Variations and Adjustments

What would happen under the SBD 2 Conditions of Contract?

The procedure to be followed up can be expressed as follows using following clauses of the SBD 2 Conditions of Contract.

Variations and Adjustments

Right to Vary

According to the Conditions of Contract every contract possesses the right to vary from the estimated quantities of the BOQ. Variations may be initiated by the Engineer at any time prior to issuing the Taking-Over Certificate for the Works, either by an instruction or by a request for the Contractor to submit a proposal as mentioned in the SBD 2 Conditions of Contract.

According to the SBD 2 Conditions of Contract Each Variation may include:

(a) Changes to the quantities of any item of work included in the Contract (however, such changes do not necessarily constitute a Variation);

(b) Changes to the quality and other characteristics of any item of work;

(c) Changes to the levels, positions and dimensions of any part of the Works;

(d) Omission of any work unless it is to be carried out by others;

(e) Any additional work, Plant, Materials or services necessary for the Permanent Works, including any associated Tests on Completion, boreholes and other testing and exploratory work; or

(f) Changes to the sequence or timing of the execution of the Works.

In the given scenario, the Project Manager has realized that the quantities were in error in construction of the East abutment pile cap. It has been found out that the pile cap was 260 cubic meters of concrete rather than 160 cubic meters as shown in the BOQ. In order to that this can be regarded as a change to the quantities of any item of work included in the Contract. However, such changes do not necessarily constitute a Variation as mentioned in SBD 2 Conditions of Contract. But in this scenario, the quantity has been varied significantly as it is varied from 160 to 260 m3. So, this can be regarded as a Variation.

As mentioned in the SBD 2 Conditions of Contract, the Contractor shall execute and be bound by each Variation, unless the Contractor promptly gives notice to the Engineer stating (with supporting particulars) that the Contractor cannot readily obtain the Goods required for the Variation. Upon receiving this notice, the Engineer shall cancel, confirm or vary the instruction.

The Contractor shall not make any alteration and/or modification of the Permanent Works, unless and until the Engineer instructs or approves a Variation.

In this scenario, the Engineer’s Representative has issued an instruction to construct the works according to the drawings and ignored the quantities shown in the BOQ. In order to that the Project Manager instructed the Site Engineer to proceed according to the instruction. After that Project Manager has indicated the details of the Variation item. Then finally, the Resident Engineer has issued a written instruction approving this arrangement and indicated the requirements of the Variation.

Variation Procedure

According to the SBD 2 Conditions of Contract if the Engineer requests a proposal, prior to instructing a Variation, the Contractor shall respond in writing as soon as practicable, either by giving reasons why he cannot comply (if this is the case) or by submitting:

(a) A description of the proposed work to be performed and a program for its execution;

(b) The Contractor's proposal for any necessary modifications to the program according to Sub-Clause 8.3 (Program) and to the Time for Completion; and

(c) The Contractor's proposal for evaluation of the Variation.

In the given scenario, the Project Manager has informed the Resident Engineer of this situation while giving a description of the proposed work to be performed and the program for its execution, the time for completion in writing and he also has copied it to the Engineer’s Representative. And this complies with the Variation Procedure mentioned in the SBD 2 Conditions of Contract.

Measurement and Evaluation

As mentioned in SBD 2 Conditions of Contract, for each item of work, the appropriate rate or price for the item shall be the rate or price specified for such item in the Contract or, if there is no such item, specified for similar work. However, a new rate or price shall be appropriate for following items;

(a) (i) the measured quantity of the item is changed by more than 25% from the quantity of this item in the Bill of Quantities

§ Measured Qty = 260 m3

§ BOQ Qty = 160 m3

§ Percentage Change = (260 – 160)*100/160

62.5%

In this scenario, the measured quantity has been changed by 62.5% which is more 25% from the quantity of this item in the BOQ.

(ii) This change in quantity multiplied by such specified rate for this item exceeds 1% of the Initial Contract Price

§ Rate for concrete = Rs.32,700.00

§ Initial Contract Price = Rs.163,500,000.00

§ Change in Qty = 260 – 160 = 100

§ Percentage from the initial contract sum = 3,270,000.00*100/ 163,500,000.00

2%

In this scenario, the total amount for the exceeded quantity has been changed by 2% which is more 1% of the initial contract price.

(b)(i) The work is instructed under Clause 13.0 (Variations and Adjustments)

(ii) No rate or price is specified in the Contract for this item

(iii) No specified rate or price is appropriate because the item of work is not of similar character, or is not executed under similar conditions, as any item in the Contract.

