JCT: What is reasonable cost breakdown to provide against lump sum prices for variation comparison

JCT Contracts
1

I am working on a JCT Contract, not D&B, which was priced on a Client’s QS Pricing Schedule with no quants therefore we gave lump sum prices against each individual item.

There have been many variations and we have provided lump sum prices against the omission of the lump sum price in the contract.

The QS is asking for detailed breakdowns of the lump sums so he can compare tender rates for Lab, Mats, Plant etc. against the new prices. Is this correct as we do not consider we should be providing this level of information as he should be able to do his due diligence on the lump sum prices through his own measure & pricing research?

In any event most of the prices were from subcontractors and they are unwilling to provide a breakdown of their pricing, which is understandable.

Can anyone offer me any advice on how to proceed and whether the QS is contractually within his rights to request this level of information from the contractor.

Many thanks

Regards
Mark

2

A reasonable cost breakdown is required to allow the valuation rules to be applied

In most JCT forms work of a similar nature should be valued at the rates and prices set out in the priced document, or adjusted for differing conditions. Similarly the omission of work should be at the rates and prices in the contract documents.

Where no such rates or prices are available or can easily extrapolated from the pricing document then this raises a difficulty!

Either the Contractor provides further information or the QS is left to make an assessment. Clearly the Contractor is best placed to provide the information such as tender price breakdowns, but is not obliged to do so.

JCT forms set a time limit by which the Contractor is to provide “all documents necessary for the adjustment of the Contract Sum” for example in the Intermediate Building Contract it is 6 months after the issue of a PC certificate. If not provided then it will fall for the QS / CA to prepare the final account based on the information in their possession.

Similarly during the course of project interim applications it will fall for the CA / QS to assess variations, additions & omissions. If the Contractor does not agree with that assessment then potentially that item will be in dispute.

Therefore it strikes me that it would be in the Contractors interest to either provide the information as far as he is able at the time it is requested or alternatively to await the QS initial assessment and then if the QS assessment is not agreed provide further information in an attempt to reach agreement.

Depending in the terms of the subcontract I would apply the same approach to the Subcontractor. They will be best placed to provide information but if they do not then the Contractor will have to make an assessment of the adjustment based on the information in its possession

The difficulties described above can be avoided or at least mitigated by making sure that a reasonably detailed breakdown or reference to a schedule or rates is included in all lump sum contracts and it seems to me (and experience has proved) that this is in the interests of all parties, the Employer, the Contractor & Subcontractors.

Unfortunately despite all talk of collaborative working, open book approach etc. there still seems to exist an element of secrecy & mistrust between the parties.

A reluctance to share commercially sensitive information is understandable, however in my view it would be healthier all round if these matter can be openly discussed. Contractors profit, margin & mark up, buying gains & loss and even errors are a reality of any contract sum priced build up and are best shared at the outset of the contract.

3

Hi Mark. You’re in a lump sum JCT with all the risk and reward that comes with it (unlike say a NEC Option C) and so collaboration and all those niceties don’t come into it. That’s another discussion! For current purposes, you can provide to the QS what you feel would assist the QS to come to the decision you want i.e. to use/ accept/ agree your quoted prices. The more you resist, the more he is likely to become entrenched. So give something to work with, but not all your confidential/ market / supply discount info. You are always at risk of him making his own assessment based on what you have offered up (and filling in his own gaps as to what you haven’t, which will obviously be conservative/ low) - he may well be reluctant to do this, however, in case it is challenged. And yes you can sit back if you want and insist he does the work himself - but again, it’s not likely to endear you to him, and he may not do it properly (i.e. you are best placed to know the market) . There’s a little bit of psychology here! PS your issues with your subcontractors are the same up the line - get them on board so that you can recover for them what they are looking for. They may need to give you some more info. Hope this helps?