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Acceleration for Variation...

10 replies [Last post]
Mon, 2005-11-07 15:11
Vishwas Bindigana...
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Hi,

Gotta get some clearance on this issue from you guys before I can proceed.

The situation is like this -

The Client has raised the building height by adding one additional floor (formerly 20 floors, now 21 floors) by the issuance of a Variation Order. The addition of the extra floor increases the project duration by approximately 03 months. Now, the client does not want to pay the extension. Instead, he says, "complete the project as per the original contract duration and claim Acceleration for the extension", for which we agreed. Now the Contract has a Liquidity Damage clause which says "0.05 % per day delay, not to exceed......blah, blah."

My Big Question, now, is -

Can I, as the Main Contractor, add the amount of Liquidity Damage for the additional 03 months in my claim for Acceleration to the client. Is this kind of claim justifiable?

Rgds & Happy Planning

Vishwas
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Replies

Thu, 2005-11-10 19:46
#1
Andrew Flowerdew
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Stuart,

If you’re going to put LD’s in it, double wrapped with very strong sticky tape.

You can put a value in for LD’s and call it something else but should someone come looking in a dispute make sure you can justify it as what ever you choose to call it.

Personally, I’d just spend some time getting the price right to do the job asked in the first place. If you can’t do it in the time then tell your client so he knows where he stands and be upfront about things.
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Thu, 2005-11-10 18:42
#2
Stuart Ness
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Andrew,

As I said below - it all depends on how you sell the package!! ;-)

Well wrapped, I hope!! ;-)

Stuart
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Thu, 2005-11-10 06:26
#3
Andrew Flowerdew
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Stuart,

I know the Engineer insitsted, they often insist on alot of things (sometimes rightly and often wrongly) but that does not mean that an EoT isn’t allowable under the contract. If the Engineer instructs them to finish on time then I agree it would be constructive acceleration. Still think, (although personally guilty in the past of doing it) that putting LD’s in price is wrong. Making sure you can achieve the finish and correctly pricing to do so correct. That price should include however risk money for uncertainty but not LD’s.
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Thu, 2005-11-10 05:45
#4
Stuart Ness
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Andrew,

Yes, applying for an EOT would be correct, assuming that there was an excusable delay, although Vishwas also pointed out in his first post that the Engineer insisted that the original completion date had to be maintained, therefore disallowing an EOT.

Could be a case of constructive acceleration, I would say!! ;-)

Cheers,

Stuart

www.rosmartin.com
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Wed, 2005-11-09 11:33
#5
Andrew Flowerdew
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Charleston,

Although I agree totally with what you’ve said, "can’t" be added is maybe not strictly true - I’ve done it before now in similar situations and got away with it, which is probably a big consideration to think about - if you do it, will you get away with it or do you risk upsetting your client, possibly big time and destroying the any trust you may have, if he finds out. Commercial decision required.

Personally these days I’d say play it straight. The games we used to play should stay in the past.
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Wed, 2005-11-09 11:24
#6
Charleston-Joseph...
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Hi Vishwas,

Going back to your original query, IMHO, you can’t add the amount of liquidated damages to your claim for extension of time including acceleration.

The only basis of your thinking to add the amount of liquidated damages is your anticipation that the client will impose liquidated damages. In this way the liquidated damages will cancel out. This is just playing around with figure relating to liquidated damages.

I hope i answer you original query. I do agree lot of ideas can be generated from this post.

Regards,

Charlie
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Wed, 2005-11-09 09:52
#7
Andrew Flowerdew
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Stuart,

Agree with your thoughts except para 3:

If you can’t complete on time then you should apply for an extension of time (assuming the contract allows it) to relieve yourself of LD liability and not include them in your price.
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Tue, 2005-11-08 05:20
#8
Stuart Ness
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Vishwas,

It isn’t clear from your post as to whether or not you have yet agreed a final price for carrying out the extra work under the VO. Also, it is unclear how far through the project stage you are; this could make a bit of a difference, as you will have to price for a higher risk in not reaching the due completion date if you get the VO when you are building the 18th floor rather than if you receive the VO when you are building the 2nd floor!! ;-)

In putting together your lump sum price for carrying out the additional floor of the building, you are entitled to include the cost of accelerating the work such that you will complete on or before the project’s due completion date.

If you receive the instruction to add on an extra floor at a time when it is not possible, however, even with reasonable acceleration measures, to complete on time, then you should add in the cost of the additional risk that arises from not being able to complete on time, i.e., the cost of the additional LADs that are likely to be incurred and that are unavoidable.

I suggest that it would be improper to claim acceleration costs that allow you to complete ahead of the due completion date AND claim for the cost of LADs, but it depends on how you sell the package to your Client.

Hope this helps,

Cheers,

Stuart
www.rosmartin.com
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Mon, 2005-11-07 20:31
#9
Andrew Flowerdew
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Hi Vishwas,

Alex is generally heading in the right direction - if the Employer is paying you a sum (which you are free to negotiate) for finishing more work in the same time, ie acceleration, then you should work out the practicalities and costs of doing so and endeavour to finish when required.

If you don’t think it’s possible then tell your employer upfront, explain your case, and work out a mutually agreeable solution. Your employer may have commitments you are not aware of and therefore telling him you can complete by a date you know you can’t (but covering yourself by including LD costs in your price) is not the way forward in gaining a happy client. A happy client pays more willingly, an unhappy client ends up in dispute. If your tactics were discovered in a dispute, your client would not only claim LD’s but have a good case for claiming further damages over and above the LD’s.

As a complete side issue, LD’s expressed as a percentage of the contract value probably don’t amount to any proper assesment of the anticipated loss caused by delay to your client and therefore may be deemed to be a penalty - therefore unenforceable. Something to seek advice on.

The best policy is honesty, otherwise give me a call when it all goes pear shaped!!!!!!!!!!

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Mon, 2005-11-07 19:12
#10
Alex Wong
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Vishwas

In my opinion, under the described conditions, I would said "No" because being claim for acceleration, meaning you accepting that you speed up your works to mitigate the additional scope. However LD is not an direct/indirect cost if your company agree to complete the project as the planned dates.

Having said that you are however entitile to negoitate a wave on some potential LD claim against you. I.e. due to the additional scope now your float is substaintially reduced(said it can demonstrate in your schedule). Then the risk of not meeting the Key dates are higher ... You would like to have a concession on the says "1st 30 days of LD wavied" "2nd 30 days 50% or something like that"

I guess these way you can cover your back as well as the entitlement of the original acceleration claim. The client do not need to pay "physically out of pocket" on top of your acceleration claim.

HTH Cheers

Alex
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