Is a contractor right to refuse the sub-contractor loss and expense because the architect has refused to certify loss and expense under the main contract?
Under standard
forms such as Dom/1, this approach is invalid. The contractor may be in default on the main contract, with no entitlement. The
sub-contractor may well be genuinely entitled under the sub-contract. Beware of
bespoke conditions and amendments to standard forms limiting
sub-contractors’ entitlements to the contractor’s recovery under
the main contract.
What if the main reason for
delay is lack of building progress and/or access?
Under most
standard forms, the sub-contractor would have entitlements due to the “act,
omission or default” of the contractor.
Again, beware contracts which omit such provisions.
Clients and contractors
usually want to base prolongation costs (ie job over-run) on the allowances
made in the sub-contractor’s tender. Is this correct?
Under Dom/1, where elements of a priced “prelims” bill are directly affected by
variations, then these elements should be adjusted accordingly. So in the case
of delays caused by variations it may be appropriate to use the prelims bill,
if one exists. In most other cases, the correct approach is to value site
establishment, staff and plant on the basis of actual costs properly incurred
as a result of the delay.
At what point in the
programme should costs of prolongation be valued?
The
assessment should be made at the point where the delay took place. This
may involve a series of calculations for varying periods of
delay at differing points in the
progress of the works. It is more
accurate and fairer than the typical approach of valuing the “tail end”
over-run.
What is meant by “prelims
thickening”?
This term
refers to increase in weekly
involvement of management, technical and supervisory resources, caused by volume of variations or increased
difficulties imposed upon the programme. This often happens when a planned
“tail end” run down becomes a “grandstand finish”. If the sub-contractor has to retain or introduce additional engineers, charge-hands etc, he should
advise the contractor at the time, explaining the reasons and stating his
intention to seek financial compensation.
An effective way of valuing “thickening” is by a histogram showing
weekly details of planned and actual “prelims” resources, plus a “job
description” for each person involved.
This will be helped by maintenance of a daily site register showing all persons, including office staff.
What is the best way of
claiming for “off site” overheads and staff due to prolongation?
The highest
figure is usually achieved by use of a formula approach (eg Hudson or Emden).
This is hard to prove, and involves
opening up the claimant’s company accounts, proving tenders turned away, and establishing actual loss of
revenue. A better approach is to ensure
that all off-site managers and staff allocate their time to individual projects
(ie by timesheets). This time can then be “job costed” every week, and readily proved as a genuine
cost. This method has the added benefit
of reducing the residual percentage for fixed overheads (eg office lease, rates, heat and light etc). This
latter can then be added as a
percentage on the bottom line.
Is it true that no
sub-contractor should ever have to lose money when carrying out a variation?
No. The wording of most contracts is such that,
even when the character and conditions of the works have changed, some regard must still be had to bill rates. If these bill rates were “low”,
this will influence the final account rates.
What is meant by “time at
large” and does it entitle a sub-contractor to revise his rates?
Time may
arguably be set at large when an act of prevention by the client or contractor
causes delay to completion, and the contract contains no specific mechanism
for revision of the completion date. A
typical example occurs in bespoke contracts where the contractor deliberately
omits provision for extension due to
his own “act, omission or default”. Another case might be where a client
or contractor failed to revise the completion date within the period stipulated
in the contract. The sub-contractor
would then have to complete in a “reasonable time”. Contrary to the popular myth, the sub-contractor is not released
from his bill rates.
What is the best way to
safeguard entitlements to time and money?
The best
safeguard is to give prompt written notice of all delays and costs as the
likelihood becomes apparent, and to maintain good records. Keep the client or contractor informed at
all times, and maintain a proactive attitude.
John Russell
Contracts and
Training Consultant
Cheshire CW4 7DP
Tel: 07770 986444
Email: swsubbie@globalnet.co.uk
WEB SITE: jrconsultant.co.uk
ARTICLE NO 10
DATED 3/8/02
FOR END OF AUGUST 2002 “ELECTRICAL TIMES”