September 20, 2022
Advice on Mark-Ups
Change management is crucial to projects proceeding smoothly. It depends on communication, recognition of entitlements as to principles, and evaluation of price adjustment. This article will examine mark-up agreements and their role in change management. Some costs, while undoubtedly arising, are hard to estimate. It could be Head Office overheads, change management costs, margins and profit, or savings share. These are often resolved by making contractual agreements through so-called mark-up clauses. Such clauses make change evaluation easier. The usual method is to relate the mark-up rate with the direct value of change. But this can be complicated. What kind of costs should be included? What should be done with de-scopes or time-extending changes? Examples of Marked-up Costs Typical categories included in mark-up clauses include profits, head office overheads, site overheads, change management costs, contingencies for risk, and share of savings. Some contracts may add fixed…
August 23, 2022
How Should Variations Be Priced When There Has Been an Adjustment to The Tender Price?
An ICCP member recently asked my opinion on how an adjustment to the Tender Price agreed upon during tender negotiations should be applied when pricing variations. This is a matter that often causes contention so I thought it would make a worthwhile blog subject. The following is a typical scenario: The Contractor submits a tender accompanied by a priced bill of quantities for the tender price. The Employer meets with the Contractor and negotiates a reduction, and the contract sum is agreed at a lesser figure than the tender price. The contract documents are prepared and include a bill of quantities which shows the final price in the bill of quantities agree with the contract sum. There is no clear record of the form of the price reduction that was negotiated. The problems start when variations occur that are to be measured and evaluated at the contract rates and prices. The Contractor argues that the rates and prices should be those shown in the bills of quantities and the…
July 2, 2019
Top Tips: Contract Documents
More often than not, the contract documents will form the basis of any claim. If something has changed, the extent of the change may only be measured and evaluated by reference to the drawings and specification upon which the Contract is based. The claimant’s entitlement will usually be spelled out in the conditions of contract as will the procedure to be followed in the case of a claim. If there is a disagreement between the parties as to design, quality, responsibility, scope of works or procedures, the contract is the place to look for guidance and resolution.
May 15, 2017
Contract Unfamiliarity Breeds Contempt
The potential for increased risks arises when the contractor is unfamiliar with the contract type, or when a standard form of contract has certain conditions that have been changed to reduce the employer’s risk. To minimise any potential risk, the contractor must be aware of the conditions agreed to in the contract and most importantly the contractor acquainted with the conditions stated and actively administer the contract in accordance to these conditions. There is much discussion about the advantages and disadvantages of the various standard forms of contract. In essence, this is a discussion on risk and who takes the larger portion of it in any project. The identified risk associated with both the project and contract conditions is then quantified and a value included in the tender price. This is standard practice, and employers and contractors are familiar with the contract type - it is only the project that has to be evaluated for any risks. This is the main reason for the…
March 18, 2017
Contractors: Project Documentation Can Make or Break Your Claim
In my experience as a trial lawyer specialising in construction claims, I see a consistent pattern with project documentation: weak project documentation impairs the claimant’s ability to resolve the claim, whether by settlement, arbitration, or trial. The weaknesses generally fall into three categories: (1) failure to follow contractual requirements for notice; (2) failure to completely document daily events, impacts and costs on the project; and (3) failure to raise critical issues as soon as practicable after they are known. Each of these weaknesses can and should be addressed on the project to improve the likelihood of a favorable and timely resolution of claims. Read and Follow the Contract Requirements for Notice I cannot say how often a client has told me it did not read the contract, or that “it’s just boilerplate,” or that it trusted the other party to do the right thing, regardless of what the contract says. None of those statements provides any relief whatsoever in a…