Payment for defective work

NEC3 and NEC4 Contracts Payment
1

I am the PM on a NEC3 ECC Option A contract. The Contractor laid kerbs and an area of binder course which is defective and notified accordingly. The defective works extents are both defined activities and are both major defect.

Both defects will delay the later programmed final surface course activity or be covered by it if remained uncorrected. Therefore, I have not certified payment for either defects as Clause 11.2(27) confirms “a completed activity is one which is without Defects which would either delay or be covered by immediately following work”.

However, the Contractor has disputed that this is not in line with the contract. They have commented that the surface course activity is not ‘immediately’ following works as it is later in their programme. Upon completion of the defective binder course and kerbing activities, the programme shows the Contractor carrying out other unrelated work activities elsewhere prior to surfacing. Therefore, they are claiming that withholding payment can only be applied if ‘immediately’ following works (in this case the unrelated works) delay or cover the defect i.e. the word ‘immediately’ literally means immediately as shown on the programme; regardless of whether the later surface course will be delayed or cover the defects.

Does the Contractor’s dispute have any merit? Does the contract, in its wording, literally mean immediately following works even if they are completely unrelated works elsewhere. Or is the PM’s interpretation correct in that despite being later on the programme, the next logical activity that is placed directly on top of the defective Binder course is surface course, which will be delayed or cover the defects if uncorrected.

2

As you rightly state, the ‘completed activity’ in the definition of Price for Work Done to Date, is qualified by ‘is without Defects’, which itself is further qualified by the tests of;

  • would delay immediately following work, or
  • would be covered up by immediately following work.

My interpretation, as I read this clause, would be that the word ‘immediately’ is a timing issue, that is without any intervening time. For this clause to operate as written, the subsequent operation on the programme would need to comply with both a timing and sequencing test, that is the correction of the Defect would delay the ‘immediately following’ operation or, if not corrected, would be covered up by the ‘immediately following’ operation.

In your case the Defect, if uncorrected, would not delay the ‘immediately following’ operation, which is unrelated to the defective works and, presumably, there is sufficient time to correct the Defect before the operation next in sequence becomes ‘immediately following’.

This situation raises a further question, whereby a payment could be certified as the ‘immediately following’ tests do not apply at that time, but if the Defect remains uncorrected then it may subsequently apply where the sequential activity is delayed, or cannot be undertaken without covering up the defective work.