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Construction Law/Variations to a Lump Sum Item

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Question
Dear Sir,

The Contract has a Lump Sum portion and a re-measured portion. The Owner has ordered a Variation to the Lump Sum works- basically has asked the Contractor to increase the size of a structure by 5 times the original size at the time of award.

The Contractor priced the structure as a lump sum item - $$. Now with the increase in size by 5 times the Contractor wants to claim 5x$$.

Is the Contractor's approach correct?

Answer
Dear Vijayashanker,

Thank you for this question.

In principle the Contractor is wrong in his approach; however what is being requested by the Employer is so different from the original intention of the contract that I doubt any instruction would be invalid.

Notwithstanding this the PArties can agree to amend the contract in order to satisfy the Employer's new requirements. It is unlikely that the Contractor's costs will simply be five times the original costs. The correct way to approach this with the existing contractor is, in my opinion, for the Employer/Engineer to request a fully detailed proposal for the varied work and for that proposal to be assessed subsequently.

You have not stated which form of contract governs the project but many standard forms contain detailed mechanisms for the valuation of changes. In the circumstances you have described I would be very cautious, however, of following those procedures dogmatically; as this could result in some injustice to either or both Parties.



I hope that this assists you.

Kind regards,
John Dowse

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Construction Law

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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