Wise Up Wednesday: Agreeing Variations Is Easy Right?
If agreeing variations was easy, then it wouldn’t be the greatest source of problems for Specialist Sub-Contractors in the construction and engineering industries!
So, no agreeing variations is NOT always easy.
It’s therefore essential to have a clear understanding of the contractual framework governing the instruction, execution and valuation of variations.
BHC and Galliford Try thought they had a clear understanding of what the contract said, but their valuations were an eye watering £13 million apart. Ouch!
OFF TO COURT THEN…
The dispute was part of the development of a gas processing plant in the Laggan Tormore gas fields off the Shetland Isles: one of the biggest UK construction projects.
BHC brought the action in order to clarify the rules relating to valuation of certain variations issued under the contract.
Galliford Try (trading as Morrison) had engaged the claimant BHC to carry out structural steelwork (including associated design works), roof and wall cladding, and precast concrete flooring works.
The principal issue was whether certain variations, provided for re-measurement of the entire works contained in the change order, or alternatively whether the starting point for measurement was to take the lump sum quote and to make additions to and omissions from that quote, a process known as ad-measurement.
The Judge, Mrs Justice O’Farrell, held that the proper construction of the variations was that they provided for complete re-measurement of the entire works as opposed to ad-measurement.
HOW SHOULD VARIATIONS BE VALUED?
Unfortunately a common misunderstanding made by many Specialist Contractors is to assume that all contracts are the same.
Let’s be clear on that; not all contracts are the same!
Instructions may merely confirm or clarify that which was originally required, whilst the Specialist Sub-Contractor may argue that it is a change which entitles him to additional monies.
Such differences of opinion can be minimised by ensuring that the description of the work in the Contract Documents is as clear as possible. And, that the rules regarding valuation are fully understood by both parties.
As BHC shows, this is very much a case of easier said than done. However, attention to detail at contract formation stage, will be well worth the effort when it is becomes necessary for you to demonstrate that the work constitutes a variation, and how it should be valued.
WANT TO KNOW MORE?
So, there we have it. Definitive proof that agreeing variations is not easy! But, with the right assistance and application of the right principles at the appropriate time, you can make it “easier”.
I have bee assisting Specialist Contractors just like you, to resolve problems just like this, for the last 28 years. And, StreetwiseSubbie.com has been providing services to our Buddies (members) for the last 10 years.
We are pretty confident that we can help you, so please feel free to call any time. Initial advice is free, subject to you meeting certain criteria.
Thanks and best regards
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