A QUESTION ON ‘PROLONGATION COSTS'A question was mooted to fellows QS, “Having to consider that the contractor has now gave notice of Loss and/or Expenses L&E on the ‘prolongation costs’, how would you verify the value of Preliminaries granted in favor of the contractor?”, [Silence…]
[A moment later], one came back to say, “There are 3 parts to the Preliminaries. The first, the initial costs apply to payment such as obtaining permits and so forth, the second, the recurrent costs, such as cost of ‘maintenance of the site office’ and so forth and lastly, the final costs, inclusive of site clearance and so forth.” He furthered explained that, “While the first and last part of the Preliminaries were to be paid out in the commencement and completion of the said work, we will evaluate, as the case maybe, on the ‘prolongation costs’ by ‘dividing the number of months of EOT granted’ against the remaining of the recurrence costs and that is their entitlement.” Wait a minute, is there something amiss? You may wonder, ‘where is the prolongation costs’? ‘Prolongation costs’ is defined as ‘extra Preliminaries’ which are actually a part of the L&E arising from the EOT granted by the Architect. One may rely on an old English case of Hadley v Baxendale [1854][1] for recovering of losses based on the principle of the reasonable man’s objective and subjective test that “Where […] a contract which one of them has broken, the damages which the other party ought to receive […] may fairly and reasonably be considered either arising naturally, […]or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract,[…]”, and saying such, the extra Preliminaries had to be ‘actual costs’ incurred. Such ‘complete particulars’ are required under cl.24.1(b)PAM2006/18 for L&E purposes but such was never warranted for the purpose of monthly interim claim on Preliminaries. “Dividing the number of months of EOT granted against the remaining of the recurrence costs”, is a sheer ‘breach of duty of care’ on the part of the Architect, under the advice of the QS. It hinders the contractor to collect the amount rightfully due to him, notwithstanding the fact that the principle role of the QS is to ‘evaluate’ and having said that, ‘evaluation’ derived from the core word – to ‘value’ as one may opined “[…] appointed to make a valuation, in such manner […] he may, […] decide solely by the use of his eyes, his knowledge and his skill, he is not acting judicially: he is using the skill of a valuer, not of a judge. […]”[2]. In the same vein, the Architect, having to be a ‘quasi-arbitrator’ is not a ‘valuer’ but a ‘certifier’. Would you not think he should be ‘liable in tort’ for hindering the contractor to collect the amount rightfully due to him? Contractor should be rightfully be paid the recurrence Preliminaries on a ‘pro-rata’ against the ‘contract duration’ stated in the contract, i.e. the ‘original contract period’ not the ‘amended contract duration’ arising out of any EOT. In the event of EOT, the contractor has the right to claim L&E and that include the ‘prolongation costs’ or extra Preliminaries that for the purpose of avoidance of doubt, shall be negotiated and agreed upon before acceptance of the contract. This essay is strictly for educational use only and it does not constitute ‘legal advice’ and should not be relied upon to advice clients on legal matters. ----------------------------------------------- [1] EWHC J70 [2] Clay & Dennys (Ed),Hudson’s Building and Engineering Contracts [2019 Sweet & Maxwell], 14th.Ed.p.1602.
1 Comment
DISCREPANCY BETWEEN THE DRAWINGS AND THE BQ, WHICH TAKE PRECEDENT?It is common to find standard forms of building contract, i.e. the PAM2006/18 come with the version of with and without Quantities. The general contents of these forms may have been similar but the salient difference of the form with Quantities are such that the tender has been called based upon the Quantities drawn up by the respective Quantity Surveyor QS named in the contract and shall be used as the basis for valuation and variation purposes as far as quantities are concerned, but not qualitative such as the ‘standard of quality’ compliance to the ‘approved building plans’ and as such which shall conformed to the drawings, to the ‘satisfaction of the architect’[1].
It came as a surprised when in most of the ‘educational and public talks’ either for the purpose of training future professional architects or otherwise, practitioner speakers whom are deemed to be ‘experts’ on the fields of ‘contract administration’ often echoed the following statement, “In the event of a discrepancy between the drawings and the Bills of Quantities BQ, in the ‘with Quantities’, BQ takes precedent over Drawings, while the ‘without Quantities’, Drawings take precedent and the Bills or the Schedule of Rates are to be treated as reference only”. I had the privileged of discussing these matters with some ‘living fossils’ of practicing architects and their views as far as the ‘intend and purpose’ of the PAM forms are concerned, are as the followings:
Having considered such, the statement that “In the event of a discrepancy between the drawings and the Bills of Quantities BQ, in the ‘with Quantities’ contract, BQ takes precedent over Drawings, while the ‘without Quantities’, Drawings take precedent and the Bills or the Schedule of Rates are to be treated as reference only” is quite ‘misleading’. It should be said that, “In the event of a discrepancy between the drawings and the Bills of Quantities BQ, in both forms, the Drawings take precedent over the Bills/Rates. In the case of ‘with Quantities’, any omission in the Bills shall be deemed a variation while in the case of ‘without Quantities’, any omission in the contractor’s Bill shall be of its own default not constituting a variation, unless proven, otherwise.” It is noted that the contractor is not responsible to ‘check on the consultant’s drawings’ for error reflected as in cl.1.4 PAM2006, “[…] If contractor finds discrepancy […]”, the onus is for the architect to decide accordingly via its instruction. Cl.3.1 PAM2006 further clarified that, “[…] in the event of any conflict or inconsistencies [referring to discrepancy][…] the priority in the interpretation of such documents shall be in the following descending order […]” and cl.3.1(d) the Contract Drawings was prioritized above cl.3.1(e) the Contract Bills. Rather strange that both PAM Forms with/without Quantities have the ‘Bills’ included. This essay is strictly for educational use only and it does not constitute ‘legal advice’ and should not be relied upon to advice clients on legal matters. ----------------------------------------------- [1] This term has been rendered as ‘a farrago of obscurities’ by expert liked the late Prof. Vincent Powell Smith but in this context it shall mean in compliance to the ‘approved drawings’. |
DYA+CAuthorDYA+C is set up by Ar. DAVID YEK TAK WAI to undertake resolution of commercial disputes through ARBITRATION and ADJUDICATION, specializing in CONSTRUCTION PAYMENT DISPUTES. This is an educational blog. We do not guarantee, confirm nor warrant the accuracy of the information and facts stated therein. Read at your own 'risk'.
Archives
December 2022
Categories
All
|