We have a task order for a mini project. Halfway through the we decided to incorporate further works which were not originally included in the scope. We did this via a compensation event and the supplier has provided a quote. The issue we have is that the supplier has applied a higher project management fee in line with the value of the CE rather than the total of the works including the original TO, which would be a slightly lower percentage. Higher value works attract a lower percentage project management fee.
The supplier is saying that the original TO was instructed under fixed price, fixed scope and the CE would not automatically result in the additional works being considered in-scope for this project.
Are they correct?
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From what you have said it sounds like your contract has introduced a mechanism to try and simplify the administration (‘sliding scale’ project management fee), but as is nearly always the case the ‘devil is in the detail’ and this sounds like consideration wasn’t fully given to the practical application.
In practice there may be some efficiencies with project management by incorporating further works not included in the original scope, certainly for time related type staff. As the contract seems to have fixed percentages based on value, however, the application would rely upon contract interpretation.
Certainly the percentage in the original Task Order would be correct. If the further works were instructed as a separate Task Order, they would, I presume, also require the application of the ‘higher’ project management fee. Although the Service Manager is entitled to give an instruction changing a Task Order, most of the compensation events relate to an Employer breach or frustration of some form.
The ability for the Service Manager to instruct a change is a sensible inclusion but it doesn’t seem to imply that ‘significant’ change is envisaged, which, if this were the case, then that should be sensibly dealt with as a separate Task Order.
As the Service Manager is adding additional work to the scope of the Task Order rather than instructing ‘changes’ to the original Task Order scope, personally I would suggest that the higher percentage applies, although you would need to review the exact wording of your contract to be able to determine this.
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