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Sub Contract: Lump Sum & Re-measure

14 replies [Last post]
Mon, 2007-03-12 19:09
Skan Bu
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Hi,

A JCT98 private with quantities contract.
Sub Contract ground work & drainage.
Sub Contract Sum say £270,000.00

Main Contractor was issued an AI to remeasure part of the bill.

Main Contractor did not issue this AI to Groundwork sub contractor.

At Sub Contract Final Account, is it to be re-measured or pay as Sub Contract Sum as per order?
If re measure & price up, the Sub Contract Final Account came to £230k(Measured Work + £40k Variations (CVI & SI)
What are argument points (for or against)& why?

Cheers
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Replies

Fri, 2007-04-27 12:10
#1
Shahzad Munawar
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Your option a is more appropriate to finalize the account rather than to go with options b and c
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Sun, 2007-04-08 03:22
#2
Skan Bu
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Hi,

Reference to "LUMP SUM" or re-measure

I came across an order from an organisation(HV developing) which gave an order to a sub contractor to install some ducting, trough & drawpits. They issued (1) a plan showing routes,(2)a few standard detail drawings and (3)specifications.

The S/C submit a quote based on the drawing (1) listing out eg trough: 100 m at £150, ducts:200 m at £40, drawpits: 10 No at £40 etc..

The total of this list is the figure transfered to the ORDER, which is very brief, Not a proper subcontract like JCT.

When I saw this, It got me thinking re this topic so I though if some of planning planet members can asist in clarifying.
(A) NO CHANGES/VARIATION:
In this case, should the sub contract work be paid lump sum at Final Account as per the Order or measure the exact as build quantities and apply the rates quoted?

(B) SOME CHANGES:
Say if the trough had reduced, the ductings had increased and the drawpits had reduced due to say the route had to change slightly because of obstruction encountered.

Say there are no SI issued nor a amended drawing issue but changes are site discussed.

(C)SOME CHANGES & VARIATION:
What will happen if an SI was issued for 2 additional Brick draw pits that was not part of their work in the original contract. This they claimed as variation on a daywork bases.

What will be the FINAL ACCOUNT?
(a) Original Order + 1 variation
(b) Remeasure of as build using rates quoted + 1 variation
(c) OTHERS???

THANKS



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Sun, 2007-03-18 08:50
#3
Stephen Coates
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Agree with Andrew’s reply a few posts down. The Architect is not able to vary the fundamental terms and conditions of the Contract, unless an agreement has been reached bewteen the Contracting parties i.e. Employer & Contractor. It may have been that the Architect issued the AI under instruction as a way to formalise the agreement reached.

If the Contractor has failed to issue the AI to his Sub-contractor, then he entered into the agreement with the Employer at his own risk. He has to suffer, what if any, additional costs occur as a result of his failure as his contract with his Sub-contarctor is still a Lump Sum.
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Fri, 2007-03-16 20:09
#4
Skan Bu
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Hi,

Thank you for the explanation.

The summary of the Contract Bills will finally become the Contract Sum (Lump Sum).

Clause 14.2 - The Contract Sum shall not be adjusted or altered in anyway whatsoever otherwise than in accordance with the express provisions of the Conditions,& subject to clause 2.2.2.2 any error whether of arithmatic or not in the computation of the Contract Sum shall be deemed to have been accepted by the parties hereto.

Clause 2.2.2.2 - if the Contract Bills is any departure from the method of preparartion or any error in description or quantity or omission of items then such departure or error or omission shall not vitiate this Contract but the departure or error or omission shall be corrected..... any such correction under this..... shall be treated as if it were a Variation required by an instruction of the Architect


My understanding based on the above, if the qty in the Contract Bills differed from the Contract Drawings, the only way available is for the Architect to issue an Architect Instruction so the Contract Sum can be amended.

Is there or under which rules, the Architect is allowed/restricted to issue any instruction to amend the Contarct Sum? Is it a valid variation if the drawing in tender and construction do not show any changes?
Or
The tender drawing and construction showed change to say piling but they want to take this opportunity to remeasure the excavation & so omit the over measure in the Contarct Bill?

I hope my point made are not too silly and if you or anyone could have a look & see whether if in such a case, the MC is being dupe to take out the over measure in the Contract Bills and loose his pricing strategy?
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Fri, 2007-03-16 09:38
#5
Andrew Flowerdew
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Skan,

JCT is a lump sum contract but the contract allows the lump sum to be varied under certain circumstances - ie very generally variations.

1. No, the measurement system doesn’t change, the variation falls to be valued as per the contract.

2. No, the Main Contractor can’t claim the Lump Sum shouldn’t be changed if the change is a valid variation.

3. Approx quantity - does it say it’s an approx quantity, then it is.

4. Generally - refer to Cl13A or Cl13B Note the bit in Cl13.5.5 about if the change in quantity substantially affects other work, then such other work shall be treated as if it had been the subject of an instruction..


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Fri, 2007-03-16 09:08
#6
Skan Bu
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Hi,

JCT 98(private with qty):Defination of Variation
Clause 13.1.1 - "the alteration or modification of the design,quality or quantity of the Works including"

.1.1 -the additional, omission or substitution of any work,
.1.2 -the alteration of the kind or standard of any of the materials or goods to be used in the Works,

"Omission" if the AI instructed to deduct a lot of excavation & drainage in this LUMP SUM contract, does it change the measurement system?
Could the MC claim that the LSum should not be reduced because they bought the risk or the over measure in the BoQ. Say drawings in tender & construction do not show any changes.

