Page 229 - Civil Engineering Project Management, Fourth Edition

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Variations and claims
Extensive variations can make the contractor’s task of constructing the works
to his original programme impossible and can seriously affect his costs. They
should be avoided if at all possible, but if they occur, the added costs can be
taken into account by allowing for them in the rates set under the variation order.
But ordered variations must not be so large as to alter the nature of a contract.
This problem more usually arises when the employer decides to delete some
substantial part of the contract works, such as a complete structure or a length
of pipeline. A large deletion may so change the content of the contract that
it may have to be re-negotiated, or maybe some agreement has to be reached to
reimburse the contractor part or all of his intended profit on the deleted work.
Clearly this is a matter for agreement between the employer and the contractor,
and could not be ordered as a variation.
Under the ECC conditions (see Section 4.2(f)) the project manager may
instruct a change to the works information and this has the same effect as
a variation. The effect of such an instruction in the terms of ECC is to create
a compensation event; one of the many such events listed in core Clause 60.1.
On giving the instruction, the project manager asks for a quotation from
the contractor, which is to include both proposed changes to the price and the
time for completion. If the project manager does not accept the quotation
he may ask for it to be revised or can make his own assessment of the
effect of the instruction. The means of assessment depend on which of the
options for payment has been selected but can include use of items in any
bill of quantities.
Under lump sum contracts the ability to order variations may be much
restricted, and may sometimes only be possible by pre-agreement. Normally
there will be some contingency money in the contract, which the engineer is
authorized to expend on necessary variations. Since there are seldom any unit
rates in a lump sum contract, the engineer may have to request a quotation from
the contractor for a proposed extra before he orders it. It depends on the con-
tract provisions how he deals with a quotation which he thinks is too high.
Sometimes he will have no power other than to negotiate a lower price from the
contractor. If that fails he either orders the extra at the contractor’s price or does
not order it. If it is a matter of some importance he may decide to consult the
employer on the matter. On lump sum or turnkey projects, care has to be taken
to ensure that any extra required is a true addition, not included in or implied
by the overall requirements of the contract. As may be imagined this is a fruit-
ful cause of dispute.
On some lump sum contracts, while all above-ground work is paid for by
means of lump sums, a small bill of quantities may be included for below-
ground, that is foundation work, so that it can be paid for according to the
prices entered by the contractor and the measure of below-ground work
required. This covers the case where the extent of the foundation work may
not be exactly foreseeable. Other lump sum contracts may include a schedule of
rates to be used for pricing ordered variations, typically adopted in the case of
electrical or plumbing contracts where additions of a standard nature are often
found necessary.