Verification of Subcontractor Payments Under NEC3 Option A

Under NEC3 Option A, a Compensation event has occurred where due to the nature of the works the men have been stood down for the day. The Contractor has claimed a CE for a full working day for the men, which the PM agrees, however the PM wants to verify that the Subcontract Workers have been paid a full day. Can the PM asks for proof of Subcontractor payments for the full working day?

1 Like

Clause 63.1 states that the CE will be assessed as the actual Defined Cost of the work already done, the forecast Defined Cost of the work not yet done, plus the fee. It then goes onto say that the point at which the Project Manager instructed the change divides the work already done form the work not yet done. That means it is actual cost which you would have to prove if it happened before instructed (but why would you do anything without an instruction?) but a forecast otherwise - which contractually you do not have to prove actual cost, just that it was a reasonable cost to have expected to pay.

Having said all that, the Contractor is obliged to mitigate delays - which in my simple thinking is doing things a different way without increasing own cost or significantly increasing risk. It does not seem that an unreasonable request to prove you spent the money in this instance. You would have won some brownie points with the PM if you had not claimed the cost even though contractually you were entitled to (depending on the above timing) which would promote the level of mutual trust and all that. Seems a bit futile claiming the cost of something that you do not need to, but you can. In my experience you might win the odd battle but you tend not to win the war…

As a much more general rule - under option A the intent is to forecast what is a reasonable forecast cost for an event in accordance with defined cost/shorter schedule cost components. None of this is intended to be proven in terms of actual cost - the only bit you ever revisit once implemented is if Project Managers assumptions on which the Contractor has based his quote prove to be incorrect.

Therefore the simple contractual answer to this specific question is you are not obliged to give the proof of actual cost as it is meant to be a forecast of what was reasonable forecast cost. The more practical answer to this (for the reasons highlighted above) might lead me however to not push for something I have not actually spent - as if I win this contractual argument there might be others in the future that do not go down so well.

Have you answersed the question?!