Dispute and Cost Control in the Provision for Variations - a Comparative Analysis of Nec3 & Psscoc

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Dispute and Cost Control in the provision for Variations - a Comparative Analysis of NEC3 & PSSCOC

A. Variations (cost control)
B. Dispute Resolution

A. Cost Control in Variations

Generally, cost control in the provision of Variations under most of the building contracts are stated in different steps. Hence, the steps can be generally divided into 3 stages which are variation notification, quotation submission and valuation based on rate, quantity or daywork. The comparison on the Variations was done under NEC and PSSCOC.

Clause 60 of NEC, defines the variations in Compensation Events base on the PM instruction on the changing of work information which is unreasonable to him.

Clause 19.1 of PSSCOC, defines the variations as “any change in the original contract intention”.

A.1 Variation Notification

In the provision of clause 61.1 of NEC, PM give instruction and the Contractor has to submit quotation on the changing decision event. Clause 61.3 states that the Contractor has to notify PM within 8 weeks from the event happened, failing which he is not entitle to claims on the cost and time implication. Under clause 61.4, PM has to reply within 2 weeks of the Contractor notification, or else the notification will be treated as acceptance by PM.

Under clause 20.2 (1) of PSSCOC, the Contractor has to carry out and comply with SO instruction even though the instruction may not a variation to the Contractor. However, the Contractor may request for variation from SO under clause 19.2 in writing within 14 days from the date of SO receipt of the instruction.

A.2 Quotation Submission

Under clause 62.2 of NEC, PM instructs the Contractor to submit his quotation and any delay to the completion date that assessed by the Contractor. However, by clause 63.2, if there is any cost saving or omission that reduce the total Defined Cost/ Contract Sum, the price are not reduces unless stated in the Contract.

By clause 19.3 of PSSCOC, SO may request the Contractor to submit quotation for his acceptance and SO is empower to accept the quotation without applying the provision of clause 20 on the valuation of variations and also Loss and Expense entitlement. A special feature in provision of clause 19.4 on any alternative proposals by the Contractor that enable the Employer to enjoy cost saving that will be shared equally by the Contractor and Employer. The Contractor may entitle to claim the half amount of saving under clause 32 Progress Payment and Final Account.

A.3 Quotation assessment/ valuation

The assessment of compensation event in NEC base on clause 63.1 showed in the list as below: 1. Actual Defined Cost (work has done)
2. Forecast Defined Cost (work not yet done)
3. Resulting Fee

The assessment of compensation event by PM is fixed although the later recorded information to have been wrong under clause 65.2.

Figure 1 shows the process of quotation submission to evaluation in NEC

All variations shall be commonly assessed as follows in PSSCOC:

1. Clause 20.1(b) states that SO determine the valuation by “the Rates for the Works” as set in the Contract with fair allowance base on the site allowance. 2. Clause 20.1(c) provides second option that the valuation can be judged by SO base of fair market rate. 3. Clause 20.1(d) gives another option for SO to assess the quotation of actual cost incurred plus 15% of profit and attendance. 4. For those item without contract rate or difficult to be measured, daywork rates should be access by SO on the labour, material, equipment or machinery recorded in the Daywork Sheet for verification within 3 days after the work has been executed.

Figure 2 shows the process of quotation submission to evaluation in PSSCOC

In practical, dispute is commonly happen when an additional request was made orally and not in written or any changes in design especially when in the provision of the contract mention that no variation of work will be...
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