How to calculate Non-Conformance Report (NCR)

What is an NCR?

An NCR is basically a document issued when something doesn't meet the agreed-upon standards or specifications on a construction project. For instance, if a contractor installs something incorrectly, uses substandard materials, or fails to follow the plan, an NCR is issued. It's like saying, “Hey, this isn’t right, and it needs to be fixed!”

When are deductions applied for NCRs?

Now, the real catch is that an NCR doesn’t just mean you need to correct the work. Sometimes, it can also lead to monetary deductions from the contractor's payment. These deductions are penalties for not following the project requirements and standards.

Let me give you a real-life scenario to make this clearer:

Scenario: Concrete Pour Gone Wrong

Imagine you're managing a G+45 high-rise building in India, and the contractor is pouring concrete for the 10th-floor slab. The contract clearly states that the concrete should be of M30 grade. However, upon inspection, you realize that they used an M25 grade by mistake.

You issue an NCR because the contractor didn’t meet the required concrete grade, and that’s a non-conformance to the specifications.

What happens next?

Rework: The contractor has to remove the incorrect concrete and redo the slab using the proper M30 grade concrete. This is costly for the contractor.
Deductions: If the rework affects the project timeline or quality, you might apply a deduction. Let’s say the rework caused a 2-day delay, and based on your contract, each day of delay incurs a ₹1,00,000 penalty. That’s ₹2,00,000 in deductions from their payment.

Here’s another example:

Scenario: Using Cheaper Materials

Now let’s say you're managing the same project in the Gulf region, and the contractor was supposed to install high-quality aluminum windows. But to cut costs, they installed cheaper, low-quality windows without informing anyone.

You notice this during a routine check and issue an NCR for using materials that don’t match the agreed-upon specifications.

Immediate action: The contractor is asked to remove all the cheap windows and replace them with the correct ones.
Deductions: In this case, you might decide to apply a deduction for the cost difference between the cheaper windows and the high-quality ones specified in the contract. Plus, you could penalize them for the time it takes to fix the issue, especially if it delays other activities on-site.

When should deductions be applied?

Delay to the project: If the non-conformance causes a delay that impacts the project’s timeline, a deduction may be applied.
Cost of rework: If the contractor’s mistake requires expensive rework or uses resources that weren’t accounted for, this can be deducted from their payment.
Quality impacts: If the quality of the final product is affected and can’t be fully corrected, deductions might be made to compensate for the reduction in value or durability of the work.

Sat Sep 14, 2024