Payment Under ECC Option E

NEC3 and NEC4 Contracts Payment
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Further to the previous question:

The condition in Contract Data that has not been met is: “equipment to be operated by qualified personnel, as a minimum two operational engineers must be in attendance”.

Contract Data also states that if any condition is not met an alternative (significantly lower) rate applies.

The Subcontract states “equipment to be operated by qualified personnel”

Note: Subcontractor is from overseas and is not procured on ECS, the subcontract is no more than an offer letter and acceptance.

The equipment performed it’s intended use to the satisfaction of the Employer, the Subcontractor was paid and we were reimbursed accordingly in PM assessments.

Approximately six months into the contract the PM issued an EWN to notify that, on a number of occasions, only one operational engineer was in attendance (Subcontractor records confirm this albeit the two records do not align).

The subsequent PM assessment was in accordance with the PM’s record of attendance and corrected amounts previously certified (Cl. 50.5) to the alternative (lower) rate stated in the Contract Data.

We acknowledge that the condition stated in Contract Data has been breached; however, there has been no impact on performance. We, therefore, believe that our accounts and records of payments to the Subcontractor justify reimbursement under Option E.

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Under option E, you are paid Defined Cost (forecast to a month ahead) + Fee.

For Subcontractors, Defined Cost is what you pay them in accordance with their subcontract (clause 11.2(23)). So, on the face of it, in an unamended contract, you are paid what you are forecast to have paid out by the next assessment date to the Subcontractor in accordance with that contract.

However, clause 52.1 2nd sentence states, “Defined Cost includes only amounts calculated usign rates and percentages stated in the Contract Data and other at … … .”

So I am presuming there are two rates stated in the main contract Contract Data for use of this Equipment and that they include for the cost of operatives.

Consequently, unless the wording stating reasons why the lower rate is used is unclear &/or does not match the circumstances encountered, my impression is that the PM is justified is in using the lower rate.

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I would agree with Jon’s summary