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Construction Law/Loss of overhead & profit due to omitted works

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Question
Hi John

Please can you advise, I am working on a project where variation orders has been issued to omit large parts (sites) of the subcontract works. We are a subcontract working on a IChemE Yellow book form of contract. The Subcontract states that the value of the works is a fixed lump sum, however, it is a rollout of some 600 sites and the sites were averaged out against the fixed lump sum to aid applications etc. Can you advise if we are allowed to recover the loss of overhead & profit against the omitted works through the variation orders?

Regards

Nick

Answer
Dear Nick,

Thank you for this question.

One factor that will determine is whether or not the omitted works will be undertaken at a later time and whether your contract provides for this. If the contract allows the Client to omit work in this manner then in it unlikely that you will be entitled to claim loss of profit on the omitted sections; however, on the facts as you have described, even if you cannot claim the loss of profit element I believe that you can renegotiate your prices on the remaining work parcels to take account of any loss of productivity (or even loss of return on investment if you have made a capital purchase of, for example, construction equipment in the expectation of completing all 600 sites) that will be suffered due to the omissions.


I hope that this assists you.

Kind regards,
John Dowse

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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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