Construction Law/Construction Claims

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QUESTION: I am looking for an explanation as to the difference between a request for a reprice from an original lump sum contract under say drawings A to new drawings O ?
Compared to the issue of a variation direction to change ?

regards

ANSWER: Dear Ryan,

May I ask you which form of Contract you are using.

Regards

IRVALI

---------- FOLLOW-UP ----------

QUESTION: Thank you for your reply .My question relates no a mongrel version of an Australian Standard AS2545 .
I need to know if there is any difference as I believe that a reprice of drawings from tendered "A" to issued for construction "O"is different as the whole design and scope has changed where as  a variation should be issued perhaps after the reprice accepted ?
Your help appreciated Irvali

ANSWER: Dear Graham,

First time I am having experience with Australian Standard, since it is quite far from our region. However, I will try to reply as general practice that we are dealing with. The so called scope of the works, once defined within the contract, including the Employer’s Requirements, Specifications, Drawings and Bills of Quantities, may require various alterations to consider circumstances and events which were not foreseen in design stage. Typically construction contracts provide so called variation clauses allowing the employer to unilaterally change the scope, sequence, method or design of the works. By this means the contract is able to respond to the practical needs of all kinds of projects. In fact, variations to the works are almost inevitable, because of the fact that events and circumstances arise which may be beyond the control of the parties albeit also being caused by them.

As in your case, "Change of Design" may cause following variations ;

Changed  Methodology of the Contractor, therefore change in the cost,
Changed  Quantities, therefore change in the cost,
Changed of the present conditions, such as change of subsoil conditions due to change of location, change of technical specifications, etc., therefore change of the cost,

As a rule a contract is legally binding on the parties to it. Changes to the contract would necessitate a new contract being drawn up if changes to the works had to be made during the course of the works. Thus most contract forms used in the construction industry allow for variations or changes to the works and the design of the works, because there must be a basis from which a variation instruction can arise. Such allowance needs to be crystallized by an instruction or order of the employer or third person, to which the contract gives the power to do so. As Variations may affect not only  design but also the Contractor’s costs and profit, both the consequences of a variation to the Contractor and those to the Employer have to be fixed by the variation order. Thus standard contract forms usually provide rules which specify the effects of a variation order on the parties. In principle such clauses will give rise to claims for additional payment and/or extension of time. Usually the contracts define the procedures and requirements whereby variations might be initiated and processed:

Under some contracts mainly, based on the common law the engineer typically has the authority to initiate variations by giving instructions to the contractor. The contractor will then have to consider whether he is entitled to claims for additional payment or whether the contract provides a valuation procedure which has to be implied anyway.

Under contracts based on the civil law, such as mostly middle east countries, the employer himself is usually authorised to instruct changes to the works. Thus the employer has the right to instruct changes to the design and to order additional work. If such change alters the basis of the price for work, a new price must be agreed by taking into consideration the higher and lower cost compared with the tender price.

When a Variation Issued to the Contractor, generally, he is obliged to perform the Works. However, if there is disagreement between the Contractor and Engineer/Employer regarding the rates to be applied or to be revised because of such Variation, then again, Contractor has to perform the Works and submit his claim for the additional cost. If they do not reach any agreement, then it becomes a dispute and Contractor needs to provide documentary evidence for such increased cost.

This is what happens because of change of the design in this part of the World.

Best Regards

IRVALI


---------- FOLLOW-UP ----------

QUESTION: Thank you very much for your reply Iravali
The design at tender was only 70% completed and the contract said that those rates in the remaining 30% of the design would come from the rates that had been shown in the original lumps sum tender .
After signing tender lump sum, at commencement of the civil works the drawings were now 100% and called issue O. There are significant changes to lengths of drains , stormwater sumps and covers ,diameter and depth of drains additional drains etc etc from the original 70% tender A drawings .The difficulty I have is that I believe that a new lump sum for the 100% design O drawings and should be repriced in full to the current design O.If the lump sum for accepted tender A is say 3 million and the reprice of O which incorporates all changes to 70% A and the extra design to make the 100% O then the contract should be reissued to design O with a new lump sum and not as the main contractor would like to do and measure each change individually and make amendment to the original A

Sorry this has had my head spinning for months and I cannot get clarity from myself
regards and best wished Graham

Answer
Dear Graham,

I understand that your contract includes special stipulations such as making lump sum agreement with available 70% drawings. What about the conditions that you may claim the difference or submit your documents on cost with pre-tender and after tender conditions ?

Best Regards

IRVALI

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ALI IRVALI

Expertise

FIDIC, Arbitration Procedures, Claim Management, Project Management.

Experience

I have experience of working at 6 countries in MENA region (algeria, Libya, Saudi Arabia, Oman, Pakistan)as the Regional Director and General Manager of a construction company. I have experience on various applications of FIDIC and construction law, arbitration procedures, claim management, project management.

Organizations
CEO of TURCON Construction presently. www.turcon.com.pk

Education/Credentials
M.S. Civil Engineer, Various Courses on Project Management, Seminars on FIDIC.

Past/Present Clients
National Highway Authorities of various countries, Water and Power Development Authorities, Karachi Port Trust, etc.

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