CHANGING RATES FOR VARIATIONS

All variations create the possibility to change the existing Contract rates, either for the direct variation works or for other works affected by the variation. There is not however an automatic right to change existing rates or apply new rates for variations and the Contractor will need to demonstrate that the existing BQ rate is no longer applicable for direct or indirect  use, such as 

• The material specification is different
• The quantity is significantly different ( + or -)
• The timing of execution is different to that of the original contract works ( use of Contract Programme to justify)
• The location of execution is different
• The plant / equipment / temporary works ( work methods) / supervision etc requirements are different

The justification of the need for a new rate may rely on the following reasons 

• An increase in quantity justifies a different subcontractor / revised plant and increased supervision/management
• A decrease in quantity means that economy of scale savings are not achievable
• Different timing of works means that the effect of other works on site affects planned progress/productivity
• Works executed after the demobilization of original plant and labour etc

The nature/ level  of pricing ( rate too high or low) is not grounds for determining that a rate is no longer applicable either for direct or indirect use, i.e.  

If the rate is too low or too high if the specification/timing etc are applicable it must still be used as the basis of the direct/indirect valuation

In most cases, the final decision on whether new/revised rates shall be applied rests with the Engineer . In many cases, the Contract will require the issue of a notice confirming the intention to apply new/revised rates for any such entitlement to be achieved/maintained.

Author: James Bristow