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Question
Hi Raja,

I have argument with our contractor regarding evaluation of rate for new item versus old item which have 1 common material used.

Old item change the thickness of main material from 2mm to 3 mm thk and we submitted variation cost prorated to the approved rate by ratio and proportion method.

On the other hand, new item requested the contractor for pricing. after submitting the cost proposal, they change the thickness of main material from 3mm to 1.5mm. Now they asked cost saving. We reduced the price but still they want more reduction.

Contractor wants same logic what we use in determining addtl cost for old item.

My question is this. Method of computation of the rate for the 2 items mentioned above should not be compared right?

Answer
Dear Geraldine,
         Very interesting question.
This is happened regularly in Middle East and all depends on different scenario;however it is all depends on your procurement method and contract conditions.If your contract is silent for this issue,then you should act genuinely to meet any legal requirements if required in future.

In my opinion the prorate basis is not advisable and correct method for both cases i.e. additional work or cost savings works.Because many cases the real life experience revealed that the material cost is not uniform based on thickness and it depends on type of material and the usage of such material.

But in normal practice,to simplify the variation process both the parties (client and contractor)are accepting the prorate calculation for additional and negative variations.
If you agreed the prorate policy in your additional variation works,then you should obviously agree and accept the same policy for negative variations also.

In conclusion and my best opinion,you have to consider the present market rate for different thickness of the material and make rate analysis to make a genuine assessment for both the cases.i.e additions and omissions.In future if this raise as a dispute then you can defend them.Because the local civil procedure code also prefers and accepts the merit of genuineness of the claim.These all subject to your contract (GCoC)conditions.
I hope this will clarify your question.
thanks,
Raja  

Construction & Contractors

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Raja,MSc

Expertise

I can answer the topics related to the following sectors in Construction: Cost Control, Cost Engineering, Quantity Surveying, Contract Management, Commercial Management, Risk Management, Sustainable Built Environment, Procurement Strategy.

Experience

My experience related to the following sectors in Construction: Cost Control, Cost Engineering, Quantity Surveying, Contract Management, Commercial Management, Risk Management, Construction Financial Management, Sustainable Built Environment, Procurement Strategy, Design and Build. Projects: Roads, Bridges, Rail, Industrial Buildings, Residential Buildings, Hotels and Resorts, Healthcare Projects.

Education/Credentials
MSc-Quantity Surveying; CDM-Certificate in Dispute Management; Certified Cost Professional-CCP; Member-AACEI,USA; Member-Chartered Management Institute,UK; Member-CIArb,UK;

Awards and Honors
Certified Cost Professional-CCP

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