Payment

Question 1

Fundamental elements of payment

Answer 1

The Prices (how much are the works supposed to cost)

Defined cost (how much the works are currently projected to cost)

PWDD (what the contractor should be paid for the works in their partially complete state)

Disallowed cost (what the contractor requested but the PM has decided he are not entitled to receive)

Schedule of cost components (a way to recalculate the costs when things change) - not applicable to main option F as contractor is reimbursed for all payments to SC’s

Question 2

How does an activity schedule differ from a BOQ

Answer 2

Activity schedules have lump sums for items

BOQ’s have quantity, unit and rate info for items (more detailed)

Question 3

How do the prices, defined cost and the fee interact

Answer 3

The prices = defined cost + the fee

This does not apply to priced contracts (main options A and B)

Question 4

Basis for cost dependent on main option

Answer 4

A & B - the Prices

C - F - defined cost + fee

Question 5

What is the fee

Answer 5

Single % given in CD part 2

Covers overheads, profit, tax, insurance etc.

Question 6

What is the schedule of cost components

Answer 6

Submitted by contractor in CD part 2

Used to calculate the cost parts of works changed from the original intent in all main options excluding main option F

Example content:
People, equipment, plant and materials, design, insurance

Question 7

What is defined cost

Answer 7

The original intended costs (the Prices) and those incurred through CE’s

The contractor’s actual incurred cost

Question 8

What is PWDD

Answer 8

Represents expenditure on the partially complete structure, determined differently dependent on the basis of payment (the Prices or defined cost + fee)

Question 9

What is disallowed cost

Answer 9

Costs that the contractor has asked to be paid, but the PM believes are unsupported by the contract

Deductions from contractor’s application for payment

Question 10

Key payment term in Construction Act (payment cycle)

Answer 10

Part II payment cycle

Payment due within 7 days of relevant period

Payment notice within 5 days (becomes notified sum)

Payless notice no later than 7 days before final date for payment

Final date for payment is 17 days after due date

Question 11

NEC4 payment process

Answer 11

Contractor submits payment application before each assessment date detailing amount due and basis for calculation

PM certifies payment within 1 week of application

Client pays contractor within 3 weeks of certification

Question 12

What if payment requires correction in later period

Answer 12

PWDD is altered accordingly in subsequent payment period

Interest is to be paid to the underpaid party

Question 13

How does NEC4 address client non-payment

Answer 13

Contractor has right to terminate

If they do not, they must continue as their obligations remain

Question 14

When is the first payment assessment

Answer 14

Within one assessment interval after the starting date

Question 15

How do final assessment intervals differ

Answer 15

Within 4 weeks of issuance of defects certificate from supervisor

Within 13 weeks of issuance of termination certificate from PM

Question 16

How is amount due calculated

Answer 16

PWDD + any other amounts due to contractor - amounts to be paid by or retained from the contractor (50.3)

Question 17

How do priced contracts differ in their PWDD calculation

Answer 17

Priced contracts - Prices spent so far

Others - forecast of defined cost to be spent by next assessment date + the fee

Question 18

Failure to submit application

Answer 18

Amount due becomes lesser of:

PM assessment

Amount due at previous assessment date

Question 19

Amount due if client terminates contractor

Answer 19

Amount due includes “a deduction of the forecast of the additional cost to the client of completing the whole of the works” (93.2)