Variations to a Contract for a Building Work

Valuation of variation will depend largely upon the timing of the variation order, the location of the work, the quantity of the work involved and the circumstances in which the work is executed. If it can be established that these factors exclude the valuation on the basis of bill rates then the valuation will usually be based on fair or reasonable prices. In addition the Bill rates and prices are used in the valuation of variations. They are also used to value the effect of changes in the measure of the Works.

There are some typical rules for valuation of all work executed by builder as the result of client or architect instruction as to the expenditure of provisional sums and the execution of work for which an approximate quantity is included in the Bill of quantities. The methods of variation depend upon the nature of the work and the conditions under which it has to be executed.

Variation will be valued on the basis of fair valuation or fair rates or reasonable prices. The principle is that if the varied work is of a similar to tender and executed under similar conditions to work and does not significantly change of quantity of work priced in the Bill of Quantities then such Bill rates and prices shall be used to value the varied work. Varied work measured in accordance with SMM7 and allow for any percentage or lump sum adjustments in the contracts bill. In addition if necessary allow for addition to or reduction of preliminary items of the type referred to SMM7 except in the case of work resulting from an instruction as to the expenditure of provisional sum in the contract bills for defined work.

If the varied work is of a similar to tender but not executed under different conditions to work and significantly changes the quantity to work priced in the Bill of Quantities, then the Bill rates and prices shall be used as the basis of valuation so far as may be reasonable with a fair allowance.

The varied work is not similar to anything included in the tender then a fair valuation will be made. The comparison between the work covered by the variation and the work priced in the Bill of Quantities requires the break down into the elements of plant, materials, labour and overheads, in order to make the appropriate adjustment of quoted rates. The elements of the rate are to be adjusted to make appropriate allowances for the effects of the variation, but those elements unaffected by the extra effort are not changed.

The varied work cannot be measured and valued in the normal way then it will be valued with actual cost and adding some percentage or lump sum adjustments in the contracts bill. Allow for any addition to or reduction of preliminary items of the type except in the case of work resulting from an instruction as to the expenditure of provisional sum in the contract bills for defined work if necessary. Work valued at prime cost on a day work basis effectively involve a cost plus method of reimbursement and form a contractors’ view point, this is therefore an attractive means of securing payment for variation.

QUESTION 2

In the traditional approach of construction procurement the design is usually completed prior to procurement and commencement of construction. Price from the contractor is based upon a bill of quantities which describes the works in detail. Final cost is measured, based on the actual quantities of work carried out. Specialist elements are tendered separately and the selected contractors appointed as nominated sub contractors to the main contractor. The traditional method there is a refinement which involves two stage tendering or negotiated tendering. By this variant, design and construction can run in parallel to a limited extent. Whilst this allows an early start on site, it also entails less certainty about cost.

Design and Build procurement approach differ from the traditional approach due client have less responsibility to select a company based on whatever criteria are most expedient. In this method Contractor should undertakes to carry out design as well as construction of the project. Mostly, this is a lump sum approach but is not considered suitable for complex projects particularly where flexibility is required. Tendering is more expensive so it carries more risk for the contractor than the traditional approach. This becourse the contractor has to develop an outline design and detailed price. Tender lists will probably shorter than for traditional approach.

In this each process has advantages and disadvantages.

Advantage of traditional approach

Quality in a construction project is controlled using detailed working drawings and specifications, which are the basis of the contract between the client and contractor. This allows to client compare the materials and workmanship of the project under construction with what are required.

And the contract is awarded to the bidder who offers to construct the project for the lowest price. This competition motivates bidders to offer the lowest price they can because they know price is the only basis for award of the contract.

In the traditional approach provides good time and cost control due to completion of design prior to tender. And extensive provision of client changes and well defined process for evaluation of variations.

Disadvantage of traditional approach

Design and construction of a complex project is difficult to undertaking. There will always be conflicts and disputes that can lead to time consuming and expensive legal action. One major source of conflicts is errors and omissions in the working drawings and specifications prepared by the client.

In the traditional approach, the contractor is not known until after the design work has been completed and a construction contract awarded. This means the design cannot incorporate any input by the contractor on construction materials and methods that could improve the project’s design, functionality, and cost.

The traditional approach is usually slower than the design and builds approach, mainly because of the sequential nature of the process.

With traditional approach, the client prepares cost estimates as the design work progresses. While this gives the client an early indication of the project’s cost, there is no cost certainty until design is completed and construction bids have been received.

Advantage of Design and build approach

The design and build approach gives the client a single point of contact. However, the client commits to the cost of construction, as well as the cost of design, much earlier than with the traditional approach. Changes made by client during design can be expensive, becourse they affected the whole of the design and build contract rather than just the design team costs.

The design and build approach is a low risk option for clients who which to minimise their exposure to the risks of over spend, delays or design failure.

The construction contractor is involved in the design process from the beginning and can provide helpful insights on construction materials and methods that can make the design more efficient and less costly to construct.

By overlapping design and construction to some extent, and by potentially reducing conflicts between designer and builder, design and build approach can usually deliver a project faster than the traditional approach.

Disadvantage of Design and build approach

The perception remains, certainly amongst architects, that design and build is not the appropriate procurement method where design quality is a high priority. The contractor argues for cheaper materials in order to increase their profits not the quality of the design

If the employer wishes to take independent advice on design issues following the building contract being entered into, or the innovation of the design team to the contractor, the employer will have to pay additional fees.

There is only limited scope for the employer to make changes to his requirements once the Employer’s Requirements and Contractor’s Proposals have been agreed otherwise the cost consequences may be prohibitive.

QUESTION 3

Date for possession uses the term date from which works may commence and the date upon which the contractor is permitted to access to the site. There may be more than one date for possession where a project relates to construction on more than one site, or where a contractor will be allowed possession of different parts of the site at different times. This date is generally given in the tender documentation and other contractual provisions such as payment may be link to this date. The construction stage stats from the date of site possession or from a specific date agreed to between client and contractor and ends when the date for completion or date for practical completion reached. In other hand date for possession of client will be reached after the practical completion.

Date for possession is important for construction project and if failure by the employer to grant possession by the agreed date will have serious consequence in terms both of time and money. In general such provision will allow to contractor to be granted an extension of time with cost.

Completion date of construction project is set in the contract by which the contractor is to complete the agreed works. This may be extended in certain specified circumstances if the employer grants an extension of time. For most contracts, the contract period is decided by the client, as a result enabling the Completion Date to be inserted in the contract data before inviting tenders. This is normally assessed on the basis of the most economical period for carrying out the Works. In certain construction contracts, the client may not only set a completion date but also require the completion of portions of the work by interim dates. Even though if the date for possession in the site delay due to some reason, completion date might be extend. In these dates require the contractor to schedule and perform the work for specified portion of work. A liquidated damage provision may apply to interim dates as well as the contract completion date.

Generally, the date of practical completion is considered to be the point at which a construction project is completed, except for very minor defects which can be put right without undue interference or disturbance to an occupier or user. This is the point at which the client considers that the works are complete, sufficient for the client to take possession as use the facility of project. Thus the mean of practical completion date is the majority of Contracts require the Contractor to only achieve practical completion.

The date of practical completion is important for a number of reasons, including start of the defects liability period and the start of the period of final measurement of construction project. And contractor can grant the first half of the retention fund when the client agreed to issue practical completion certificate. Also the employer takes responsibility for insuring the works from the practical completion date and the end of a period for which liquidated damage may be deducted.