Peter Gill
Managing Director, Infrastructure
The dozens of parties and moving parts in every infrastructure construction industry project means there is only one certainty - plans will change. The complexity of infrastructure construction projects means no amount of risk assessment and preparation can prevent this.
That’s why construction variations in client-contractor agreements offer critical flexibility to change the scope of activities and help with smoother contract negotiations and dispute resolution. Here’s your guide to making sure you get the best of these variation terms.
What can compromise an infrastructure contract?
Good project management includes forecasting alternatives to a Plan A - and in infrastructure construction projects, you will need a backup! A number of factors can introduce risk to the day-to-day processes of your infrastructure construction project:
- Design changes/scope growth - these can occur after the contract has been awarded, to accommodate feedback/new requirements from the client or stakeholders, site specific conditions and/or amendments in the statutory provision or requirement.
- Technological advancement - infrastructure projects typically run for years. In that time, new technology can become available which changes the scope of works.
- Foreign exchange fluctuations - as mentioned above, infrastructure projects have long project durations and as such are exposed to fluctuations in foreign exchange rates and asset prices, especially for large construction plant/equipment manufactured overseas (tunnel boring machines, rolling stock etc).
- Legislative changes - the length of time taken for builds also means construction industry standards around building heights, safety practices and material use can alter mid-project.
- Employment conditions - public and private enterprise infrastructure groups can become affected financially by economic and political conditions which compromise their future,
- Availability of suppliers - projects hinge on construction materials being available at a reasonable price and expert contractors being able to fulfill the responsibilities required.
Whether offering contractors an extension of time to complete a phase of the build or changing agreement terms to ease dispute resolution negotiations, contract flexibility is core to success.
Infrastructure developments rarely go forward with no plan changes - make sure you are prepared for contract variations!
How to assess construction variation claims
Construction variation claims can come from anyone, from a development-level partner to contractors and subcontractors - if it’s outside the scope of the original contract, it’s a variation. That makes assessing each claim critical to ensuring your business doesn’t lose out.
Watch out for these risk factors when analysing an extension of time request or an intended change of project scope:
- Scope change responsibility - if there is a change to the project scope, you need to assess whether this was client-initiated or should have been reasonably included in the contractor’s original contractual scope of works coverage based on tender documentation.
- Construction timelines - an extension of time variation, even by a few days, can throw other deadlines/milestones out of whack, so make sure the period of time extension claimed is fair and reasonable as the project program will conversely be affected.
- Rates - when assessing variations always ensure that the productivity rates used for the various additional works performed are in line with any schedule of rates provided by the contractor or are fair and reasonable within the context the works are performed under.
Getting the best from infrastructure sector partnerships
Retrospective assessment of your infrastructure contracts helps you identify areas in which you can offer construction variations that suit your timelines and reject claims without legal risk. Developing an eye for what works and what doesn’t in an infrastructure sector partnership takes experience and expertise - for guidance on both, contact the DCWC infrastructure team today.