LECTURE 5 FORMULATION PRESENTATION OF Variations

LECTURE 5 FORMULATION & PRESENTATION OF • Variations OTHER • • Acceleration Fluctuations CLAIMS • Quantum Meruit • Finance charges • Cost of preparing the claim

VARIATIONS OF THE CONTRACT · Change of the terms of a contract such as the level of price or basis of payment or contract period or a change of its scope. VARIATIONS UNDER THE CONTRACT · Change the design, quality or quantity of the works described under the contract.

DEFINITION OF VARIATIONS "Any agreed change which adds to or subtracts from the terms and conditions or intent of the original contract. It is usual that a contract contains either an express or implied term that a variation does not vitiate the contract. " EXTENT OF VARIATIONS The variations must be similar in character to the work being done under the original contract It is limited to what the parties might reasonably have contemplated would be a variation

VARIATION UNDER HKSFBC Clause 11 (2) of the Conditions of Contract defines variation as: alteration design, the or of the quality or of the Works as modification quantity shown upon the Contract Drawings and described by or referred to in the Specification

VARIATION UNDER HKSFBC INCLUDES: addition, the omission or of any work, the alteration of the substitution standard of any of the or goods to be used in the Works, & the removal from the site of work, executed any materials or or goods brought . . .

ISSUE OF VARIATIONS • Variations, except invariably occasions such as safety matters, should be confirmed in writing before the work being executed. • The contractor submits the TIME & COST effects of the variation to the Employer for settlement • The Employer may agree, at no extra cost, the variation proposed by the Contractor to simplify his construction sequence, etc.

COMMON VARIATIONS • Under measurement of provisional or prime cost sums • Unavailability of specified materials • Lack of coordination of trades and consultants • Change in user requirements • Design changes • Changes in site conditions • Mistakes by the contractors • Latent defects • Lack of research into local conditions • Changes by authorities • Errors in documentation

TYPES OF VARIATIONS IN HKSFBC Cl 4(1) Variation from the Contract Drawings or Specification t Cl 4(1) the conforming to. Variation Ordinance of Government Works alteration. . . of Cl 11(2) the The 'Variation under HKSFBC' above) Cl 12(3) Correction of error in contract drawings / specification Cl 32 (3) Instructions for protective work etc. during hostilities Cl 33 (1)(d) Removal of debris, protective works, make good war damage Cl 36 (5) (f) Fluctuation

VALUATION OF VARIATIONS BQ / SOR PRO-RATA RATES STAR RATE (NEW RATE) CONTRACTOR'S QUOTATION DAYWORKS

METHODS OF VALUATION OF VARIATION Similar character under similar conditions · The prices in the BQ / Schedule of Rates Not similar character or not under similar conditions · The prices in the BQ / Schedule of Rates as basis · Fair valuation Work cannot be measured and valued · Daywork rates inserted at tender · Daywork rates Labour cost + Plant cost + (Material cost +15%) Omission · BQ rate / Schedule of Rates Substantial omission · remaining items - use the prices in the BQ / Schedule of Rates as basis · fair valuation

ARGUMENTS FOR USING NEW RATES Changed conditions / circumstances · different from those methods, etc. contemplated in the tender stage Changed quantities · e. g. increase of concrete volume may require overtime working Changed timing · Works not in the same period of the program Small quantities · loss of purchasing discount · higher rates for smaller quantities of work Time related costs · extra pumps, tower crane, supervision & other preliminary costs due to variation

CAN A CONSULTANT CHOOSE NOT TO USE THE ERRONEOUS RATES ? • The rates, even erroneous, generally stand in valuing variations. PAYMENT OF VARIATION · Variation to be paid, if works completed, in interim certificates (Clause 11(5)) · Variation cost to be adjusted in the Contract Sum · Variation to be paid upon determination (Clause 26(2)(b)(ii), (iii)) BILLS OF VARIATION · Clause 30(5)(a) - The main contractor shall be supplied with a copy of the priced Bills of Variation not later than the end of the Period of Final Measurement and Valuation.

PROCEDURE FOR MAINTAINING RECORDS OF VARIATIONS OF WORK · Obtain A. I. or confirmation of verbal instruction or Clerk of Works instructions empowered by the Architect. · Check the contract conditions for any conditions that are precedent to a claim. e. g. notice of claim to be submitted within a certain period. · Prepare standard form for routine or repetitive variation work to simplify the procedure. · Keep all delivery notes, vouches, invoices, etc. about materials, plant, etc. · Complete Daywork sheet everyday with labour, material, plant used for variation. · Request Clerk of Works to countersign the Daywork sheet everyday the day after completion of the variation work. · Record the details of the variation work in the Site Diary Book so that it can be easily traced at a later stage. · Submit the variation or daywork claim as soon as possible to the consultant Q. S. for early and easy settlement.

MINIMIZING VARIATIONS • Coordinate with • Take care in establishing the consultants contract • Work as a team documentation • Examine climatic and • Read & response to the local conditions brief • Not to be too • Examine precedence innovative • Prepare checklist • Provision for unknown • Test materials before • Adequate site testing use • Construct prototype • Consult with authorities & samples

ACCELERATION REASONS: • Earlier completion for commercial reasons • Cost of acceleration is less than the cost of prolongation caused by qualifying events • Contractor's savings in escalation costs for earlier completion There is no acceleration clause in Hong Kong Standard Form. If acceleration is required, separate agreement with the following is required: • Revised Date for completion • EOT for subsequent delay by qualifying delay • Revised Liquidated Damages • Revised program for the remaining works

ACCELERATION COSTS • Non-productive overtime • Loss of productivity n not all overtime payment n inefficient output for labour in a n only those additional required for acceleration congested site n coordination of • Extra staff & operatives various trades & n Higher rates of pay activities n incentives n waiting time n travelling time between activities n subsistence • Equipment & plant n transportation n additional plant / • Lighting & power equipment n in winter n additional idling time

FLUCTUATION Fluctuation AMC x MI PMC x MI to be = -------- - --------recovered BI BI Actual fluctuation Planned fluctuation AMC = actual monthly cost MI =index for relevant month PMC =planned monthly cost BI =base index

QUANTUM MERUIT Action on quantum meruit - for as much as he has earned • void contract - it cannot be pleaded in court as the basis for damages. • work done by the contractor based on verbal confirmation by the Employer, but later agreement cannot be reached. • Changes which extents are outside the definition of the variation - substantial variation.

FINANCE CHARGES • Additional finance charges for additional works (if such cannot be compensated in the valuation of variation works) • Undercertified amount of work done • Late issue of interim payment certificate or payment • Delay on the works and hence the release of retention • However, interests are not recoverable

COST OF PREPARING THE CLAIM • Normally the cost is not recoverable • May be recovered in the staff cost under the prolongation claim if it is prepared by the staff • The employer may have to recover the contractor if the contractor has to prepare the final account himself instead of by the consultants of the employer • Certain works prepared for the arbitration