Page 239 - Civil Engineering Project Management, Fourth Edition

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Variations and claims
Some other costs may have to be added, such as continuing to keep an
excavation dewatered, or prolonged use of timbering to keep an excavation
open, hired plant having to be retained on site longer, etc. These delay costs
are separate from and additional to the rates set to cover the work actually
undertaken. The latter rates should allow for the further difficulties and costs
encountered as the work proceeds, such as continued de-watering for example.
If a delay justifies extension of the contract completion period, or it extends
a major activity, then clearly some of the site resources have to continue for that
much longer. Hence site on-costs must be added (see Section 17.9). On large jobs
with several sub-agents or teams of staff, each may have to be considered sepa-
rately to identify the effect (if any), which a delay has had in keeping them on
site. Head office on-costs may also need to be added, but these are often a source
of much confusion in relation to extension of the contract period. Acontractor is
not entitled to maintenance of a steady income from a site irrespective of what
is actually happening at the time. An attempt should be made to identify any
actual head office costs associated with an extension of the contract period
using time sheets or other means; but if this proves impossible a general per-
centage addition which represents a reasonable proportion of head office costs
to turnover costs can be added. Formulae such as Hudson or Emden may be
proposed by contractors but it is important to recognize that these have no
connection with any actual costs incurred.
It must be emphasized that it is the conditions of contract, which set out
the delays for which payment of costs may be recovered by the contractor, and
reference must always be made to them. The conditions will also generally
define what is meant by ‘cost’, which usually excludes profit, although profit is
deemed to be included in bill rates, which are often used for pricing variations.
The ICE conditions specifically allow for profit when unforeseen conditions
have to be dealt with.
The ECC conditions do not define cost as such (other than as a valuing mech-
anism) and may allow addition of profit to all price changes by means of the
added fee. Both ICE and ECC conditions refer to financing charges as part of cost
and these must be distinguished from interest on late payments (see Section
17.13). In this sense a financing charge is part of the cost itself and not due to any
lateness. An example of a valid financing charge would be the cost of financing
a retention deduction for longer due to delay. Claims for payment under ECC
may not distinguish clearly between such financing costs, which are allowable
under the contract, and claims for interest for a period following the end of the
delay, which may not be allowable.

17.12 Quotations from a contractor for
undertaking variations

On being instructed to vary the work or experiencing unforeseen conditions,
it is sometimes the practice of a contractor to submit a quotation for dealing