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VO, Provisional sum and Prime cost sum By Yap Kian Hoong Wendy Teo

Pp1 seminar

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VO, Provisional sum and Prime cost sum

ByYap Kian Hoong

Wendy Teo

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VARIATION ORDER

• A change of job scope in a construction contract• Additional, substitution or omission of the original scope of works• Parties make a further valid agreement for alteration

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VARIATION ORDER

• Changes to the provision in the Contracts regard to:• Any limitation of working hours;• Working Space• Access to utilization of any specify part of the Site;• The execution and completion of the work in any specific order

• Negligence, omission, default and/or breach of contract by the Contractor and such change shall be executed by the Contractor entirely at his own cost.

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PRIME COST SUMS

• Sums included in the contract to cover specialist works and specific materials• This sums entail the employment of nominated sub-contractor• Prime Cost Sums are to be excluded of any profit

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PROVISIONAL SUMS

• Works for which the full extent and character cannot be determined precisely at the time the BQ is prepared

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VALUATION RULES

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Clause 11.3 – Issue of Variations after Practical Completion

•Architect may request for variations in writing before the issuance of Certificate of Practical Completion. •However, any variations AFTER the completion of original

contract works will be permitted. •Only limited to certain circumstances.• These variations need to be necessitated by obligations with

the requirement of any appropriate authority or service provider.

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• If the VO does not fall within the scope – contractually invalid• Therefore, no duty of compliance on the contractor. • In the event that the VO falls within the scope, rates for

valuation is not stated.• Presumably, contract rates may not be applicable.• Contractor may be able to renegotiate new rates.

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Clause 11.6 – Valuation rules•Any variation works done by contractor for which a

provisional quantity is included in the contract and the expenditure of provisional sum shall be made in accordance to the following rules:

Clause 11.6 (a) – work is of SIMILAR CHARACTER under SIMILAR

CONDITIONS and does not significantly change the quantity of work as set out in contract documents, rates and prices in the contract shall determine the valuation.

Adding extra work – tiling works during work

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Clause 11.6 (b) – work is of SIMILAR CHARACTER but NOT under

SIMILAR CONDITIONS or under similar conditions but there is significant change in work quantity, rates and prices in the contract shall be the basis for determining the valuation which shall include fair adjustment to take into account. tiling after completion.

Clause 11.6 (c) – work is NOT of SIMILAR CHARACTER as set out in the

contract documents, valuation shall be at fair market rates and prices determined by the QS. different works provided in contract – changing material (character) Requesting for tiling works which is not in the contract scope of works.

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Clause 11.6 (d) – work cannot be properly measured and valued in accordance with clause 11.6 (a), (b) or (c), contractor shall be allowed:

• Clause 11.6 (d) (i) – daywork rates in contract document.

• Clause 11.6 (d) (ii) – no such daywork rates in contract document, actual cost of his materials, additional construction plant and scaffolding, transport and labour for the work concerned, add 15% for use of tools, standing scaffolding, supervision, overheads and profits.

Variations after work completion, plant and resources are not on site and have to be brought specifically for the varied work.

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• To claim for payment, daywork records or vouchers should be submitted as pre-agreed by architect and contractor.

Content 1. Workers’ names 2. Materials 3. Additional construction plant4. Scaffolding and transport used5. Time spent daily upon the work

• Contractor’s site agent records and sign before submitting to site staff to verify for accuracy and sufficiency.

• This is done at weekly intervals with final record delivered to architect and QS not later than 14 days after work completion.

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Clause 11.6 (e) – when work is omitted under a valid variation instruction, omission shall be valued using the rates and prices in the contract document. •Omitted part will be deleted from any sum or money to be paid

to contractor. • If omission vary the conditions, the valuing of variations

depends on the conditions that falls under Clause 11.6 (a), (b) or (c)

Clause 11.6 (f) – in respect of re-measurement and valuation of provisional quantities. •QS re-measures based on the actual quantities executed. Rates

and prices in contract document determine their valuations.

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Clause 11.7 – Additional expense caused by variations

When variation caused the contractor to incur additional expenses for which he would not be reimbursed under the provisions in Clause 11.6, contractor is eligible to make claim provided:

•Clause 11.7 (a) – notification stage- contractor giving a written notice to architect of his

intention to claim for additional expenses to the architect together with an initial estimate supported with all necessary calculations.

- Submission of notice must be within 28 days from the date of AI or CAI giving rise to his claim.

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•Clause 11.7 (b) – substantiation stage

- within 28 days of completing variations, contractor shall send to the architect and QS complete particulars of his claim for additional expenses together with necessary calculations.

- If contractor fails to submit required particulars within stated time, it shall be deemed that the contractor has waived his rights to any additional expenses.

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Clause 11.8 – Access to contractor’s books and documents• Contractor is required to keep existing records and shall

submit all particulars to architect and QS to prove his claims for additional expenses under Clause 11.7•Architect and QS have access to the documents • Contractor shall provide a copy to architect and QS if

requested free of charge . •All documents should remain available until all claims have

been resolved.

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Clause 11.9 – Variations and additional expenses added to contract sum•Once the architect has ascertained the variation amount and

additional expenses claimed by contractor, the amount shall be added to the contract sum. • The amount will be included in the interim certificate.

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QUESTIONS & ANSWERS

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QUESTION 1

What is variation order and what are the clauses about variation order in the PAM standard form of contract?

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ANSWER 1

• Variation order are changes of job scope in construction contract• Additional, substitution or omission of the original scope of works• Parties make a further valid agreement for alteration• Clauses for variation order in the PAM standard form of contract is

clause 11

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QUESTION 2

• What are the differences between Prime Cost Sums and Provisional Sums

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ANSWER 2

• Prime Cost Sums are sums included in the contract for specialised works.

• Provisional Sums are works that are not able to be determined by the time the BQ is prepared

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QUESTION 3Clause 11.6 (a), (b) and (c) seem quite alike but they differ when examined in detail. Briefly explain the difference of pre-conditions between these clauses.

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Clause 11.6 (a), (b) and (c) seem quite alike but they differ when examined in detail. Briefly explain the difference of pre-conditions between these clauses.

ANSWER• Clause 11.6 (a) – similar character under similar conditions; no

significant change in quantity of works

• Clause 11.6 (b) – similar character but NOT under similar conditions; no significant change in quantity of works

or

- similar character and conditions but significant change in quantity of works

• Clause 11.6 (c) – not of similar character

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QUESTION 4

•Briefly explain the two stages to claim for additional expenses in Clause 11.7

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Briefly explain the two stages to claim for additional expenses in Clause 11.7

ANSWER1. Notification stage

- submit a written notice + initial estimate + necessary calculation within 28 days from date of AI or CAI

2. Substantiation stage - Send complete particulars + necessary calculations

within 28 days of completing variations.

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THANK YOU!