We have completed a Contract a month early. The client has taken over the Works. His recognition of our good management and the fact that he can see savings in us not demobilising the whole site, has decided to issue further works via a PMI; rather than negotiate a new Contract.
How do we stand with regards to Delay Damages, which would have commenced had the Contract extended beyond the 12th March. And can he take retention on the amount of the PMI, once a quote has been agreed?
The additional works are dealt with through the compensation event procedure. Most likely you have a compensation event under clause 60.1(1) ⌠Project Manager gives an instruction changing the Works Information. If the PM hasnât notified it as a CE (which he should have under clause 61.1) then you should notify him of it. Then you should submit a quotation for time and cost in accordance with clause 62 and assess it in accordance with clause 63. From a time perspective you assess âany delay to the Completion Dateâ which in your case sounds like it was 12th March - remember Completion Date is when the contract required you to finish, and Completion is when you actually finished therefore your entitlement to an extension of time runs from 12th March. Once youâve assessed how long the additional works will take beyond 12th March, and the PM has accepted this, the Completion Date is moved accordingly and your liability for delay damages will run from the new Completion Date. If youâve had the PMI instructing you to do the additional works then the works themselves are not complete until the additional works are carried out. Retention will therefore be retained on the additional works along with the retention on the original works, with release of the first half when you achieve Completion (of the additional works) and the second half when the Defects Certificate is issued.
I agree absolutely with what Neil says for the process under the contract. However, I would be concerned to identify whether there is in fact still a contract in existence that can be varied.
If all the works have been completed the contract is concluded. If the contract is concluded the PM has no further substantive power to issue a change. The fact that you have finished early may raise questions around whether the works are complete but if the employer has taken beneficial use it seems likely that completion has been achieved in any event.
You can agree a supplemental contract, on exactly the same terms as the original, for the extra work or bring in whatever changes are appropriate (eg no delay damages where the employer already has beneficial use). What cannot happen, post completion, is that the PM requires further work.
The Original Contract is complete - it was demolition works. The PMI is for Construction works in a different part of his Site completely. In fact we are possibly talking about 2 or 3 packages of work. He does not want to go through the business of issuing a new contract for these works, but to save time issue them as a CEs and pay under the old contract. Whilst we do not mind going along with his wishes, I wondered where we sat with damages and retention. If in the CEs we stated that we reject any further delay damages or retention being held, and just treat them as small packages of work, giving him the wherewithall to make payments using the original contract - are we at any risk?
To my mind you have two choices - (1) accept these additional works as a variation to the original contract and deal with them as a CE or (2) treat them as being completely new works and seek to negotiate a deed of variation with the Employer and seek better terms for the additional works than you had for the original works. As the overriding reason for doing additional works under the contract is purely for the Employerâs convenience you may find that youâre in a stronger negotiating position. If the additional works are dealt with as a CE in principle you should be no worse off than you were before provided that you assess the time and cost properly and allow sufficient risk allowances.
Neil - Thanks
A couple more thoughts
presumably this is not a contract with a public body. If it is then you need to have a think about the impact of procurement regulations.
If you agree to it being dealt with as a CE the delay damages will no longer work at all and will need to be adjusted as will the definition of Completion, ie what works need to be done to achieve Completion.
From a strict legal perspective I donât think there is actually a difference between Neilâs two options. The first is most likely a new contract just on exactly the same terms as the previous one and using an agreed method to produce a value. The second is also a new contract but one where new terms are considered. Whi9chever option you pick you need to have a new contract, the original was performed and therefore falls away. It cannot suddenly be brought back to life.
Interesting scenario. Not disagreeing with your legal analysis but strictly speaking in accordance with clause 14.3 there is no limitation placed on the PM as to when he can / canât issue a PMI - should this clause be amended to limit PMIâs to being before Completion? Also could the PM claim the Contractor is in breach of contract by not obeying this instruction in accordance with clause 27.3.
Is the contract actually concluded? If still in defects period with retention held I would say the contract is still in existence. In which case a PMI before defects period ends is legit. However, it sounds like the works are very much different, in which case the choice is yours to accept or not.
The contract still exists, Rob was pointing out that the Contractorâs main obligation is to Provide the Works in accordance with the Works Information, which he has duly done therefore the contract is concluded in terms of his main obligation. The contract exists as it hasnât been terminated and the provisions for defects and retention etc are still enforceable.
As I understand it, the PM can notify a CE up until the defects date, clause 61.7. However CE1 is an instruction changing the works information. âThe worksâ is briefly described in CD part one. So one question is whether this additional construction work is within the scope of the original contract as agreed. Additionally, CDM 2015 would need to be considered by the client in terms of the experience and resources of a demolition contractor to carry out construction work Geoff
Please note (geofpow) we do a multiplicity of Civil Engineering Works and have a reasonable amount of Marine Plant. This contract was undertaken with marine plant and our expertise covers demolition, we are not a pure demolition company. We are experts in concrete repairs for a variety of clients. What was pertinent was that a current completed contract is being exploited by a client wanting an easy life, and I wanted to understand the risks. So thanks to all who have contributed.