In clause 13.4.1.1 - Valuation of Variations and Provisional Sum work & work covered by an Approximate Qty.
.1.1 - all work executed by the C for which an Approximate qty has been inc’d in the Contract Bills.
shall, unless agreed by the Employer & the C, be valued

What does this mean? Approximate qty included in the BoQ, be valued?

If say the PQS put a lot of qty in the BoQ as approximate qty for excavation & drainage, then the MC priced, the Contract accepted & later is executed.

The Architect issue an AI to omit the Approximate qty, is this allowed? Lump Sum is for the whole.. no?


I agreed with A. Flowerdew that in the MC/SC case, the MC lost out if he did not pass on the AI.
Can MC issue the AI at FA stage and recover the reduction and adjust the SC sum?

Thanks
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Thu, 2007-03-15 11:11
#7
Andrew Flowerdew
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Hi all,

As for the Architect changing the measurement system, which would have been a term of the original contract - he can’t and there is no provision I know of that allows HIM to do so under the contract.

BUT, the Employer and Contractor can by agreement, change whatever they want. Such a change should not be issued as a variation but this may just be a misunderstanding of the contract on the part of the Architect - who’s just trying to put into effect the Employers and Contractors agreement. The fact, if it happened, that the agreement exists will be far more important than the Architect mistakenly administering it.

I’m wondering who actually agreed what, as I can not see an Architect unilaterally trying to impose such a change.

As for the sub contractor. Main contract and sub contract are two different and separate contracts. Sub contractor is entitled to get paid in accordance with his contract. If the Main Contactor thought he was being clever by not passing on the change and it turns out the sub contractor will be paid more than the Main Contractor will, tough.
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Thu, 2007-03-15 03:54
#8
Kinley Brown
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Also, a variation is defined in JCT98 as "the alteration or modificaiton of the design, quality or quantity of the Works.."

There is no scope for the Architect to issue a variation ordering a change to the pricing mechanism.
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Thu, 2007-03-15 03:50
#9
Kinley Brown
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A change to the payment mechanism would, I believe, be outside the scope of the variation clause as it fundamentally alters the basis on which the contract was tendered.

If this were the case then the contractor would be under no obligation to comply with the alleged instruction.
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Thu, 2007-03-15 02:54
#10
Clive Randall
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Id like to see what Amdrew says
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Thu, 2007-03-15 02:38
#11
Skan Bu
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Hi Clive,

Thanks for the explanation.

I always thought even if it is fundamenatlly a Lump Sum Contract, the contract included Variations clause & we were taught that is why variations clause are so important so both sides could vary during the contract. The architect can vary due to more detail design & have the chance to change(add or omit) & the MC make change in some cases where if they cast something that is too big or drainage run alter route slightly but do not affect the scheme. They can ask for the change to be confirmed in AI & so be it.

I see what you said & yes this could be a case but what can one do if faced with such a case?

"AI to remeasure a specific section flys in the face of the basic precepts of the contract in that in crude terms it is swings and roundabouts you lose here you gain here and the status quo is maintained
The Architect has no power to change the contract fundamentals"
I would like to analyse/discuss this further beacuase I think in a lot of cases, this is happening & we do not give it enough thoughts.
I welcome others to comment
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Wed, 2007-03-14 20:36
#12
Clive Randall
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The fundamental here is whether this is or is not a remeasurment contract
If its not a remeasurement but a lump sum spec and drawings then to issue an AI to remeasure a specific section flys in the face of the basic precepts of the contract in that in crude terms it is swings and roundabouts you lose here you gain here and the status quo is maintained
The Architect has no power to change the contract fundamentals
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Wed, 2007-03-14 19:30
#13
Skan Bu
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Hi,

This is not a real case but one I thought of & could very easily happened.

Yes, I agree that the MC should have pass on the AI but just like a lot of real case, the site management is not up to scratch & maybe thinking that there might be advantage not to pass on an AI that require remeasure.

Yes, Ithink the MC could lose if the remeasure come out less than the original BoQ and because he did not pass on the AI, he stand to lose & no redress back to the client.

"However the ability of the architect to change potentially an intrinsic element of the contract should be reviewed in that the groundworks or elements thereof are now remeasured."
I do not understand what you mean, could you expand?
Is it not within the right of the architect& PQS to issue an AI(Variation) to the change. In any case if say drawing issue for construction show changes from tender drawings and so re measure & the remeasure will determine that the qty in the original BoQ had over measured. What will happen then?

On the MC/SC: could the MC say there are changes due to issue of drawings & drawings showed changes and so Add/omit and remeasure the SC at FA? say the remeasure at £190k. would that be a good enough argument?

Would appreciate Andrew or others comments.

Could the MC also claim loss due to reduction in Qty? purely based on the SC showed £270 to £190, almost 1/3 reduced.

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Mon, 2007-03-12 21:50
#14
Clive Randall
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What did the subcontract say
On the face of it the MC should pass on the AI otherwise it would appear he is going to overpay the subcon and have redress to the client for the difference
However the ability of the architect to change potentially an intrinsic element of the contract should be reviewed
in that the groundworks or elemnts therof are now remeasured.
I am very rusty on JCT but I am not sure whether AI would cover this
What says Andrew???
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