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Contract Practice > Change / Variations > Flashcards

Change / Variations Flashcards

1
Q

What is a Change/Variation?

A

The term Variation means the alteration or modification of the design, quality or quantity of works.
A change order is work that is added to or deleted from the original scope of work of a contract, which alters the original contract amount and/or completion date.

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2
Q

When should a change/variation mechanism be established?

A

At the beginning of the project during the feasibility stage to understand how change will be controlled and managed.

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3
Q

What would you define in a change control procedure for your project?

A
  1. Governance procedure. Different levels of sign off
  2. Document the process (change control logs). Monitor and log changes.
  3. Change control forms
  4. Set regular meetings for reviewing and agreeing change
  5. Report cost impact with regards to changes. Work with QS
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4
Q

What is a change control log?

A
  • Change identity no.
  • Date raised
  • Description
  • Cost and Time impact
  • Owner
  • Accepted / Closed
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5
Q

What is a change control log? What does it capture?

A 
It is a document that records all changes made on the project. it records:
•	Change identity no.
•	Date raised 
•	Description
•	Cost and Time impact 
•	Owner 
•	Accepted / Closed
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6
Q

What is change control?

A

Change control is a process that ensures potential changes to the deliverables of a project or the sequence of work in a project, are recorded, evaluated, authorised and managed

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7
Q

How can change be funded within a project?

A
  1. fund the change from the construction/project risk allowance (contingency).
  2. fund the change by budget transfers within the project; or
  3. fund the change from a third party.
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8
Q

Who can instruct a change?

A

JCT – A/CA and EA

NEC - PM

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9
Q

How is change dealt with differently between JCT and NEC?

A

JCT contracts deals with time and cost change separately through relevant events and relevant matters whereas NEC deals with it combined in compensation events.

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10
Q

What effects the way change is valued?

A

The way the contract is priced. lump price cost agreed upfront, re-measurement at the end

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11
Q

How is a variation defined in the JCT?

A

The term Variation means the alteration or modification of the design, quality or quantity of works including:
• Additions, omissions or substitutions of any work
• The alteration of the kind or standard of any material or goods to be used in the work
• The removal from the site any work executed or site materials other than work materials or goods which are not in accordance with the contract.
The imposition by the employer of any [additional] obligations or restrictions, or the addition to or alteration or omission of any obligations or restrictions. These obligations or restrictions refer specifically to:
• access to the site, or specific parts of the site,
• limitations on working space or working hours
• Carrying out of work in a specified order

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12
Q

What section can of the contract is variations noted?

A

Section 5 – Variations

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13
Q

How are Variations Valued?

A

Employer and the Contractor shall agree the value of a Variation. (Common practice in the industry for the parties to exchange information and calculations pertaining to the value of a Variation and reach an agreement, which forms part of a rolling final account)
Additionally, the contractor could be asked to submit a quotation for agreement prior to an instruction being issued by the A/CA
Where agreement has not been reached, the QS is obliged to carry out a valuation of the variations in accordance with the Valuation Rules.

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14
Q

How is it priced differently with JCT SBC with Quants?

A

It is not they use the same 3 processes for valuing change as JCT SBC XQ

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15
Q

What is the Priced Document referred to in the contract?

A

They are documents within the contract that are used as a basis for valuing variations. Within JCT SBC XQ these include:
• Work Schedule
• Contract Sum Analysis
• Schedule of Rates

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16
Q

What is a variation quotation? (JCT SBC)

A

If the A/CA in his instruction for a Valuations states that the Contractor is to provide a quotation in accordance with Schedule 2 (Variation Quotation) the Contractor shall (subject to sufficient information) provide a quotation, unless within 7 days of his receipt of that instruction (or longer if agreed) he notifies the A/CA that he disagrees with the application of the procedure to that instruction.

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17
Q

What happens if the Contractor notifies the Contractor that he disagrees with the variation? (JCT SBC)

A

If the Contractor notified that they disagree with the variation within the (7 days or more if agreed) time period, he shall not be obtained to provide that quotation and the Variation shall not be carried out unless and until the A/CA gives a further instruction that the Variation is to be carried out and is to be valued by a Valuation.

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18
Q

What happens if the CA instructs a variation on an accepted Variation Quotation? (JCT SBC)

A

Where the Contractor has produced a Variation for the works and a Confirmed Acceptance issued, THEN if the A/CA subsequently issues an instruction requiring a Variation of that work, the Valuation of that Variation shall be made on a fair and reasonable basis. The valuation shall acknowledge the content of that quotation and that Variation shall include the direct loss/expense, if any incurred by the Contractor because the regular process of the works or of any part of them is materially affect by compliance with the instruction. The Variation Rules shall apply only to the extent that they are consistent with those requirements.

