total of the Prices, any change to the Prices would need to be done by CE (see below).

Unless there are terms in the call-off contract that have been flowed-down from the framework then you are right in thinking the call-off contract takes precedence as clause 12.4 makes the call-off contract the entire agreement between the Parties.

This said the entry in CD part 2 creates ambiguity or inconsistency in or between the documents which are part of the contract which should be resolved under clause 16.1. If the Service Manager resolves the ambiguity or inconsistency in a way which the Consultant doe not agree with, then the recourse could be CE under clause 60.1(11) and ultimately dispute resolution.

Hope this answers your questions.

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