Value Engineering - NEC3

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NEC3 ECC Option D

The Contractor is responsible for the Design and Build of a drainage route but due to a number of Employer’s Risk occurring the original route planned in the Works Information was understood by both parties as no longer being possible.

The Contractor has raised a number of EWN’s raising this an an issue and also CEN’s for additional design hours as the Contractor took it upon themselves to find an alternative solution. After some time, the Contractor proposed a number of options to deliver the Works which required a different material type. This was raised as an EWN as it increased the Defined Costs.

Following further discussions, the Employer advised they could possibly free-issue some material which allowed the original route to be achieved with some subtle changes however the Contractor required to do the design / calculations / report on whether it was achievable. This was carried out and it was found to be so. The Employer received this report and made the decision to proceed to issue the free issue material.

The Employer is expecting a reduction to the Defined Cost (OK) and also the Target Cost. It is the Contractor’s view that only the Defined Cost should reduce as this should be considered Value Engineering.

Based on the above, would this thinking be in accordance with 63.11.

Many thanks,

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Ok, let’s start with the definition of “Target Cost”; that would be the Total of the Prices as defined in cl. 33.

By your reference to cl. 63.11, are you saying that the change in the Works Information was proposed by the Contractor? If that is the case, then the Prices (as defined in cl. 31) are not reduced and therefore I see no reason looking at the Total of the Prices (or Target Cost as you say).

In the alternative scenario, i.e. if based on the facts the Employer proposed the change and the above exception does not apply, the Prices would be reduced (due to the reduction to the Defined Cost). However, I am not sure if the Total of the Prices would be reduced, because this is calculated by the completed quantity of work in the BoQ, multiplied by the rate. You would therefore have to wait until Completion for the preliminary and final assessments to be made (cl. 53.7 & 53.8).

What I’m trying to say is that, even if any of the Prices are reduced, that will not necessarily result in the reduction to the Total of the Prices (Target Cost) and therefore any such discussion would be premature.

I hope this helps.

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