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19
Q

What right does the Contractor have to be present at measurement? (JCT SBC)

A

Where it is necessary to measure works for the purpose of the Valuation, the QS shall give the Contractor the opportunity to be present at the time of measurement and to take notes / measurements as required.

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20
Q

What is the effect of an accepted valuation? What happens once a valuation is agreed?

A

For each confirmed acceptance or other agreements by the Employer and Contractor such as written instructions from CA or Provisional sums in specifications/ works schedules/ERs, shall adjust the Contract Sum.

21
Q

What are The Valuation Rules? (JCT SBC)

A

The valuation rules are set out in the Contract Conditions and prescribe how to value variations and what criteria is used to differentiate between the assessments based on how closely the varied work resembles work that is part of the Contract Documents.

22
Q

How are works valued if they are of similar character?

A

• Where works is of a similar ‘character’ to work in the original Contract Documents then the valuation of the Variation shall be consistent with rates, prices or amounts for work in the Priced Document (bill of quantities or a schedule of rates). The valuation shall include a ‘fair allowance’ to reflect any change in conditions or change to the quantity of work carried out. It should also make appropriate allowance for any addition to or reduction of preliminary items.

23
Q

What complex issues must be considered when valuing a variation?

A
  1. Character – Character of work similar or specification fo work.
  2. Conditions – Stage at which work is programmed into the contract period will affect the cost of execution. Could be due to the timing in the year (i.e groundworks in winter) or constraints due impinged access or productivity impacts (i.e completing cladding works once scaffolding has be struck)
  3. Quantity – At tender Contractor will assess the economics of scale at can be achieved by carrying out the quantity of work indicated in the Contract Documents. The estimator will make judgments such as procurement volume discounts, labour gang efficiencies and supervision ratios. If these quantities change, up or down, then these factors need to be revisited and adjusted.
  4. Preliminaries - contractor to prepare a bill of preliminaries for a project, which should follow the structure of New Rules of Measurement (NRM). review these resources for each variation to assess if allowances ar due to be made (in addition or omission) to cater for the impacts on the contractor’s preliminaries by execution of the change WHERE APPROPROIATE.
24
Q

When would you use fair rates and prices?

A

It would be used in instances where work is not of a similar character. Open to debate and interpretation

25
Q

What is Dayworks and how is I valued?

A

Daywork is a method of valuing additional or substituted work which cannot properly be valued by measurement.
Records need to be produced by the contractor for the labour, plant and materials used
in the operation. These records are to be submitted to the architect/contract administrator for verification. The valuation of work on daywork is made by using the verified records and applying rates derived by reference to the ‘Definition of Prime Cost of Daywork carried out under a Building Contract’ current at the Base Date, together with the percentage definitions set out in the Priced Document.
LAST RESORT

26
Q

Change of condition of other work?

A

where there is a substantial change in the conditions under which other work is executed, then that other
work shall be treated as if it had been the subject of a variation instruction.
Substantial is subjective term and should be operated fairly.
Where a substantial change of conditions has occurred then those effects on other work can be valued as well, in accordance with the Valuation Rules

27
Q

What are the provisions of Schedule 2 Variations Quotations (JCT SBC)?

A

• Any instruction of the A/CA requesting a Variation Quotation shall provide sufficient information to te Contractor to provide the quotation to the QS.
• If the Contractor does not consider the information to be sufficient the no later than 7 days of receipt of the instruction, they shall notify the A/CA who shall provide the information that is reasonably required.
• The Variation Quotation shall compromise of:
o The amount of the adjustment to the Contract Sum
 excluding any loss and/or expenses
 including the effect of the instruction on any other works (supported by the necessary calculations and where necessary refer to the rates and prices in the Priced Document)
 including allowances for adjustments to the preliminary items
o Adjustment to the time required to complete the works and/or section (including where relevant a completion date earlier than the completion date in the contract particulars) to the extent that such adjustment is not included in any revision of the completion date made by the A/CA or in any other confirmed acceptance.
o The amount to be paid in respect of any direct loss and/or expenses that is not included in any other confirmed acceptances
o A fair and reasonable amount in respect of the cost of preparing the quotation
o Where specifically required by the instruction indicative statements on:
 The additional resource required to carry out the variation
 Method of carry out the variations
• Each part of the quotation shall contain supporting information that is reasonably sufficient to enable the quotation to be evaluated on or behalf of the Employer.
• The variation for which the Contractor must submit a variation quotation shall NOT BE CARRIED OUT until received a confirmed acceptance of it or instruction.

