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Claim for Decreasing Scope of Work

6 replies [Last post]
Thu, 2008-04-10 15:50
Mohammed Owais
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Joined: 11 Mar 2005
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My company role in a project is centeral A/C subcontractor,Before one month and befor we going to supply the machines of the project, the owner ask us to replace units of indoor and outdoor machines with anthor brand which is a little expensive than what we agreed on the contract ,so when we asked him to pay some extra for this change he refused ,then after some days he sent to inform us that he will buy and supply the machines of the project by himself and the original value of machines according to project prices breakdown will be deducted from the project payments and he will pay us only for fixing charge.the value of the machines is more than 40% of the original value of the contract. should we have to ask for change claim acoording to this decreasing in the scope of work ? why ? and, how much?
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Replies

Wed, 2008-04-23 05:02
#1
Raphael Adeyemi, ...
User offline. Last seen 10 years 2 weeks ago. Offline
Joined: 23 May 2007
Posts: 51
Groups: Petro-Chem / Oil & Gas

Hi mohammed

Your Client has write to varied the contract by adding, omitting or changing the character or quality or kind of any such works.

Nevertheless, he is not empoyer to remove part of the contract and given to other to perform or purchase on his own for economic reason. There are several court judgement in this regards.

You are entiltled to your Profit and overhead or unabsorbed over head and if you can proff it your loss in not accepting new contract offer (opportunity cost).


If your Client is paying you Profit and over head for the ommitted items good luck.

I hope you find this advic euseful

Kind regards
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Fri, 2008-04-11 10:52
#2
Mohammed Owais
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Hi Mike It’s not clear to me how to apply Hudson or Emdens formula on my situation because those formulas using the delay peiod as a parameter and there is no delays in my case ,also you have to consider there’s a Piping and Ducting works are done in Simultaneous with the machines fixing which the owner will pay us ,so, Can i know how to apply your mentioned formulas on my case ? thnx
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Fri, 2008-04-11 09:11
#3
Mike Testro
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Joined: 14 Dec 2005
Posts: 4418
Groups: Building Information Modelling, Content Moderators, GPCCAR Editors
Hi Mohammed

I am assuming that HOOH means Head Office Overheads.

If you can demonstrate that recovery of HOOH was included in your price breakdown for the ommitted machinery then you will be entitled to recovery.

If not then you may have to rely on either Hudson or Emdens formula which usually relates to EOT but would be equally valid for a large scope reduction.

Best regards

Mike Testro
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Fri, 2008-04-11 07:35
#4
Mohammed Owais
User offline. Last seen 10 years 41 weeks ago. Offline
Joined: 11 Mar 2005
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Thanks all for your valuable replays , but what a bout unabsorbed HOOH ? Even my company will not supply the machines but still the period of the project not changed and we’ll fix the machines (in addition to the piping and ducting works) according to the original Project Schedule plan so, still HOOH value is not changed after scope of work decreased becuase the price of supply & Fix the machines in the prices breakdown of the project was loaded by profit and some of HOOH.
So,do you think my claim has to include this share of unloaded HOOH value in addition to the loss of profit?
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Fri, 2008-04-11 06:59
#5
Mike Testro
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Hi Mohammed

As always it depends on what it says in your sub-contract.

If your client is entitled to omit items from the contract then he can do so. What he cannot do is ommit work from your sub-contract and order it from someone else.

If he is bypassing you and ordering the kit from the manufacturers himself then that falls into a grey area.

You are at least entitled to your loss of profit and compensation for any design input.

Also be very careful regarding warranties and performance specifications - since you will not be responsible for the supply of the kit.

Best regards

Mike Testro
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Thu, 2008-04-10 21:24
#6
Trevor Rabey
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Joined: 29 Nov 2005
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Your contract was for supply and fix.

A change in scope is usually small in comparison to the overall value of the contract and it is usually considered to not amount to a change to the overall contract, which would require much more re-appraisal and formality. So it is just a variation and the contractor has to cop it.

A change in scope that causes a 40% decrease in the contract value is not a variation, it is a new contract which effectively supersedes the current contract.

You are now in a position where you have no contract. Good luck.
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