Extension of Time, EOT

Extension of time is not a strange word for a Quantity Surveyor. When we say this, we will automatically link the EOT to the following:-

a) Additional preliminaries which the Contractor will be entitled to
b) Amended Completion Date
c) Liquidated damages

Recently, the Contractor of my project claimed for 4 months EOT with over 30 million USD claim for additional associated cost. It was a surprise to us as a Consultant while the project has just started for 1 year and still have 2 years to go. Well, the most surprise thing is the monetary claim of USD 30 million. Therefore, what I intend to write on this post is relating to the monetary claim associated with EOT - we referred it as compensation due to prolongation.

As normal, it would put it in question and answer form as it is a better way to illustrate.

Question: Will be Contractor be automatically entitled to compensation due to prolongation when EOT is granted to him?

Answer:
NO. Entitlement to an EOT does not automatically lead to entitlement to compensation and vise versa. Contractor will only be entitled to compensation if EOT is granted because of the delay is caused by the Employer. The Contractor will not be entitled to compensation if the EOT is granted due to force majeure, as per the conditions of contract. There may be other reasons which the Contractor can be granted EOT but not for monetary compensation which will be stated in the conditions of contract.

Question: Will be Contractor be entitled to compensation due to prolongation for concurrent delay (where Contractor Delay to Completion occurs or has effect concurrently with Employer Delay to Completion)?

Answer:
If the Contractor incurs additional costs that are caused both by the Employer Delay and concurrent Contractor Delay, then the Contractor should only recover compensation to the extent it is able to separately identify the additional costs caused by the Employer Delay from those cause by the Contractor Delay. If it would have incurred the additional costs in any event as a result of Contractor Delays, the Contractor will not be entitled to recover those additional costs.

Question: What is the basis of calculation of compensation for prolongation

Answer:
Compensation for prolongation shall be assessed based on work that actually done unless otherwise expressly provided in the contract (e.g. by evaluation based on contract rates). The objective is to put the Contractor in the same financial position it would have been if the Employer Risk Event had not occurred.

Question: When is the period for evaluation of compensation

Answer:
It should be evaluated as soon as possible when the Employer Risk Event was felt. The evaluation is not recommended to be done only the the end of the contract as will be difficult to assess the effect at that time if no proper records have been kept.


Having other questions? Feel free to write down some so that we can discuss together.

Bill of Quantities

This is post is to discuss the basic information regarding Bill of Quantities (BoQ).

Question: What is BoQ?

Answer:
It is a list of items of work which are briefly described to provide a measure of the extent of work in order to allow pricing of the work. The work included in the item is defined in detail by the rules in Method of Measurement.

Question: What is the function of BoQ?

Answer:
BoQ may serve as:-
a) A breakdown of the tendered price, with no contractual status, but providing information for the selection from tenderers;

b) A estimate measure of the work for the tendered price, to be used to arrive at a revised contract price once the actual quantities of work carried out are measured. This is the remeasure form of contract.

c) A schedule of rates as the contract basis for valuing variations in the work.

d) A basis for measure of the value of work competed for interim payments.

Question: When mistake (in Quantity or description) is found in the BoQ, can it be a variation order which give rise to cost implication to a contract?

Answer:
It depends on the types of contract. For construction contract without quantities - normally is called lump sum contract (based on drawing and specification where BoQ may just be used to derive the tender sum), mistake in the BoQ cannot give rise to variation order.

For construction contract with quantities, mistake in description within BoQ can give rise to variation order provided BoQ has higher precedence than the Contract Drawings and Specification within the Contract document. For substantial mistake in the quantity within the BoQ, it will be corrected and dealt with as an variation order.

Question: Must the BoQ be prepared according to Standard Method of Measurement (SMM)

Answer:
No. Standard Method of Measurement is just the guideline how construction works should be described and in what way they should be measured. It is recommended that the SMM to be followed in order to provide standard framework for measuring the construction works but it is not a must. In fact, most of the QS consulting firms now have varied the measurement rules for some items.

Design Responsibility of the Contractor?

What is the design responsibility of the Contractor? Will the Contractor be liable for defective design?

Well, these questions are really depend on what type of building contract does the Contractor and the Employer go into? Is it a design and build contract? Or it is a conventional construction contract where the Contractor will only construct a structure based on the Consultant Designer's design.

It is quite clear that if the contract is design and build contract, the Contractor is responsible for the design. But the next question will arise, to what extent the Contractor liable to the design? The answer is the Contractor will be wholly liable to that. Any defective design will be the fault of the design and build contractor.

For conventional construction contract, I would rather refer it to non-design-and-build contract, the Contractor is basically responsible only to develop shop drawings based on tender drawings designed by the Consultant Designer (the Engineer and Architect). The question of whether they are liable for defective design depends on whether or not they are aware that the design of the Consultant Designer is defective.

If the Contractor is aware of the design defect, they should write letter informing the same to the Designer or Employer. The Contractor has no responsibility to propose an alternative design replacing the defective design. Proper notice to the consultant and Employer will release them from being liable to defective design. However, failure in doing so may cause the Contractor to be partially liable for the defective design.


This post is mainly to share some knowledge and experience of the writer which it is not intended to be used by anybody without proper legal advice from the legal adviser. The writer will not accept any liability or loss as a result of the use of information contained herein.