I have been looking at the NEC4 PSSC contract and I am a little confused in relation to Defined Cost and Fee.
Defined Cost as stated in cl11.2(5) states People Rates by time and the Fee is added to this cl11.2(6), however, in the ‘Managing a Professional Service Short Contract’ book it states that Defined Cost and Fee ‘is only used in the assessment of compensation events’? Also does the people rates assume it is the rate to be paid to the individual (i.e. Defined Cost), if so where is the recovery of corporate overheads? in the Fee?
I then looked to guidance on ‘Time Charge’ vs ‘Price List’ and it confuses me further, what is the difference?
Apologies but I am new to NEC and I thought I understood it on an ECC but this has thrown me.
Absolutely no need to apologise Emma, that’s what we’re here for, plus I think you’ve identified an ambiguity in the PSSC.
The Price List isn’t intended to be used where work is to be carried out on a time charge basis using People Rate x time spent. When the Price List refers to rates multiplied by quantities it should be used for things like surveys which a consultant might quote an amount per property, it shouldn’t be used for inserting categories / names of people who are to be paid for based on the number of hours / days they work.
When the work is not going to be paid for as either a lump sum or rate x quantity, it is paid for based on time charge which is People Rate x time spent.
The problem is, as you describe, People Rates can be used for both the work defined in the Scope and compensation events however compensation events attract Fee whereas the other work does not.
If the work is being done on a time charge basis, compensation events are technically irrelevant, as the Consultant is paid for the amount of time spent regardless as to what they are doing. For example if an architect is appointed to manage a project on a time charge basis, the Client pays for all their time in doing this regardless as to how long it takes. So what would a compensation event be in this case?
It would be good if the contract had some words in it to cover this - there is a risk of one party taking advantage of the other the way it is currently drafted. This wasn’t a problem in NEC3 PSSC as didn’t use Defined Cost plus Fee!