NEC4 PSSC with a mix of prices and work on a time charge basis

KEY POINTS

• NEC4 PSSC is much simpler than NEC4 PSC and ideal for straightforward consultancy contracts.
• The guidance in the contract says the consultant can only be paid by lump sum or time charge, but mixing the two seems to be possible.
• With some minor modification, NEC4 PSSC can be used for a mix of lump sum and time charge payments.

Some people consider the NEC4 Professional Service Contract (PSC) too complicated for straightforward consultancy contracts but find the NEC4 Professional Service Short Contract (PSSC) too inflexible on pricing options.

In particular, the guidance note at the top of the PSSC price list form says, ‘The contract does not provide for the Consultant to be paid on a mixture of time charge and Prices and one or the other must be selected.’ But is that really the case?

PSSC clause 50.3 states, ‘If the Consultant submits an invoice for payment before the assessment day, the amount due at the assessment day is

• the Price for each lump sum item in the Price List which the Consultant has completed,
• where a quantity is stated for an item in the Price List, an amount calculated by multiplying the quantity which the Consultant has completed by the rate,
• for work carried out on a time charge basis, the time expended on work which has been completed multiplied by the appropriate People Rates plus the Fee,
• the amount of the expenses stated in the Price List properly spent by the Consultant,
• plus other amounts to be paid to the Consultant,
• less amounts to be paid by or retained from the Consultant.’

So, based on 50.3, it seems the consultant can be paid based on lump sums and rates in the price list and for work carried out on a time charge basis. But the consultant’s offer and client’s acceptance form says, ‘The offered total of the Prices is [ ] Enter the total of the Prices from the Price List. If all work is to be carried out on a time charge basis, enter ‘Not Applicable’.’

Giving clients the option

It is not unusual for a client to be able to define part of its scope well enough for a lump sum for thatpart but to want to carry out other work on a time charge basis. Making this possible might help get the PSSC used more often.

A client could go to tender based only on the lump sum work and then instruct other work as compensation events. But those compensation events would then have to be priced as lump sums. Despite the guidance note requiring the client to make a choice, the wording in clause 50.3 clearly to allows a mix of payment mechanisms.

If the client did want a mix of payment mechanisms, the scope would have to be very clear on what is to be covered by the lump sum and what is to be paid on a time charge basis. It would also be normal for the scope to require the consultant to keep time sheets at least for the work on a time charge basis.

Either the consultant should have to submit timesheets with a payment application, or make them available for inspection, as is the case with records in the NEC4 PSC. The client might also want to see timesheets for the work under the lump sum, although that would not affect payment. Also when managing the contract, if the client changes the scope it would have to state whether the changed work was to be under a lump sum or on a time charge basis.

Borrowing from PSC

The PSSC is a very short contract and there is no clause requiring the consultant to forecast the outturn cost of the work done on a time charge basis. That could be added based on the words of clause 20.4 in the PSC option A (priced contract with activity schedule).

The revised clause could read (change shown in bold): ‘The Consultant prepares forecasts of the total amount for work on a time charge basis in consultation with the Client and submits them to the Client. Forecasts are prepared at the intervals stated in the Contract Data from the starting date until Completion of the whole of the service. An explanation of the changes made since the previous forecast is submitted with each forecast.’

Notably the PSSC compensation event mechanism is all about changes to the prices. There is no mention about changes to the amount likely to be due on a time charge basis. It would therefore seem logical to include an item in the price list called ‘Estimate of price of work on a time charge basis’.

So, despite the guidance words in the NEC4 PSSC price list, I believe the contract can, with care, be used for a mixture of work under a lump sum and other work on a time charge basis.

Further reading

For a comparison between the PSSC and PSC, see Patterson R and NEC Contract Board (2023) Comparison of the Professional Service Short Contract with the Professional Service Contract, NEC Guidance Note, on the NEC website.