We have a subcontractor on a bespoke subcontract largely based on the NEC 3, Option A. The subcontractor has already started works. One of my senior QS’s has realised that the Pricing Schedule has been incorrectly calculated thus the subcontract value is less than the correct calculation.
My first instinct was this can be resolved via the compensation event clause where there is a clause that states ‘the final total quantity of work done and the quantity stated for an item in the Price List’.
However, the procurement manager has said a Deed of Variation is required. I disagree as we are not changing any terms of the subcontract or the Works Information. We are correcting an incorrect calculation, which I would have thought would be sufficient under the compensation event mechanism.
Was wondering if my thought process is correct or am I missing something that would require a Deed of Variation in this situation?
The compensation event provisions permit changes under the contract. The fact that there are typos that need correcting would mean they are changes TO the existing agreement. I would be inclined to agree with your procurement manager but I would not be drafting the DoV yourself - this should be done by a legal qualified person.
Answering these questions is inherently difficult, because how much of the NEC3 A is retained? This answer is based on a ‘clean’ NEC3 ECC Option A, so any amendments would have to be taken into account.
The truth is that the Contract does not contemplate this. I know its not helpful at this stage, but this inconsistency should have been picked up and dealt with pre-contract.
I’m also surprised at your reference to ‘… final total quantity …’ because that is an Option B / D compensation event. It does not apply to Option A.
The next question is which value do you want to be the total of the Prices? Is it the one in Contract Data, or the one in the Activity Schedule?
If the you want the Contract Data value you could just get the Contractor to submit an new Activity Schedule per Cl 54, with the correct value, and accept it.
If you prefer the Activity Schedule total, then you need to change the total of the Prices. A compensation event could achieve that, but there is no compensation event for this. As such the procurement manager is right, you’d need to vary the contract. In that respect, take a look at Cl 12.3. Whether you need a DoV or something else is a question of how the original contract was formed, what your procurement and governance processes say, and preference. I agree with @BH56 that that will require specialist advice.
I would agree with the others regarding the deed of variation and specific advice, however, you cannot force that on the subcontractor.
He has started a lumpsum contract on a fixed lump sum, he is entitled to be paid that lump sum unless you can agree a variation to the contrary. If he has started work, he is in the driving seat as to the total value of the contract.