We are the project manager on an NEC3 Engineering and Construction Contract (ECC) Option A (priced contract with activity schedule).
The contractor is claiming defined cost for support staff in its head office within compensation event quotations for delay. The contractor included its head office within the working areas identified in contract data part two. Our understanding is that defined cost of people is only paid according to time worked in the working areas, which can only be those areas necessary for providing the works and used only for work in this contract. The contractor’s head office does not meet this definition, so the cost of staff working there are included in the fee. Are we correct?
You are correct. The second bullet of the definition of working areas in clause 11.2(18) clearly excludes head offices. Therefore the contractor is wrong for two reasons. Firstly, while ‘working areas’ is an identified term, it does not define who gets paid for working in them. People need to be in the ‘Working Areas’, which is a defined term, see the preamble to people item 1 of the shorter schedule of cost components. The contract makes it clear that the contractor only gets paid for people in the ‘Working Areas’, and the definition of that term makes it clear that head offices are not included.