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Withdarw from cost saving variation

6 replies [Last post]
Thu, 2006-06-15 14:38
W A
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Hi all,
I have the following situation:

1) during tender, the Contractor provided offer of cost saving in case of using cast in-situ concrete for linear corince instead of the specified GRC.

2) the Owindr accepted the Contractor offer.

3) during construction, it was found that the Contractor failed compeltely to provide acceptable quality for the corince using Cast in-situe concrete instead of the GRC.

4) We (as the consultant) rejected the the contracotor completed work for the same.

5) the contractor want to withdraw form his offer and want to complete the remaining work as specified (GRC), and cancel the tender alternative he provided.

6) the owner insists on taking the cost saving even if the COntractor will use GRC.

I am bit confused, can the COntractor withdraw or not, and do the owner has the right to charge for the cost saving offered by the COntractor even though the COntractor failed to do his offer?

any thoughts? I know that it was the contractor fault from the begining to provide unplanned unpractical cost saving offer, but is he prevented from withdrawing? i couldnt find any thing in the contract in this regards, what u think?

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Replies

Sun, 2006-06-18 14:53
#1
Aneesuddin Zubair...
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Hi Walied,

Few thoughts on the subject..

How I look at the whole situation is that ‘the Contract/Agreement is not tied properly’, the loose ends are - the bidders were asked to submit an offer based on specs during tender stage and cost savings are not yet agreed. What I do not understand is what was accepted as a part of tender submission?? if the concrete cornice was accepted at the tender stage then the Contract sum should have been adjusted accordingly. That is past but we need to acknowledge that this leaves room for dispute.

If we go literally according to the book the contractor has to provide the cornice either in GRC or in cast-in concrete of an acceptable quality with cost saving to client. But the consultant/client also shares the responsibility of designing the cornice in concrete which is not practical or doable in cast-in concrete due to workmanship constraints. Considering the above, I reiterate the consultant should play fair.

Hope this helps,

Anees
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Sun, 2006-06-18 11:28
#2
Andrew Flowerdew
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Walied,

If I’ve got this correct the contract was let on the basis of using GRP and no cost saving. The use of insitu concrete and the cost saving was later covered by a variation order. (even if the exact amount of the saving is yet to be agreed)

You could just withdraw the variation order therefore reverting to the original contract and hence no cost saving.

You could insist on the variation order and tell the contractor to get on with it, even if this means the contractor reverting to GRP in order to get the job done. The cost saving would stand in this case unless the contractor can show that it is impossible to do by the insitu method or some other reason given in the contract. Just because the idea came from the contractor doesn’t mean it is treated any differently from any other variation issued by the Employer. The Employer considered the idea, issued the variation looking to take the advantage of a cost saving. Had the Employer thought of the idea and negotiated a cost saving and the idea didn’t work then you would probably not be asking the question. Generally, the same answer applies whoever thought of it.

The contractor could also try to say it was a mistake on his part(probably won’t get him far) or that the variation was ambiguous (unlikely) or similar - basically he would have to try and rely on a common law remedy outside the contract and this is going to be both expensive and risky.

Bottom line is probably a commercial decision to be taken based on the value of the work against the cost and time of ending up in a dispute over it.
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Sat, 2006-06-17 11:58
#3
W A
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Quality issue, he filed to produce accepted linear cornice, the mock-up he did was very poor in which he had very hard time to correct it with plastering, but even though, the final result was not good, in addition to time factor of course.

Actually, my opinion that it was mistake form him to make such offer form the beginig, because it is known that the GRC gives very good looking, and it is easy and fast to be installed, GRC is even cheaper when you consider the time and effort of the labours.

I;m still confused, the contract do not address situation like this. and ideas will be highly appreciated.
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Sat, 2006-06-17 11:51
#4
Andrew Flowerdew
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Walied,

The answer hangs largely on why the contractor couldn’t produce the work using insitu concrete instead of GRP.

Was it poor workmanship or some other cause?
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Fri, 2006-06-16 00:53
#5
W A
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Anees,
Thank you for reply

During tender every tenderer was requsted to submit his offer as per specification, and if the contractor had any cost saving it should be addressed seperately for review.

Therfore, the contract sum did not consider any cost saving offers during tender, and all the offers after that was addressed as variations,

the variation of the GRC was accepted from the owner, but the amount of cost saving agreed lately, during construction, i even think the savig amount is not final yet officialy.

we, as the consultant, wanted to play fair, and we make recommendation to the owner to accepte the contractors withdraw and cancel the saving. the cost engineer of the owner, accpeted the contractor’s request to use GRG back, but reserved his right to claim for cost saving !!!! i know what u might think about this, i hated this action too.

now, i need justification for the case so i can advise the owner and still fair with the contractor, the contract do not say anything in this regard, what is the common law? or what is the professional act!!

thanks again
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Thu, 2006-06-15 18:47
#6
Aneesuddin Zubair...
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Hi Walied,

I understand the offer of cast in-situ concrete instead of GRC cornice was agreed during the tender stage, apparently the contract price was adjusted thus this is not a cost saving variation (I mean this is not a variation to contract).
If the above is correct then the contractor has to fulfill his contractual obligation by completing the cornice in concrete. However, if the cornice cannot be done in concrete i.e. it is not doable in concrete due to practical and workmanship constraints, then the owner and consultant should play fair.


I hope this helps.

Regards,

Anees
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