Negative Compensation Event


I’ve scoured reachback before asking this and couldn’t find any material relating specifically to my question, so hope you don’t mind the question.

For context, we are a sub on an option A NEC 3. When pricing an item of work, we highlighted what this work would cost at tender time and proposed it as a “value engineering” i.e if you don’t need it, then the price reduces. We’ve been sent a PMI which was issued with a negative compensation amount asking us to confirm the amount of the reduction, the client essentially used our tender price quote to generate the sum.

We’ve debated this internally and we are wondering whether we only credit out net cost or whether we credit the net cost plus risk and profit? the client quite rightly looks at our amount as their “cost” however it is out cost plus margin plus risk. I personally thought that we credit the amount as per quoted, cost plus risk and margin however we’ve debated whether we just credit the net cost?

Appreciate any help.