We are a client using the NEC4 Engineering and Construction Contract (ECC) Option A (priced contract with activity schedule). Our project manager has instructed a change to the scope during the construction phase and, because of labour availability at the time, the contractor says it can no longer provide the works with people at the rates stated in contract data part two. Can the contractor include within the compensation event quotation the actual open-market rates being paid for people carrying out the works associated with the compensation event?
Clause 52.1 is clear that, if there is a rate or percentage contained in contract data, this must be used. The remainder of the second sentence concerning ‘open market or competitively tendered prices’ is only applicable to items of defined cost for which there is not a rate or percentage stated in the contract data.
Clause 63.16 states: ‘If, when assessing a compensation event the People Rates do not include a rate for a category of person required, the Project Manager and Contractor may agree a new rate. If they do not agree the Project Manager assesses the rate based on the People Rates. The agreed or assessed rate becomes the People Rate for that category of person.’ However, this clause is only applicable if there is not an existing rate as opposed to one party believing the existing rates are not reflective of the actual costs to the contractor of employing the relevant people.
There is an opportunity in clause 63.2 for the project manager and contractor to agree rates or lump sums to be used to assess the change to the prices as an alternative to defined cost plus fee. However, this clause can only be used with the mutual consent of the project manager and contractor. There is also the option for the client and contractor to agree to amend the contract in accordance with clause 12.3, but this again can only happen with the mutual consent of both parties.