NEC4 ECC: Payment Application – If the Contractor fails to submit an application for payment to the Project Manager before the assessment date, is the Contractor entitled to payment?
The Project Manager decides the first assessment date, following discussion with the Client and the Contractor in respect of the internal processes and procedures of both Parties. The first assessment date is not later than the assessment interval after the starting date set out in the Contract Data. Assessment dates occur at the end of each assessment interval, typically one calendar month, until either the Supervisor issues the Defects Certificate or the Project Manager issues a termination certificate.
The Contractor should submit an application for payment to the Project Manager before each assessment date. The application for payment should set out the amount the Contractor considers to be due, details of how the amount has been assessed and be in the form stated in the Scope. The Project Manager takes into account the application for payment the Contractor has submitted when making an assessment.
The amount due at the assessment date is the Price for Work Done to Date, plus other amounts to be paid to the Contractor such as incentive payments for achieving Key Performance Indicator’s under Option X12 or X20 or advance payment to the Contractor under Option X14, less amounts to be paid by the Contractor such as the cost of the correction of Defects by the Client in accordance with clause 46.
If the Contractor fails to submit an application for payment prior to the assessment date, the amount due is the lesser of: the amount the Project Manager assesses as due at the assessment date; and the amount due at the previous assessment date. As such, if there is no change in the period which reduces the amount due in the previous assessment, no further payment is made which will affect the Contractor’s cash flow.
However, if the Project Manager decides that say the amount due at the previous assessment date has been incorrectly over-assessed, or a reduction is required as a result of a compensation event, or if Option X7 is selected and the amount of delay damages levied for the period is greater than the Price for Work Done to Date, the Contractor is required to pay the Client the difference between the amount paid at the previous assessment date and the amount due at the assessment date.
This provision in the contract is likely to discourage the Contractor from deliberately not submitting an application for payment in circumstances where there is a reduction in the amount due since the previous assessment and as a result, the Contractor has been overpaid.
Relevant Clauses: 50, 51.1
Produced by Andrea Rae, Head of Commercial & Legal Services, Stradia in conjunction with Quantity Surveyors International