Owned Equipment

We are currently working on an NEC3 Opt C Contract. We have equipment on site (listed in the CDP2), which we own and are charging the client at open market rates. The client now wishes to instruct us to purchase this equipment and charge them a one off purchase cost in lieu of the ongoing market rate. Where do we stand as we have to obey an instruction under 27.3?

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Not sure I follow Neil. Do you mean that the Employer wants to purchase the equipment from you? (you say you already own it).

In any event, clause 27.3 states that the Contractor “…obeys an instruction which is in accordance with this contract and is given to him by the Project Manager or the Supervisor.” (my emphasis). Is there any such provision in your contract?

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Sorry Peter, to provide a little more context. We are yet to receive the instruction however, the assumption is that it will be for the equipment we already own (it was purchased new for this scheme).
There is nothing in the scope that provides for this or anywhere else that I know of. Given we own the equipment, any such instruction would surely have to mean purchasing additional, and removing ours and replacing with the clients?

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I’m afraid to answer this we need more precision. Looking at the Schedule of Cost Components, you seem to be using a hybrid of its contents. You say that this equipment is owned by the Contractor and is listed in the CD. However, you are charging at open market rates. I think that’s wrong. Given you own the Equipment you have 2 ways to recover cost.

  1. If the equipment is NOT listed in CD, then you use SoCC 22, open market rates.
  2. If the equipment is listed in CD then you use SoCC 23. There should be a cost in CD to cover the time related element of cost (fuel, consumables, servicing and so on) plus ‘change in value over the period’ - i.e. depreciation.

The information we have says you are in SoCC 23, but charging as if you are in SoCC 22.

As for the PM’s instruction, I don’t think its normal for the scope to direct the Contractor on how they should procure Equipment. Equally, I think you could include such a scope item. What I don’t understand is why you would want to. I suspect the way forward is to use an EW to have a specific RR meeting and try to find out what the logic behind that instruction is; and my hunch is that its something to do with payments, related to the issue above.

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No worries Neil, actually Andy made a good point.

Nonetheless, I would suggest that you wait for the instruction, see on what basis it is given and take it from there.

Of course, any discussion beforehand does not hurt, but why waste your time on something hypothetical?

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