How is payment of subcontracted work treated in the NEC3 Engineering and Construction Short Contract (ECSC)? Clause 11.2(5) states that defined cost includes amounts paid for people employed by the contractor, plant and materials, work subcontracted by the contractor and equipment. However, clause 21.2 states that the contract applies as if a subcontractor’s employees and equipment were the contractor's.
Does that then mean that the subcontractor's people and equipment are deemed to be the contractor's people and equipment and therefore the contractor can only claim for 'cost' incurred by the subcontractor (not including subcontractor's uplift) plus defined cost uplift stated within the ECC contract data? In other words, what does the contractor include within its defined cost for subcontracted work: costs payable by the subcontractor, or costs payable to the subcontractor?
Does that then mean that the subcontractor's people and equipment are deemed to be the contractor's people and equipment and therefore the contractor can only claim for 'cost' incurred by the subcontractor (not including subcontractor's uplift) plus defined cost uplift stated within the ECC contract data? In other words, what does the contractor include within its defined cost for subcontracted work: costs payable by the subcontractor, or costs payable to the subcontractor?
The definition of defined cost is set out in clause 11.2(5), and it includes, ‘the amount paid by the contractor…for...work subcontracted by the contractor’. This clearly means that, when using defined cost to value compensation events, the contractor is paid what it has paid or is forecast to pay its subcontractors. That would include for any plant and materials supplied by the subcontractor.
How that figure is calculated will depend upon the terms of the subcontract the contractor has with the subcontractor. It therefore may, or may not, be a cost-based assessment. To this cost is then added the percentage for overheads and profit added to other defined cost, as stated in the contractor’s offer in the contract data.
Clause 21.2 covers matters such as risks and insurances. It does not and cannot alter the meaning of a clearly worded clause of the contract about something completely different.