Construction Law/Variation Order for Lump Sum price
Our Contract is Lump Sum and fixed price ,I am working for the Engineer (Employer Representative). Regarding any variation order to be issued to the contractor based on his variation Proposal, should it be firm and exact in Price and Time extension if any. I mean that should it be final and lump sum too? in order to the total final Price of the whole Contract be defined and specific once the VO approved and issued? Could the VO issued on an Estimate Amount and Estimate time impact, then after finishing the work of the change the final amount will be found different from the estimated and approved one in the VO?
The Contractor submitted his Variation Proposal with Estimated Cost and Time stating that the payment will be according the actual work on site based on the given unit rate ... and he asks us to issue the VO ?
Dear Mr. Khaled,
Thank you for your question and have following comments to offer on your question.
COULD THE VO ISSUED ON AN ESTIMATE AMOUNT AND ESTIMATE TIME IMPACT
The variation order is issued on the basis of estimated amount as agreed between the 2 parties and therefore presently this is the value of the variation order from contractual angle. In case both sides agree and it is apprehended that scope of work may change subsequently, a provision can be made in the variation order that the amount of this variation order subject to change provided the quantities after execution are found to vary either side by more than say 5% or any other figure that both side agree. In my views this is one way of dealing with the issue and you can think of similar solutions as well. Please remember that VO is issued after agreement between 2 parties and they can agree any thing as long as it is not against provisions of applicable law. I hope this answers your question.