Wednesday, January 6, 2010

Public Works Contracts for Minor Civil and Building Works (IRELAND) - Important Amendment

Remarkably for personnel in the Construction Industry a new version of this Form of Contract was published on 4 November 2009 last - follow this link or copy and paste it for the downloadable version...

What is so remarkable about this new publication is that it appears to have taken place completely under the radar of Contractors. Colleagues of mine say that I was the first to inform / notice this new issue. I only noticed it lately on receipt of a tender.

On a very quick perusal so far the most significant change / amendment to the August 2007 version of the Form of Contract is the amended Sub-Clause 10.6.4 (extract below with the change / amendment highlighted in bold).

10.6.4 The Employer’s Representative may conclusively direct that additional or substituted work required as a result of a Compensation Event be determined (in full or in part) on the basis of the cost of performing the additional or substituted work, compared with the Contractor’s cost
without the Compensation Event, determined as follows:
(1) the number of hours worked or to be worked by each category of work person stated in the Schedule, part 2D, and engaged on the work to which the Compensation Event relates, on or off the Site, multiplied in each case by the tendered hourly rate for that category stated in the Schedule, part 2D (But if any of the tendered hourly rates are less than 75% of the relevant rate in the construction industry registered employment agreement current on the Designated Date, they will be read instead as 75% of the relevant rate in that agreement) and
(2) the cost of materials used in that work, taking into account discounts and excluding VAT, plus the percentage adjustment tendered by the Contractor and stated in the Schedule, part 2D (But if the percentage adjustment tendered is negative or blank it will be read as 0%) and
(3) the cost of plant reasonably used for that work, whether hired or owned by the
Contractor, at the rates in the document listed in the Schedule, part 1K (as that
document may be modified according to the Schedule, part 1K) plus or minus the
percentage adjustment tendered by the Contractor and included in the Schedule, part
2D (But if the percentage adjustment tendered is a deduction of more than 100% it will be read as a deduction of 100% or if the entry is blank it will be read as 0%). If the document listed in the Schedule does not give a rate for a plant item, a market rental rate shall be used, plus or minus the percentage adjustment.

The 'old' sub-clause 10.6.4 relied totally on the tendered rates filled out in the schedule to the Form of Tender. The obvious problem with this was that tendering contractors were leaving the schedules blank (which they were allowed to do) in order to minimise their overall tender total and thus give them better chance of winning a particular contract. Assuming that schedules on hourly rates were left blank at tender stage would have appeared to be a technical breach of clause 5.3 "Pay and Conditions of Employment" or the "GAMA clause" as it has become known. This is the clause where Contractors are bound by both Law and the Contract to pay the agreed rates of pay per current industry employment agreements. Perhaps the amended clause 10.6.4 now tackles this anomaly.

One thnig it does tackle and where it sheds some light for Contractors is that the sub-clause forms part of the Valuation of Change Orders or Adjustments to the Contract Sum Clause 10.6 (as a Result of Change Orders).

The hurdles or steps to take in evaluation of Change Orders are Similar to the Old IEI or ICE form of Contract where 3 cascading rules are followed, these are,
1 - Pricing Document (BOQ) Tender Rates used for evaluation for Work Similar to that in the tender BOQ and in similar conditions to that work Priced in the Original Tender.
2 - Works that are not of a similar nature or not carried out in similar conditions then tender rates are used as a basis of evaluation.
3 - If 1 or 2 cannot lead to the evaluation of the change order then the Employers Representative makes a 'fair valuation'.

So the next step is then 10.6.4 (we don't know how an employers rep is supposed to make a fair valuation?) - where hours and rates are utilized and thus a Contractor's worst case scenario is to suffer a 25% loss on his labour costs (assuming the schedules are not filled in at correct employment agreement rates by the contractor in his org tender). If a Contractor has the schedule completed correctly (i.e. at his labour cost rates) and a dispute occurs during a project regarding the valuation of change orders then one would assume that the Contractor at worst will recover his cost based on the test of sub-clause 10.6.4?

One flaw with this amended clause is that where a Contractor hasn't the registered rates compiled in the schedule of his tender then the Employers Rep will have to calculate what 75% of the registered rate is, how will he / she carry out this task?, i.e. a Contractors Cost isn't just the Nett rate per the published registered agreement but the obvious on-costs such as employers PRSI, levies, insurances etc that have to be factored onto the registered agreed hourly rate. This perhaps is a discussion for another day as well as any other changes that may be included in the November 2009 version of this Form of Contract.