We have secured a project on NEC3 Option C and included a sum from a subcontractor which was considered excessive but as it was the only quotation received we based our Tender on their price. Subsequently the subcontractor agreed that their quotation could be significanlty reduced if they had more information and could visit all areas of the works. We therefore want to enter into a subcontract where the prices for each area are to be agreed by negotiation as information becomes available. The original tender would be considered to be a maximum price. What would be the best way of going about this?
1 Like
The answer is : it depends on how much information will be there when the addition is agreed. If there is a lot, then it would suggest a high degree of price certainty and a priced based contract could be used. Depending on the circumstances, this could either be option A or, if the work is of a relative simple nature/complexity/ risk (i.e. not too many trades, little or no Subcontractor design etc), then Engineering & Construction SHORT Contract. You could do it as a low initial Price for the work that is well defined and then add in each part of the works as a compensation event as it becomes well defined and priced.
You could also do this as an option C subcontract. However, the main deficiency of each of these approaches is that the Subcontractor will be motivated to maximise the upward adjustment each time.
An alternative approach could be to subcontract on option C, but for all the works as currently specified. Providing the Subcontractor had a sufficient share of any savings, they would then be motivated to work with you from day 1 to reduce costs.
The pros and cons would depend on the strengths and weaknesses of the Employer, yourselves and Subcontractor, risks (threats and opportunties) who is doing the design development, etc etc, so this answer can only suggest the options, but not be definitive in terms of which one is right for you.