Subcontracted costs in a NEC4 Option E CE

Uncategorized
1

Hi all,

I am working from the client side on a project where we have a contractor carrying out works under the NEC4 Option E form of contract.

A CE arose, the contractor priced this and we accepted it. Within the the quote were works that would be carried out by a subcontractor. The subcontractor had priced these on a fixed price basis - NEC4 Option A.

We are now receiving application for payment from the contractor for the CE. Within these are amounts being claimed by the subcontractor, all of which were set out in the quote. However, it has became clear that the subcontractor priced materials and resources that they have not needed on site.

I have disallowed these costs but I wanted to ask whether this is correct, or whether they should be paid? I am seeing multiple different perspectives on this.

Thanks
Somo

2

Hi @Som2310

You have a head contract on Option E (I’m assuming an Engineering and Construction Contract). In simple terms, that means that, for Subcontractors, you pay the Contractor whatever they paid their Subcontractor.

Here a compensation event had occurred, and was implemented, on an Option A Subcontract. That was your opportunity to question the allowances made in the compensation event, and you say it was agreed. As such, the materials that were not used are the Subcontractor’s opportunity.

All you have to check is whether the Subcontractor was actually paid the amount in the compensation event. Assuming yes, you also have to pay it.

I often find it useful to consider the opposite. If the Subcontractor had missed something out of their quote, would you be seeking to pay them more?