NEC 4 ECC Hong Kong Edition July 2023 - Main Option Clauses

(25) [HK Edition: (29)] Defined Costis

• the amount of payments due to Subcontractors for work which is subcontracted without taking account of amounts paid to or retained from the Subcontractor by the Contractor which would result in the Client paying or retaining the amount twice and
• the prices for work done by the Contractor

less Disallowed Cost.

(26) [HK Edition: (30)] Disallowed Cost is cost which

• is not justified by the Contractor's accounts and records,
• should not have been paid to a Subcontractor or supplier in accordance with its contract,
• was incurred only because the Contractor did not
  • follow an acceptance or procurement procedure stated in the Scope [HK Edition: contract],
  • give an early warning which the contract required it to give or
  • give notification to the Project Manager of the preparation for and conduct of an adjudication or proceedings of a tribunal [HK Edition: an arbitration or other tribunal] between the Contractor and a Subcontractor or supplier

and the cost of

• correcting Defects after Completion,
• correcting Defects caused by the Contractor not complying with a constraint on how it is to Provide the Works stated in the Scope,
• Plant and Materials not used to Provide the Works (after allowing for reasonable wastage) unless resulting from a change to the Scope,
• resources not used to Provide the Works (after allowing for reasonable availability and utilisation) or not taken away from the Working Areas when the Project Manager requested and    
• preparation for and conduct of an adjudication or proceedings of a tribunal [HK Edition: an arbitration or other tribunal] between the Parties.

(27) [HK Edition: (31)] Disallowed Cost is cost which

• is not justified by the Contractor's accounts and records,
• should not have been paid to a Subcontractor or supplier in accordance with its contract,
• is a payment to a Subcontractor for
• work which the Contract Data states that the Contractor will do itself or
• the Contractor's management,
• was incurred only because the Contractor did not
• follow an acceptance or procurement procedure stated in the contract,
• give an early warning which the contract required it to give or
• give notification to the Project Manager of the preparation for and conduct of an adjudication or proceedings of an arbitration or other tribunal between the Contractor and a Subcontractor or supplier

and the cost of preparation for and conduct of an adjudication or proceedings of an arbitration or other tribunal between the Parties.

(29) [HK Edition: (32)] The Price for Work Done to Date is the total of the Prices for

• each group of completed activities and
• each completed activity which is not in a group.

A completed activity is one without notified Defects the correction of which will delay following work.

(30) [HK Edition: (33)] The Price for Work Done to Date is the total of

• the quantity of the work which the Contractor has completed for each item in the Bill of Quantities multiplied by the rate and
• a proportion of each lump sum which is the proportion of the work covered by the item which the Contractor has completed.

Completed work is work which is without notified Defects the correction of which will delay following work.

(35) [HK Edition: (38)] The Total of the Prices is the total of

• the quantity of the work which the Contractor has completed for each item in the Bill of Quantities multiplied by the rate and
• a proportion of each lump sum which is the proportion of the work covered by the item which the Contractor has completed.

Completed work is work which is without notified Defects the correction of which will delay following work.

The Contractor notifies the Project Manager when the Defined Cost for a part of the works has been finalised, and makes available for inspection the records necessary to demonstrate that it has been correctly assessed. The Project Manager reviews the records made available, and no later than thirteen weeks after the Contractor's notification

• accepts that part of Defined Cost as correct,
• notifies the Contractor that further records are needed or
• notifies the Contractor of errors in its assessment.

The Contractor provides any further records requested or advises the correction of the errors in its assessment within four weeks of the Project Manager’s notification. The Project Manager reviews the records provided, and within four weeks

• accepts that part of Defined Cost as correct or
• notifies the Contractor of the correct assessment of that part of Defined Cost.

If the Project Manager does not notify a decision on that part of Defined Cost within the time stated, the Contractor’s assessment is treated as correct.

The Contractor keeps these records

• accounts of payments of Defined Cost,
• proof that the payments have been made,
• communications about and assessments of compensation events for  Subcontractors and
• other records as stated in the Scope.

The Contractor keeps these records

• accounts of payments made to Subcontractors,
• proof that the payments have been made,
• communications about and assessments of compensation events for  Subcontractors and
• other records as stated in the Scope.

If the Contractor

• changes a planned method of working at its discretion so that the activities on the Activity Schedule do not relate to the operations on the Accepted Programme or
• corrects the Activity Schedule so that the activities on the Activity Schedule relate to the Scope

the Contractor submits a revision of the Activity Schedule to the Project Manager for acceptance.

A reason for not accepting a revision of the Activity Schedule is that

• it does not relate to the operations on the Accepted Programme,
• any changed Prices are not reasonably distributed between the activities which are not completed or
• the total of the Prices is changed.

A difference between the final total quantity of work done and the quantity stated for an item in the Bill of Quantities is a compensation event if

• the difference does not result from a change to the Scope,
• the difference causes the Defined Cost per unit of quantity to change and
• the rate in the Bill of Quantities for the item multiplied by the final total quantity of work done is more than [HK Edition: the greater of]
  • 0.5% of the total of the Prices at the Contract Date [HK Edition: or
  • the compensation amount]. 

If the Defined Cost per unit of quantity is reduced, the affected rate is reduced.

The Project Manager gives an instruction to correct a mistake in the Bill of Quantities which is

• a departure from the rules for item descriptions or division of the work into items in the method of measurement or
• due to an ambiguity or inconsistency.

Each such correction is a compensation event which may lead to reduced Prices.

Assessments for changed Prices for compensation events are in the form of changes to the Bill of Quantities.

For the whole or a part of a compensation event for work not yet done and for which there is an item in the Bill of Quantities, the changes are

• a changed rate,
• a changed quantity or
• a changed lump sum.

For the whole or a part of a compensation event for work not yet done and for which there is no item in the Bill of Quantities, the change is a new priced item which, unless the Project Manager and the Contractor agree otherwise, is compiled in accordance with the method of measurement.

For the whole or a part of a compensation event for work already done, the change is a new lump sum item.

If there is a termination, the Project Manager assesses the Contractor's share after certifying termination. The assessment uses as the Price for Work Done to Date the total of the Defined Cost which the Contractor has paid and which it is committed to pay for work done before termination, and uses as the total of the Prices

• the lump sum price for each activity which has been completed and
• a proportion of the lump sum price for each incomplete activity which is the proportion of the work in the activity which has been completed.