The new NEC 4 “deemed acceptance of defined costs” clause will be either unnecessary or written out

The new clause

The new NEC 4 Contract allows the Contractor (under options C, D, E and F) to ask the Project Manager to review and either accept its total Defined Cost or explain any problems.  If the Project Manager does nothing, after 13 weeks the Defined Cost will be deemed to be accepted.

Rationale

The new provision seeks to avoid the situation where the Employer or “Client” brings in an army of cost checkers, late on in the project, to look for ways to reduce Defined Cost before the final assessment is agreed.  Often the, “findings” which are generated by the cost checkers to drive down defined cost are tenuous and based on an inappropriate extrapolation of minor issues.

Comment

It is perfectly legitimate for Clients to seek assurance over Defined Cost. The sort of behaviour the new clause is intended to prevent however is not in line with a spirit of mutual trust and cooperation.  This approach undermines the Contractors’ reported margins, potentially leads to dispute and is likely to drive inappropriate Contractor behaviours in the future as they anticipate a bun fight at final assessment.

I suspect that Clients who do not intend to commit to working in a spirit of trust and mutual cooperation will seek to remove the new provision with a Z clause. Contractors working with Clients who have robust, collaborative and timely defined cost assurance regimes in place simply won’t need it.