Construction Law/Design variation & cost impact in Lumpsum contract
Dear Mr Manish,
Let me share the following event –
Recently we are awarded nine hospitals at different locations in our state. State Govt. is the client & it’s a “Design & Build” contract on turnkey basis.Out of nine hospitals four are only 5 storied and will follow isolated footings instead of pile foundation . A payment schedule on percentage basis were agreed with client upon completion of certain milestones which specifies as stated below -
a)On completion of 50% foundation ( Pile only) @ 5.5% of Contract value
b)On completion of balance 50% foundation ( Pile only) @ 5.5% of Contract value
Now here is a dispute. .As per Payment schedule it seems payment will be made against pile foundation only. Now instead of pile foundation if we adopt isolated footings client may ask for savings by saying that they bought the building including pile foundation and raft etc which is now changed to isolated footings which are more cost effective. So , client may treat this event as a part of “value engineering” to issue a variation order in their favour.
As a contractor are we entitled to get full payment as agreed ?
Contractually how to protect ourselves ? If you kindly advise, thanks
Regards - Kallol Seal , L&T- Kolkata , India
I agree with your concern. Please let me know if the issue relating to "chaning Piles to isolated footing" has been discussed openly with the Client?
Nonetheless, Client can ask for at least 50% savings due to this VE.
To advise you specifically; I need to have a look into your Contract Conditions.