Contractual policies for extra work
ON POLICYMAKERS ’ DESKS fthmb . tqn . com
Procedures are laid down in all contracts , involving notices in various forms including programming requirements , and time bar procedures .
Contractual policies for extra work
The management of a construction project is the management of risk . Risks are events and circumstances that will incur the parties more cost and take more time to complete the work . Fundamental to the successful outcome of any construction project is the formulation of a competent and comprehensive contract document . A good contract document should anticipate all the risks that are likely to arise whilst carrying out the work to the contract . These are risks that we know will have to be managed as well as those that have a high potential for occurring and / or will have a serious impact on the carrying out of the works if they did occur . Not only must the document identify these risks , but it must also identify which of the parties to the contract will be responsible for managing such risks . The formulation of such a competent and comprehensive contract document is therefore an essential step in the contract life cycle and requires skill and a high competency to achieve a successful result . Unfortunately , in the current South African construction environment , good contract documents are not produced and this has a negative impact on the outcome of our contracts . One of the major risks that must be managed on any contract is that of scope and scope growth . All our contract forms recommended for use in South Africa by the Construction Industry Development Board ( CIDB ) make provision for making variations to the contract on the basis that they have to be instructed by the employer ’ s agent . There are mechanisms for valuing these variations based on the rates that have been agreed will apply to the work involved in the project . Most of our contracts are what is referred to as ‘ re-measurable contracts ’. In other words , the contractor gets paid ( generally speaking ) for the work that he or she actually carries out and not on the basis of the estimate that the employer ’ s agent or the contractor did at tender stage . Where differences occur , both positive and negative ( what we call ‘ organic growth ’), the contractor will get paid for
4 - CEC April 2018 this changed quantity of work . Depending on the contract form applying , there may be some controversy over whether the original rates or some adjusted rates should apply for the changed scope or circumstances under which the work must be carried out . Claims come about when events and circumstances occur on the contract that the contractor did not realise he had to allow for when compiling the tender . There is usually controversy over these issues because , in all likelihood , the employer ’ s agent also did not foresee that these risks could occur and possibly would have to ask the employer to vote additional funds to pay for these changed circumstances . Again , there are procedures laid down in all contracts , involving notices in various forms including programming requirements , and time bar procedures . Essentially , the contractor has to earn the right to make his claim by putting the employer ’ s agent on terms ( the notice or programme requirement ) and then sustaining the right to make his claim by complying with the claim administration clauses ( usually a time constraint and some specific detail is required ). There is a further category of risk that could potentially give rise to the contractor being entitled to additional payment and more time . These can be categorised as employer ’ s risks ( sometimes called ‘ excepted risks ’). Traditionally , these have been limited to take care of the work-type risks , but modern contract forms ( like the GCC 2015 ) have cast these much wider and the contractor can now recover other direct costs that may have been incurred in addition to the repair costs that he used to be limited to . Finally , there are indemnified risks . All our contract forms contain cross-indemnities where the parties indemnify each other against specific risks . Again , traditionally these were usually against claims by third parties and were managed by way of insurance cover . There have been changes here too and the indemnities are also cast wider and now include risks other than third-party claims . Source : Ian Massey – MDA Consulting