Hello all,
This is my first post, probably of many, I am a trainee QS and VERY interested in contract law. The NEC form of contract I feel is truly the best contract I have worked on.
Regarding the schedule of cost components, should items be missed off and not included, can these items still be claimed for in the event of a CE? My understanding is that yes, of course it’s still claimable, it could just take some negotiating regarding rates etc whereas inserting it in the schedule of cost components makes the process easier.
Any response and advice would be greatly appreciated.
Looking to connect with people on LinkedIn and in person too!
Thank you,
Dave
Hello Dave - For Compensation Event quotations the Contractors costs are recovered under the Schedule of Cost Components. There are eight titles under which the Contractor can forecast their costs (or claim direct cost incurred if notified of a CE event after the event happened: see “dividing date”). The eight titles are: People, Equipment, Plant & Materials, Subcontractors, Charges, Manufacture & Fabrication, Design and Insurance. If a cost cannot be claimed under one of these titles then it’s deemed the cost is included in the direct fee percentage applied. CE quotations are a forecast of Defined Cost plus the Fee. Bear in mind the direct fee percentage is fixed, the more costs that sit out side the schedule the less cost/profit the Contractor can recover.
If you missed off an item in your quotation and the CE has been implemented then it can’t be claimed for. CE’s can’t be revisited once implemented.
Hello and thank you for your response!
I think I may have explained the scenario wrong. I understand that if an item is missed off the CE then once implemented this will not be able to be changed.
I meant, if rates and costs are missed off the schedule of cost components in the contract data part 2, then would those items missed off the list not be claimable? An example, we have forgotten to put a rate for an engineer in the contract data part 2, would that mean we now cannot claim for an engineer at all once the project/contract commences?
I hope that makes sense.
Thank you
You can still claim for them. Contract Data Part 2 allows for some pre-agreed rates to be entered for plant, equipment and design cost rates outside the working area. These are optional and do not have to be filled in for a contract to be signed. CL.63.2 allows the PM & Contractor to use pre-agreed rates by mutual agreement for costing CE’s, they do not have to use these rates. The starting point under NEC is always a forecast of defined cost. If you leave the Contract Data Part 2 blank them you can still claim for staff under the Schedule of Cost Components. The PM may ask you to demonstrate your staff rates are Defined Cost i.e. the true cost the company pays to employ that person. Under NEC 4 CL.63.16 allows the PM & Contractor to agree a rate if it’s not present.
Pre-agreed plant & equipment rates must include any discount the Contractor gets on hire costs, these must be passed on to the project. Big companies tend to get significant discounts (20-30%) on hire rates for equipment (diggers, dumper trucks, haulage etc). In some instances it’s easier and quicker for both parties to price up additional works (CE) using pre-agreed rates e.g. 6No dumper trucks x 10 days at a pre-agreed rate of £150/day. The Contractor would then apply their direct fee percentage on top of this. If equipment rates are not agreed then the Contractor builds up their forecast using open market rates, this would be based on quotations from plant hire companies.
For staff costs, you would build up a forecast for your staff for the works using defines cost rates. The schedule of cost components tells you what to use in these rates e.g. Project Manager at £800/day, this would be the true cost that it costs to company to employ this person, it would include provisions for pension contributions, travel allowances, holiday pay, sick pay, annual bonuses, medial care provisions, training etc.
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Hi again and thanks so much for the response and breaking it down further for me. It is very much appreciated! I fully understand now : )!
Thanks again!
Dave