Frequently Asked Questions

We are the client on an NEC4 Professional Service Contract (PSC) using main option E (cost reimbursable contract). In item 11 for people in the schedule of cost components, is the defined cost calculated by using whatever period of time is most appropriate for each cost component under consideration? Secondly, does our service manager on a UK contract have the final say on the calculation of defined cost by virtue of clause 50.9?
Component 11 is written to recognise that your consultant’s employees often work on several different projects. It is applied on each assessment of defined cost. Given your assessment intervals will probably be monthly, it means that the calculation is made based upon that month’s figures, not the year. As long as the period is worked and can be evidenced by the consultant’s time-recording system, you should pay for it.

For your second question, it is not so simple. Your service manager decides what is due and paid each month and at the end of the contract, and certifies it, see clauses 50.1, 51.1 and 53.1. However, UK law requires the service manager to act independently of either party and use their professional knowledge to come to a fair decision. If the service manager fails to do all of this in time, the law and contract will put the onus on the consultant to assess, see for example clause 53.2 and the last sentence of clause Y2.2.

Clause 50.9 needs to be read carefully. It requires the service manager to check the consultant’s defined cost (which they are supposed to anyway) and take actions on them. If the service manager fails to do so within the required period, the consultant’s figures for defined costs are treated as correct, and the service manager cannot challenge them.

Finally, it is important to understand that if the consultant does not agree with the service manager’s assessment, it is entitled to take the dispute to the adjudicator. The adjudicator’s decision is binding on both parties unless the parties agree to change it or a tribunal changes it. All of this is set out in option W2, which is used in the UK when the Housing Grants, Construction and Regeneration Act 1996 Act applies. In the UK a tribunal will usually be arbitration or the courts. So, in the long run, the person with the final say if the parties disagree will be the adjudicator, an arbitrator or a judge.

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