The clauses of (a).i, ii and (b).i in the clause 12.3 Evaluation of SBD 2 Conditions of Contract as mentioned above are applicable for the given scenario where as (b).ii, iii are not applicable. In relation to SBD 2, each new rate or price shall be derived from any relevant rates or prices in the Contract, with reasonable adjustments to take account of the matters described in sub-paragraph (a) and/or (b), as applicable.

If no rates or prices are relevant for the derivation of a new rate or price, it shall be derived from the reasonable Cost of executing the work, together with reasonable profit, taking account of any other relevant matters. In order to that appropriate new rate has to be prepared for the Variation item mentioned in the scenario. It is allowed by the SBD 2 Conditions of Contract.

Omissions

Whenever the omission of any work forms part (or all) of a Variation, the value of which has not been agreed, if

(a) The Contractor will incur (or has incurred) cost which, if the work had not been omitted, would have been deemed to be covered by a sum forming part of the Initial Contract Price

The situation mentioned in this scenario can’t be regarded as the above type of omission.

(b) The omission of the work will result (or has resulted) in this sum not forming part of the Contract Price

The scenario indicates an above type of omission which will result in this sum not forming part of the Contract Price. The Quantity change is the omission of the Engineer and this has not included in the contract sum.

(c) This cost is not deemed to be included in the evaluation of any substituted work: then the Contractor shall give notice to the Engineer accordingly, with supporting particulars.

The omission of the quantity change has not identified in the evaluation also. In order to that tha contractor is allowed to give notice to the Engineer accordingly. In this scenario the Project Manager has informed the Resident Engineer of this anomaly in writing and copied it to the Engineer’s Representative.

Claims, Disputes and Arbitration

Contractor’s claims

In accordance with SBD 2, if the contractor considers himself to be entitled to any extension of any additional payment, under any Clause of these Conditions or otherwise in connection with Contract, the Contractor shall give notice to Engineer, describing the event or circumstances giving rise to the claim. The notice shall be given as soon as practicable, and not later than 28 days after Contractor became aware, or should have become aware, of the event or circumstance. The Contractor shall also submit any other notices which are required by the Contract, and supporting particulars for the claim, all as relevant to such event or circumstance.

In this scenario, Project Manager is entitled to claim the additional cost which relates to the increase of the quantity and he has submitted all relevant documents which are supporting to evaluate the relevance of the claim.

Whenever these Conditions provide that the Engineer shall proceed in accordance with this Sub-Clause 3.4 Determinations to agree or determine any matter, the Engineer shall consult with each Party in an endeavor to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances.

The Engineer shall give notice to both Parties of each agreement or determination, with supporting particulars. Each Party shall give effect to each agreement or determination unless and until revised under Clause 19.0 (Claims, Disputes and Arbitration).

Conclusion

The Project Manager and all the parties relevant to Contractor’s side have proceeded in an agreeable manner which is accepted by the SBD 2 Conditions of Contract. Engineer refusing the claims for the additional costs incurred is unreasonable. As the Engineer’s point of view the payment would be made for the pile caps at the rate per cubic meter contained in the Contract Documents. The payment to be made for the works with additional items for increased costs in the site, on costs incurred because of the changed method and for the lost time incurred in the two days curing of the concrete in the first pour.

Project Manager is entitled to claim the additional cost which relates to the increase of the quantity and he has submitted all relevant documents which are supporting to evaluate the relevance of the claim. This may either go for negotiation or any resolution method according to the facts mentioned in the SBD 2 Conditions of Contract.

The contractor is entitled to request for a new appropriate rate rather than choosing claims. Then the Engineer can be either settle on negotiation or any relevant arbitration/ claim management procedure if it is not agreed through negotiation as mentioned in the SBD 2 Conditions of Contract.

Prepare the Variation order for this issue?

Assumptions

Ø Assume that the contractor is entitled to prepare a new appropriated rate for above variation through the negotiations between the contractor and Engineer.

Ø Assume the given rate for concrete is a composite rate of concrete, Form Work and Reinforcement.

Ø Reinforcement requirement is assumed as 100kg for 1m³.

Ø Form work requirement is taken as 55m² for whole work.

Ø Assume construction joint length is 60.00 m and the rate includes form work and materials used to form the joint.

Ø The letter contains the adjusted estimate of the variation.