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Topics: Change Management, Construction, Consulting
Scope/Quantity variation in construction contract
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Under the BOQ/Item rate contract term "Time is the essence of the Contract "how does the Scope/Quantity variation affect the contractor's performance on a fast track project and what are the remedies available to the Contractor to safeguard his business interest? Please share your experience.
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I have managed what we refer to as indefinite delivery/indefinite quantity type contracts (IDIQ). These contracts are written with a certain minimum delivery amount and include a maximum dollar value. The Buyer and contractor can then agree to deliver quantities that will satisfy both of their requirements.

https://www.fpds.gov/help/Indefinite_Delivery_Contract.htm
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1 reply by Chandrashekhar Thatte
Feb 14, 2017 12:43 AM
Chandrashekhar Thatte
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The discussion was specific to BOQ/Item rate contracts where the Contractor is confronted with the execution of enhanced scope or itemized quantities within contract period.The IDIQ contract,perhaps, has no time limits and hence are comparatively easy to execute with lesser risks to be managed.Any contract with time limitations has a higher stake being the fast track project.
Network:124305



Scope / Quantity variation in most cases will have an impact on timing. It shouldn't impact the performance if those changes were requested by the client.

However, you need to do an analysis for the scope and quantity changes especially if the material is a long lead item so it differs from case to case.
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1 reply by Chandrashekhar Thatte
Feb 14, 2017 12:54 AM
Chandrashekhar Thatte
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Rami,things become difficult to manage especially if the contract variations come to surface towards the end of the contract period and the contractor is unable to augment resources in a short span leading to project time overruns for which he runs the risk of being penalized under Liquidated damages contract provision.
Network:253



It is one of toughest questions to the contractor in construction domain. There might two types of variations to original scope (including quality of the Works). Major concerns to contractor might result from the unexpected variations to seriously affect the scope of the Works so that the performance of the Works might also be seriously suffering from cost, time, quality variations.

Another type of variation might be from the foreseen events and contractor's plans or bid prices might include scope variations to some extents without damaging the overall time and cost estimates, in this case, the performance might not be suffering.

In general, there might be relevant clauses of the contract to deal with unexpected variations and proper contract management from the early stage of project should be introduced and executed.

And there might also be some instructions of unit price which the contractor should carefully review and incorporate all price requirements of the instructions into his bid or plans.

In a BOQs contract, it is not easy for the contractor to handle the unexpected variations to mitigate the adverse impact to the original costs, quality and time unless the relevant clauses of the contract or the client allow(s) the contractor to revise his plans accordingly.

By the way, there are always unexpected variations in any construction contract even though the contractor might well prepare the plans or bid price. There might a dilemma for the contractor that in a high competition bid, overpricing or sufficient considerations in pricing might result in failure to award the contract.
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1 reply by Chandrashekhar Thatte
Feb 14, 2017 12:59 AM
Chandrashekhar Thatte
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Sungjoon,I agree with your views !Wish,you should have shared your experience.Thanks anyways !
Network:610



Feb 13, 2017 9:31 AM
Replying to Michael Ziyadeh
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I have managed what we refer to as indefinite delivery/indefinite quantity type contracts (IDIQ). These contracts are written with a certain minimum delivery amount and include a maximum dollar value. The Buyer and contractor can then agree to deliver quantities that will satisfy both of their requirements.

https://www.fpds.gov/help/Indefinite_Delivery_Contract.htm
The discussion was specific to BOQ/Item rate contracts where the Contractor is confronted with the execution of enhanced scope or itemized quantities within contract period.The IDIQ contract,perhaps, has no time limits and hence are comparatively easy to execute with lesser risks to be managed.Any contract with time limitations has a higher stake being the fast track project.
Network:610



Feb 13, 2017 4:03 PM
Replying to Rami Kaibni
...
Scope / Quantity variation in most cases will have an impact on timing. It shouldn't impact the performance if those changes were requested by the client.

However, you need to do an analysis for the scope and quantity changes especially if the material is a long lead item so it differs from case to case.
Rami,things become difficult to manage especially if the contract variations come to surface towards the end of the contract period and the contractor is unable to augment resources in a short span leading to project time overruns for which he runs the risk of being penalized under Liquidated damages contract provision.
...
1 reply by Rami Kaibni
Feb 14, 2017 1:15 AM
Rami Kaibni
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In order to be able to answer your concern, I have a question: We did these variations come from ? Client ? Something Missed by the contractor ?
Network:610



Feb 13, 2017 7:09 PM
Replying to Sungjoon Park
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It is one of toughest questions to the contractor in construction domain. There might two types of variations to original scope (including quality of the Works). Major concerns to contractor might result from the unexpected variations to seriously affect the scope of the Works so that the performance of the Works might also be seriously suffering from cost, time, quality variations.

