Frequently Asked Questions


Can you help with the following assessment of a Compensation Event quotation under a NEC3 Option B construction contract.

The PM has accepted a C/E in respect to a change in Works Information which required the removal of an item of work which was covered by a lump sum under the BOQ.

The Contractor has submitted a reasonable quotation based on the SSCC but has excluded any labour or management cost stating that these elements are included elsewhere in the BOQ.

The Contract appears to be fairly clear that the labour staff costs should be included but I am unclear about the management/supervision costs. Should the quotation normally include for management and supervision staff even if they are required on site for other work on a full time basis?

Clause 63.1 requires that you decide what change to the forecast Defined Cost for carrying out the work is caused by the CE.  The rates in the BOQ and what they did or did not include is totally irrelevant.  As I think I said a few months ago to you if the Contractor was going to make a fortune from doing the original work, he still going to make a fortune; if he was going to lose a fortune he still is going to lose a fortune.

So what is the change in Defined Cost caused by the removal of this item?  And that will include the cost for People.  And, as long as they pass the test set out in the bullet points at the beginning of item 1 of the SSCC then those people will be included whether they are management or supervisory staff or hourly paid operatives, or labour only subcontractors (see 3rd bullet).  Of course with hourly paid operatives it is easy.  If the work was going to take 2 labourers two weeks then you can just deduct the cost of those labourers.  However with management and supervisory staff it is not the same.  Just because there is a bit less work the Contractor will still need to employ the Site Agent, foreman, QS etc., so their cost will not decrease.  Just in the same as if you add a bit more work their cost will not increase. 

However that will not always be the case.  If the work is on the critical path and therefore according to the Accepted Programme the Contractor will be on site for 2 weeks less then the cost of the management and supervision will decrease.  In the same way as if the CE added an additional 2 weeks time on site the cost of the management and supervision would increase.  Or maybe the CE added so much additional work that the Contractor had to get in an additional Supervisor or QS to run it then, again, the Defined cost of those would be added to the value of the CE.

So in summary, yes the Defined Cost of management and supervision staff (as long as they pass the test in the SSCC) can be included in principle, but only if you can show that their cost has actually changed because of the CE.

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