A contract allowance for a new tenant reception area has been omitted from a Contractor’s scope. Within the Bills he supplied at tender stage he has clearly defined a value for these specific works. This sum was removed but they are claiming that the cost of this works are 20% cheaper and want to agree the lesser amount.
We then have a another situation where addition desks are required where they are saying that the actual costs for these desk have increased and the sum detailed within the Bills ISN’T applicable.
What is the correct approach?
I am assuming this is an option B contract as you mention Bills, but the same principle applies whatever the option.
Clause 63.1 is the default clause for assessing the effect of a compensation event on the Prices whether an addition, deletion of something in the Works Information, omission or change. Without going into what separates forecasts from records, change in Prices = CHANGE in Defined Cost + tendered fee percentage (which is negatively applied if the change in Defined Cost is negative).
So if the Contractor has a very good rate for the original work and you want more, then they do not get more of a very good rate : the Contractor benefits from the good original rate only for the original work and gets the change in Defined Cost + Fee for the changed work only. Equally, if you want less, then the Contractor benefits from the good original rate only for the original work and the omission is calculated as the negative change in Defined Cost + negative Fee. The reason is to stop - except for cash flow purposes - the game of loading and unloading rates.
By agreement, the Parties can agree to use rates and lump sums - see the last sentence of option B & D clause 63.13 (or 63.14 for options A & C).
Its Option A priced contract with activity schedule. A bill was also sumbitted with the tender.
Re the reception works if he provides a breakdown of the works to be omitted is he entitled to keep the balance.?
Yes, providing this breakdown accurately reflects his Defined Costs + (negative) fee percentage.