Change is (almost) inevitable in construction. Virtually all construction projects depart from the original tender design at some point during completion of the works. For this reason, all major forms of construction contract and subcontracts include some form of change control procedures for dealing with these changes.
There are any number of reasons that changes can occur during a construction project including:
- Statutory changes;
- Technological advances;
- Changes in conditions;
- Design development; or
- Non-availability of specified materials.
These can then lead to changes to the design, quality or quantity of works. Under the change control procedures of the standard forms of construction contract, these changes generally need to be instructed by the Contract Administrator to confirm that the terms of the contract are being amended. It is important to note that an instruction from the Contract Administrator may not necessarily be a change. Instructions can also be issued for the following reasons:
- confirm the date possession of the site, or a section of the site, has been granted;
- postponement of the works, or part thereof;
- the requirement to correct defective or non-compliant works;
- the requirement to open up works for inspection;
- the removal of work and / or exclusion of a person from site, etc.
Instructions that are issued to vary the works can give rise to additions or deductions from the Contract Sum. These variations can be valued in a number of different ways, however it is most common for the (sub)contractor to provide a quotation for the varied works. This quotation will include:
- a description of the change;
- the costs/saving for the change;
- any associated preliminary costs;
- any associated loss & expense claims if the instruction creates delay or disruption to the works.
If the work is of a similar nature, carried out under similar conditions, then it is usual to use the rates and prices that make up the Contract Sum to value the variation works. Otherwise, a fair valuation of the works required should be completed that considers the direct costs plus overheads and profits. However, the NEC forms take a slightly different approach in that the assessment of compensation events is based on their effect on Defined Cost plus the fee.
It is important to understand the change control procedure as it relates to your contract because it can have a huge impact if you get it wrong. For example, under the NEC forms of contract, there are several mechanisms involved in the change control procedure that are time barred. This means that you could lose your entitlement to additional costs if you do not issue an early warning notice or notice of a compensation event within the prescribed timescales. Under some forms of contract, the change quotation must be issued before the works are instructed so it is important to issue the quotation as quickly as possible to ensure you do not cause a delay to the completion date.
If you need assistance managing change, or feel this is something you are not able to do in-house, either through lack of experience, confidence or time, VOLOCO can provide this service. We have been successfully providing this service to our clients, on a range of standard form and bespoke construction contracts, and saving them significant sums of money in the process. Get in touch if you would like to discuss this further for a specific tender or just talk about the service generally.
