Frequently Asked Questions

We are a client using an NEC4 Term Service Contract (TSC) option C (target contract with price list). Clause 52.1 says, ‘Defined Cost includes only amounts calculated using rates and percentages stated in the Contract Data’. It is our understanding that this refers to any rates or pricing rules associated with manufacture and fabrication work undertaken away from the affected property as per the schedule of cost components item 6. Please can you confirm our understanding is correct.

It is important to look at all of the schedule of cost components to determine the answer to your question, because it is not as simple as your question suggests.

To start off with, it is important to note that item 61 applies only if the manufacturing and fabrication is being carried out directly by the contractor, see the wording in the preamble to item 6. If that is the case, the contractor will get paid for its people carrying out this work based on item 61. The contractor is not paid for any of the equipment it uses in this manufacturing or fabricating because only equipment used within the service areas will be paid for, see preamble to item 2. However, there is no such restriction applied to the plant and materials used for this manufacturing or fabrication and therefore that will also be paid for under items 31 and 32.

On the other hand, if the manufacturing or fabrication is being carried out by a subcontractor, as defined by clause 11.2(17), the amount to be paid for it is that set out in item 41. And finally, if the manufacturing or fabrication is carried out by a supplier which has a contract to provide a product to the contractor, that product will be paid for as plant and materials under items 31 and 32.

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