Contract: Option B Amended (nothing amended to 6 - Compensation Events)
Works: Civil - Earthworks/drainage/ducting/founds
Query:
We have had a scheme where an original design had been priced under a BOQ prepared by the Contractor to the Subcontractor. The issue i have is that there has been multiple design changes which constitute a CE under 60.1.1 as the original drawings were included within the Works Information.
Before I came on this scheme the CE’s were being managed for example by a change in drainage (spec & volume) the BOQ items were fully removed and then priced on a forecast basis of defined cost.
There has been various other changes with this approach so now we have a mixture of CE pricing and original BOQ pricing. One issue which has been raised by our Subcontractor is now that we have a number of changes across the job some of the original rates are now not fit for purpose mainly due to the method of pricing for BOQ i.e. as we are now carrying out works over a longer period the recover of plant within the BOQ items is insufficient as their productivity rates have been effected.
I can understand this argument as the bill items would have been priced on a number of plant items over the works required under their planned works. Now we have changed some elements of this the recovery of plant costs could be effected.
I apologise for the vagueness however there is too much detail to get in to. I am aware of the Contract and its mechanisms however this feels like a grey area and I am reviewing this from a reasonable point of view especially as I have came on to the project at a stage when most of this change has already occurred.
My queries are:
- Contractually this has been caused by a group of CE’s rather than one original event and how this effects entitlement if it has not been raised as an issue till the last CE.
- Has anyone had experience of plant recovery from a mixture of CE and BOQ items?
- The type of demonstration that one would expect for this? I was looking to request a plant resource with utilisation rates profiled for a before and after taking in to account and demonstrating the effect of the CE’s
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This is effectively a ‘loss and expense’ type claim, which under other forms of contract would be dealt with separately from the variation entitlement, although under NEC is required to be included within a CE quotation.
It seems that what you have identified is the consequential effect of previous compensation events on the contracted scope of works, whereby the rates in the BoQ no longer represent what is actually occurring on Site.
What usually occurs is that the cumulative effect of CE’s means that you now require additional resources, either People or Equipment, to manage the works, although this in itself is not a CE. It is often caused by the disrupting influence of previous CEs although is difficult to conclusively prove as there will usually be other such events which are a (Sub) contractor’s risk, such as (non CE) weather, Equipment breakdowns or availability etc.
An analysis of the programme for each CE is essential to assess the possible impact of each event and to make an appropriate allowance, even if included as a risk allowance for disruption. This will almost certainly not be accepted by the PM / Contractor as it is not an ‘obvious’ effect, even though disruption is a very real issue (see the Society of Construction Law’s Delay and Disruption Protocol for details).
Assessing the value of disruption is difficult after the event so even more so beforehand, although does fit better with the requirements of a CE quotation as it complies with the ‘significant chance of occurring’ and are ‘not compensation event’ tests. This creates a further problem with how you price such risks as a quotation is required to be priced on the basis of Defined Cost, so an arbitrary percentage addition almost certainly wouldn’t comply with this requirement, unless agreed.
Each time you are pricing a CE you are assessing the combined disrupting affect of every CE and apportioning an amount within the quotation. Not an easy principle to ‘prove’ although it is based on the ‘balance of probabilities’ so a programme assessment should be a good starting point and highlights the importance of managing the programme under an NEC contract.
If you can agree, an instruction to change the Works Information (as suggested by Jon Broome) to add additional resources (People or Equipment) would be a simple way to deal with this matter.
Thanks Andrew. The response is much appreciated. Would you think it is fair to say that this risk should have been highlighted as the Contractor has occurred them on site i.e. when previous scope changes CE’s were priced previously they should have included for an element of risk or pricing for the increased equipment/resources on site that no longer reflect the bills and therefore have now missed their opportunity to do so by waiting till the end of the project and pushing this on the last change CE?
This is certainly something that should have been included within CE quotations previously. The essence of a quotation is to price the impact or effect of the CE upon the work both before and after the ‘dividing date’. Obviously not all of these effects are clearly obvious (a ‘known unknown’) but that is what the risk allowance clause is there for. If the previous CE’s are implemented, then the only contractual action is dispute resolution, where this would apply, for instance where the Contractor makes a quotation assessment and an appointed Adjudicator would then have authority to review and revise any action of the Contractor.