Another type of variation might be from the foreseen events and contractor's plans or bid prices might include scope variations to some extents without damaging the overall time and cost estimates, in this case, the performance might not be suffering.

In general, there might be relevant clauses of the contract to deal with unexpected variations and proper contract management from the early stage of project should be introduced and executed.

And there might also be some instructions of unit price which the contractor should carefully review and incorporate all price requirements of the instructions into his bid or plans.

In a BOQs contract, it is not easy for the contractor to handle the unexpected variations to mitigate the adverse impact to the original costs, quality and time unless the relevant clauses of the contract or the client allow(s) the contractor to revise his plans accordingly.

By the way, there are always unexpected variations in any construction contract even though the contractor might well prepare the plans or bid price. There might a dilemma for the contractor that in a high competition bid, overpricing or sufficient considerations in pricing might result in failure to award the contract.
Sungjoon,I agree with your views !Wish,you should have shared your experience.Thanks anyways !
...
1 reply by Sungjoon Park
Feb 14, 2017 5:19 AM
Sungjoon Park
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The contract management by the contract experts should be inclusive in the project management as soon as the contract documents have been signed between the client and contractor.

I would say that once the construction project begins, what the project manager can do to minimize the possibility and adverse impact from the unexpected variation to the scope of the works is to strongly use the project management approaches from the initiating stage to the closing stage. All Knowledge Areas in PMBOK might be strongly applicable from the beginning of the project, especially contract management and risk management. Relevant processes should be tailored or added based on the project situations.
Network:124305



Feb 14, 2017 12:54 AM
Replying to Chandrashekhar Thatte
...
Rami,things become difficult to manage especially if the contract variations come to surface towards the end of the contract period and the contractor is unable to augment resources in a short span leading to project time overruns for which he runs the risk of being penalized under Liquidated damages contract provision.
In order to be able to answer your concern, I have a question: We did these variations come from ? Client ? Something Missed by the contractor ?
...
1 reply by Chandrashekhar Thatte
Feb 14, 2017 2:03 AM
Chandrashekhar Thatte
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Obviously,these variations are ordered by the Client.This situation arises under the BOQ/Item rate contract where the bids are invited by the Client.
Network:610



Feb 14, 2017 1:15 AM
Replying to Rami Kaibni
...
In order to be able to answer your concern, I have a question: We did these variations come from ? Client ? Something Missed by the contractor ?
Obviously,these variations are ordered by the Client.This situation arises under the BOQ/Item rate contract where the bids are invited by the Client.
...
1 reply by Rami Kaibni
Feb 14, 2017 2:13 AM
Rami Kaibni
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Then contractually, there shouldn't be much liability to the contractor as this is ordered by the client but the contractor should put in writing the consequences of such variations and take written approval from the client.
Network:124305



Feb 14, 2017 2:03 AM
Replying to Chandrashekhar Thatte
...
Obviously,these variations are ordered by the Client.This situation arises under the BOQ/Item rate contract where the bids are invited by the Client.
Then contractually, there shouldn't be much liability to the contractor as this is ordered by the client but the contractor should put in writing the consequences of such variations and take written approval from the client.
...
1 reply by Chandrashekhar Thatte
Feb 14, 2017 4:34 AM
Chandrashekhar Thatte
...
I agree with you.However,this may not always be a financially win-win situation for him.Consequences of ordering variation towards the end of the project imposes greater liability (being under contract obligations) on the Contractor to take resources augmentation measures to complete the project in time and if the contractor is unable to augment adequate resources in a short span leading to project time overruns , he runs the risk of being penalized under Liquidated damages contract provision.
Network:610



Feb 14, 2017 2:13 AM
Replying to Rami Kaibni
...
Then contractually, there shouldn't be much liability to the contractor as this is ordered by the client but the contractor should put in writing the consequences of such variations and take written approval from the client.
I agree with you.However,this may not always be a financially win-win situation for him.Consequences of ordering variation towards the end of the project imposes greater liability (being under contract obligations) on the Contractor to take resources augmentation measures to complete the project in time and if the contractor is unable to augment adequate resources in a short span leading to project time overruns , he runs the risk of being penalized under Liquidated damages contract provision.
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1 reply by Rami Kaibni
Feb 14, 2017 9:23 AM
Rami Kaibni
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I am not sure I totally agree with this as if the client ordered this scope variation then normally the contrsctor will submit a time and cost variation order and upon approval from the client they will proceed. I do not see any financial liability to the contractor as long as thsi change was imposed by the client.
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