NEC3 Auditing Service

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Our Services and Experience

Using a team of Chartered Quantity Surveyors and Chartered Accountants we have audited Public Sector contracts worth approximately £200 million.

Throughout Scotland our main Client has recovered a seven figure sum as a result of NEC3 auditing. This form of auditing is very different to normal internal or external auditing as it requires an in-depth knowledge of NEC3 and of the Construction Industry. It necessitates detailed interrogation of the Consultant/Contractor’s ledgers from an independent perspective and is an off-shoot of Forensic Auditing.

The Benefits of NEC 3 Auditing

* Transparency – Increases the Employer’s awareness of Actual costs
* Control – Policing the accounting of the Projects ensures accountability
* Recovery – The discovery of errors and exaggerations can result in substantial amounts recovered

NEC3 Contracts

This form of Contract provides substantial benefits between Purchaser/Employer and the Contractor or Consultant. For large projects the Option C (Target contract with activity schedule) and D (Target contract with bill of quantities) are commonly used in Scotland.

The Contract includes a ‘Schedule of Cost Components’ and the Contractors/Consultants are reimbursed according to their stated actual costs. Despite the acceptability of this form of contract it can often lead to inflated costs.

Examples of Overcharges

The more common examples of these extra costs being charged to the Purchaser/Employer in the regular Application include: –

* The rate charged for staff and other workers includes an estimated ‘Uplift’, ‘On-cost’ or ‘Burden’. This is an estimate, but in the regular Application
by the Contractor/Consultant, it is treated as an actual. This estimate has to be compared to the actual payments to staff.

* Consultants. The rates they are allowed to charge are normally listed and a Management Fee added. However, the Management Fee differs for various categories of Consultant. Agency staff may have no Management Fee added. If not examined, the ‘actual costs’ could include such disallowed charges.

* Accruals. If a careful study of the Contractor’s Accounting Ledger is not undertaken, it could have accruals and estimates remaining in the Ledger. These are supposed to be reversed on a monthly basis. It requires careful auditing to identify and remove accruals that have not been reversed.

* The Schedule of Cost components disallows various costs. If the Accounting Ledger is not audited, these disallowed costs may be included.

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