Frequently Asked Questions

I am the project manager on an ECC Option C (target contract with activity schedule) project. The contractor’s latest application for payment exceeds the latest target and l do not know from a contractual point of view whether I should certify the full amount due. The contract is ongoing and there are a number of compensation events to implement that will increase the target. I have looked through the contract and the relevant payment clauses and cannot find a clause that states the client can only pay up to the latest target.
ECC Option C is a risk-sharing contract, in the sense that the client shares the risks of cost overruns and rewards of cost savings. The ‘target’, as you call it, is just that – a target.

As project manager you are required to certify the amount due at each assessment date, see clauses 50 and 51. That includes determining the price for work done to date and, in Option C, that means the defined cost plus the fee, see clauses 11.2(29) and (23) for detailed definitions.

It is not until completion that you make a preliminary assessment of the pain/gain share, and that assessment is based upon the forecast figures for the final price for work done to date and the final total of the prices (the target), see clause 53.3. If that means that the contractor is required to pay back part of the difference as its share, then it must do so – see clause 53.2, 3rd bullet of 50.2 and 3rd sentence of 51.1.

You are not able to carry out the calculation before completion of the whole of the works. You are then required to make a final calculation of the share once the final figures for the price for work done to date and the total of the prices are known, see clause 53.4.

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