28
Q

What is measured works?

A

Where the valuation relates to the execution of additional or substitute work which can be properly valued or measure, works shall be valued in accordance to the following rules;
• Where the work is of similar character to work include in the Contract Documents the Valuation shall be consistent with the relevant rates, prices or amounts for such work in the Priced Document and shall include a fair allowance for any change in the conditions under which the work is carried out and/or any significant change in the quantity of such work from that included in the Contract Documents
• Where the work is NOT of a similar character to work set out in the Contract Documents, it shall be valued at a fair rates and price

29
Q

How is omitted variation valued under measured works?

A

Where the valuation relates to the omission of work set out in the Contract Documents, the valuation of the works omitted shall be in accordance with rates, prices and amount in the priced document.

30
Q

What if the work is similar to an item in the schedule of rates but slightly different?

A

Where the works is similar to an item in the schedule of rates but slightly different, the valuation of the variation use the rates within the schedule however shall include a fair allowance for any change in the conditions under which the work is carried out and/or any significant change in the quantity of such work

31
Q

How can variations be valued?

A

The Valuation Rules:
• Every effort should be made by the QS to value variations/changes in the following way:
1. Contract/Bill Rate
1. Where the works are both identical in character and executed under similar conditions to work priced in the contract documents.
2. Adjusted Contract Rates
1. Calculated on the basis of the contract rates and applied where works are of a similar character, but quants may be of slight difference (pro rata rates).
3. Fair Rates/Prices
1. When works are not similar, it is not possible to produce a new rate or price on the above basis, rates are taken from other sources.
4. Dayworks
1. When a rate cannot be identified, day works are utilised. Work is valued on the basis of the time taken and resources used to complete it. The contractor must provide timesheets the week the work took place, identify the time spent and plant/material used (last resort).

32
Q

What does the term Change mean?

A

A Change in the Employers Requirements which makes necessary the alteration or modification of the design, quality or quantity of the Works
The imposition by the employer of any [additional] obligations or restrictions, or the addition to or alteration or omission of any obligations or restrictions. These obligations or restrictions refer specifically to:
• access to the site, or specific parts of the site,
• limitations on working space or working hours
• Carrying out of work in a specified order

33
Q

How are changes valued?

A
  • The employer and the contractor shall endeavour to agree the value of a variation.
  • Where agreement has not been reached, a valuation of the variation is made, in accordance with the Valuation Rules. It is not clear who undertakes this valuation. It is probably at the direction of the employer’s agent. (Imposing a valuation is to be a least favoured option)
34
Q

What Clause can of the contract is variations noted? (NEC)

A

Clause 60

35
Q

How is change implemented?

A

Change is implemented via a Compensation Event. Compensation Events deal with the cost effect of the change together with the any extension of time and loss and/or expenses.

36
Q

What is a Compensation Event?

A

Compensation events are events which, if they occur and do not arise from the Contractor’s fault, entitle the Contractor to be compensated for any effect

37
Q

How is change valued NEC ECC Option A?

A 
Change is valued by considering changes to the Activity Schedule. 
The prices (specific parts of the contract sum) are assessed (valued) as the effect on:
(i) the Defined Cost of the work already done
(ii) the forecast Defined Cost of the work not yet done
(iii) the resulting fee (fee percentage applied to the amount of Actual Cost covering specific costs, mainly head office overheads and profit).
38
Q

What is an Early Warning Notice?

A

An early warning notice is given by the Contractor or the Project manager notifying the other of:
• A delay to meeting completion date or key date
• Increase in the total Price
• Impairment to performance of the work in use

39
Q

What is the Early Warning Process?

A
  • The PM prepares an Early Warning Register and issues it to the Contract within 1 week of the starting date. The Project Manager instructs the Contractor to attend a first early warning meeting within 2 weeks of the starting date.
  • Early Warning meetings are held throughout the contract period, if ether party instructs the other to do so or based on the intervals stated in the Contract Data.
  • Other members of the team can be instructed to attend EW meetings (subcontractors)
  • The Project Manager revises the Early Warning Register to record the decisions made at each early warning meeting and issues the revised Early Warning Register to the Contractor with one week of the early warning meeting. If a decision needs a change to the Scope, the Project Manager instructs the change at the same time as the revised Early Warning Register is issued.
40
Q

What happens at an Early Warning Meeting?

