Project Management

Please login or join to subscribe to this thread

Re-measurable to Lump sum contract, Is it in good faith?

linkedin twitter facebook   Construction  
avatar
Arnel Francisco Senior Estimator/Cost Control Pasig City, Philippines
I work in a a subcontractor. Recently, we had a conflict with the MC regarding our contract. From the beginning, we all knew that our contract was a re-measurable contract but we later found out it was a lump sum contract. We insisted the fact that we had several meetings with them and we even raise a variation and notices. But we were never had a response from them that we do not the right to vary. Now, the MC organization has restructured, all the people who were involved in the kick-off meeting had left the company. Leaving a new person to handle our claim and he just insisted on what was written in the contract and has disregarded any discussion we had with their previous team. How can we insist on our right that the changes were not discussed to us?
Sort By:
avatar
Thomas Walenta Global Project Economy Expert Hackenheim, Germany
Ha, not an uncommon problem, had it myself and learned from it.
That's why contracts and change management are important.

In any case it requires negotiation and you might search professional help here (not saying a lawyer yet, but might be necessary later).

Did a lump sum for 15 million based on 11 pages SOW and when it blew up, I luckily had a cya email to protect myself and negotations (by a negotiator) were based on the fact that 11 pages never should result in a lump sum, in good faith.

They payed 30 million.

Some contractors go that path to win signings and then see what happens (and the sales guys are no longer on board anyhow). It is a jungle. And project managers are sometimes used as scapegoats.
avatar
Stelian ROMAN Project Manager| MicroSafety Carlingford, New South Wales, Australia
Fix price contracts are very risky for the buyer. You should be very careful when you chose them.
Normally the vendor should and will put enough contingency to cover the risk and leave some room for additional scope. But there are vendors and vendors.
I had proposals for 30% upfront payment. Legally that was a trap. the vendor could deliver nothing and then forfeit the rest of the contract.
My advice is to read carefully the contract and then try to negotiate a CR. It depends how willingly the vendor is to do business with you i the future.
...
1 reply by KEYULKUMAR DAVE
Mar 28, 2019 1:02 AM
KEYULKUMAR DAVE
...
Hi,
How this CR works? Cost is determined by Audit or Inspections. But CR can leads to additional cost to buyer than Seller. Also Risk is very high for buyer if Auditing system is not proven.
If there is dispute in cost determining, What are the alternatives to resolve disputes?
avatar
Tamer Zeyad Sadiq Assistant Cost Manager| Turner & Townsend Riyadh, Ar Riyad, Saudi Arabia
The client has authorization to change contract but in a proper way and he should has contract change control system and communication method like a formal written if there is any change contract clauses.

I think the problem is there is no correspondence between you and the client and there is missed documentation to show what is mentioned the scope on a format of papers. It should be has information management system.

Without agenda or conclusion of a meeting or correspondence, it will be created a lot of issues!!!
avatar
KEYULKUMAR DAVE PMP, Six sigma Black belt| Thailand Banchang, Rayong Province, Thailand
Mar 27, 2019 4:17 AM
Replying to Stelian ROMAN
...
Fix price contracts are very risky for the buyer. You should be very careful when you chose them.
Normally the vendor should and will put enough contingency to cover the risk and leave some room for additional scope. But there are vendors and vendors.
I had proposals for 30% upfront payment. Legally that was a trap. the vendor could deliver nothing and then forfeit the rest of the contract.
My advice is to read carefully the contract and then try to negotiate a CR. It depends how willingly the vendor is to do business with you i the future.
Hi,
How this CR works? Cost is determined by Audit or Inspections. But CR can leads to additional cost to buyer than Seller. Also Risk is very high for buyer if Auditing system is not proven.
If there is dispute in cost determining, What are the alternatives to resolve disputes?
...
1 reply by Stelian ROMAN
Mar 28, 2019 1:29 AM
Stelian ROMAN
...
From the question posed results that there is a change in the initial contract.
Any discussion that was not minuted and agreed in writing is legally void. To amend the contract there should be change request from the client that is agreed with the service provider.
An audit or inspection doesn't determine costs in any contractual engagement. The audit just validate that the contractual conditions are met and eventually alignment with policies and regulation.
In a fix price engagement there is no such thing as audit or inspection for the vendor costs. If the scope is delivered for $1 and the value of the contract is $1,000,000 the question should've been asked before the contract was signed.
In a fix price contract changing the conditions it's always at the risk of the client.
The only way to resolve disputes is to check if the conditions of the signed contract are met. Verbal promises and undocumented assumptions are not a valid ground.
avatar
Stelian ROMAN Project Manager| MicroSafety Carlingford, New South Wales, Australia
Mar 28, 2019 1:02 AM
Replying to KEYULKUMAR DAVE
...
Hi,
How this CR works? Cost is determined by Audit or Inspections. But CR can leads to additional cost to buyer than Seller. Also Risk is very high for buyer if Auditing system is not proven.
If there is dispute in cost determining, What are the alternatives to resolve disputes?
From the question posed results that there is a change in the initial contract.
Any discussion that was not minuted and agreed in writing is legally void. To amend the contract there should be change request from the client that is agreed with the service provider.
An audit or inspection doesn't determine costs in any contractual engagement. The audit just validate that the contractual conditions are met and eventually alignment with policies and regulation.
In a fix price engagement there is no such thing as audit or inspection for the vendor costs. If the scope is delivered for $1 and the value of the contract is $1,000,000 the question should've been asked before the contract was signed.
In a fix price contract changing the conditions it's always at the risk of the client.
The only way to resolve disputes is to check if the conditions of the signed contract are met. Verbal promises and undocumented assumptions are not a valid ground.
...
1 reply by KEYULKUMAR DAVE
Mar 28, 2019 10:47 AM
KEYULKUMAR DAVE
...
Thanks for the detail description.
avatar
KEYULKUMAR DAVE PMP, Six sigma Black belt| Thailand Banchang, Rayong Province, Thailand
Mar 28, 2019 1:29 AM
Replying to Stelian ROMAN
...
From the question posed results that there is a change in the initial contract.
Any discussion that was not minuted and agreed in writing is legally void. To amend the contract there should be change request from the client that is agreed with the service provider.
An audit or inspection doesn't determine costs in any contractual engagement. The audit just validate that the contractual conditions are met and eventually alignment with policies and regulation.
In a fix price engagement there is no such thing as audit or inspection for the vendor costs. If the scope is delivered for $1 and the value of the contract is $1,000,000 the question should've been asked before the contract was signed.
In a fix price contract changing the conditions it's always at the risk of the client.
The only way to resolve disputes is to check if the conditions of the signed contract are met. Verbal promises and undocumented assumptions are not a valid ground.
Thanks for the detail description.

Please login or join to reply

Content ID:
ADVERTISEMENTS

"I'm glad I did it, partly because it was worth it, but mostly because I shall never have to do it again."

- Mark Twain

ADVERTISEMENT

Sponsors







Vendor Events

See all Vendor Events

Newsletters

Jun 3: The Career Problem Facing New PMs
May 20: Your PM Career as a Project Life Cycle
May 13: The Big Lie After Layoffs

See all newsletters