A

Those who attend an early warning meeting work cooperatively to:
• Propose and consider solutions to how the effects of each matter can be avoided or reduced
• Seek solutions that will bring advantages
• Agree on the action what will be taken, who (in accordance with the contract) will owner the risk
• Review actions recorded and decide if different actions need to be taken

41
Q

What events constitute a compensation event?

A
  1. PM instruction
  2. Client doesn’t allow access to and use of site
  3. Client dies not provide something by the date in the accepted programme
  4. PM gives an instruction to stop works / not start / change key dates
  5. The client or other does not work in the times shown in the accepted programme, do not work in the conditions stated in the scope, carry out work on the site not stated in the scope
  6. PM or Supervisor does not reply to communications from the Contractor within required period of time
  7. PM gives an instruction with a object of value or of historical interest found on site
  8. PM or Supervisor changes a decision which has been previously communicated
  9. PM withholds acceptance for reason not stated in contract
  10. Supervisor instruct the Contractor to search for defects and no defects are found UNLESS the search is needed only because the Contractor gave insufficient notice of doing work obstructing a required test or inspection
  11. A test or inspection by the Supervisor causes unnecessary delay
  12. The Contractor encounter physical conditions on site (not weather conditions)
  13. A weather measurement is recorded
  14. An event which is a Client’s liability stated in these conditions of contract
  15. The PM certifies take over of a part of the works before both Completion and the Completion Date.
  16. The Client does not provide materials, facilities and samples for tests and inspections as stated in the Scope
  17. The PM notifies the Contractor of a correction to an assumption which the Project Manager stated about a compensation event
  18. A breach of contract by the Client which is not one of the other compensation events in the contract
  19. An event which stops the Contractor completing the works, or one neither party could prevent
  20. The PM notifies the Contractor that a quotation for a proposed instruction is not accepted.
42
Q

What happens if the Contractor does not notify of a CE within 8 weeks?

A

If the Contractor does not notify a compensation event within eight weeks of becoming
aware that the event has happened, the Prices, the Completion Date or a Key Date are
not changed unless the event arises from the Project Manager or the Supervisor giving an
instruction or notification, issuing a certificate or changing an earlier decision.

43
Q

What is the compensation event process?

A

If a compensation event arises from the PM or Supervisor giving an instruction or notification, issuing a certificate or changing an early decision, the PM notifies the Contractor of the CE at the time of that communication

  1. The Contractor notifies the Project Manager of an event which has happened or which is expected to happen
  2. The Project Manager replies to the Contractor’s notification of a compensation event within 1 week after the Contractors notification
  3. Contractor submits a quotation within 3 weeks of being instructed to do so by the Project Manager.
  4. The Project Manager replies within two weeks of the submission either accepted, revised or PM will make assessment
    a. If revised- The Contractor submits the revised quotation within 3 weeks of being instructed to do so.
44
Q

What does a compensation event comprise of?

A

Proposed change to the Prices and any delay to the Completion Date and Key Dates assessed by the Contractor.
If the programme for remaining work is altered by the compensation event, the Contractor includes the alterations to the Accepted Programme in the quotation.

45
Q

What happens if the PM fails to reply to the Contractors notification of a CE?

A

If the Project Manager fails to reply to the Contractor’s notification, the Contractor may notify the Project Manager of that failure. Failure continues for a further 2 weeks after the Contractor’s notification it is treated as acceptance by the Project Manager that the event is a compensation event and an instruction to submit quotations

46
Q

How is a CE assessed?

A

Cost – defined costs actual and forecast + fees

Time – completion date / key date

47
Q

When should a CE be implemented?

A

When the PM accepts the Contractors quotation or treated as accepted.
When a compensation event is implemented the Prices, the Completion Date and the Key Dates are changed

48
Q

When does the PM assess a CE?

A
  • if the Contractor has not submitted the quotation and details of its assessment within the time allowed,
  • if the PM decides that the Contractor has not assessed the compensation event correctly in the quotation
  • if, when the Contractor submits quotations for the compensation event, it has not submitted a programme or alterations to a programme which the contract requires it to submit or
  • if, when the Contractor submits quotations for the compensation event, the PM has not accepted the Contractor’s latest programme for one of the reasons stated in the contract.

Contract Practice (10 decks)

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