Variations and Preliminaries

Claims for Additional Preliminaries as a Result of Variations

We are often asked for advice on variations. One question crops up time and time again. Does the contractor have entitlement to payment for additional preliminaries arising from variations?

The short answer to the question (as usual) is that it depends.

What Are Preliminaries?

The preliminary section of the bill of quantities is where the contractor prices for project overheads and running costs. These will include things like:

  • Mobilisation and demobilisation.
  • Costs for management, administration and non-productive labour.
  • Costs for plant, equipment offices and temporary buildings.
  • Contractual costs.

Many of these costs are time related. Provided there is no delay to the project or significant changes to the works, such costs will remain fixed.

If a variation arises, the contractor’s payment will depend on the contract. In the case of remeasurable contracts, you can expect this to be picked up in the remeasurement. In the case of lump sum contracts, these costs are measured and evaluated separately.

The contract rates and prices will include overheads and profit. However, they will not include any additional allowance for ‘preliminary’ costs. So, is this the contractor’s due entitlement under such a procedure?

Cause & Effect

To answer this question, we need to look at our old friends ‘Cause and Effect’. It may be helpful to consider these questions:

  1. Has the variation had an effect on the time for completion? If so, the contractor may claim payment for costs. This is because they have incurred costs by providing site overheads for a longer period than originally envisaged.
  2. Has the variation caused the contractor to mobilise additional plant, equipment or personnel? If so, the contractor is entitled to the reimbursement of such costs, because they are not compensated within the rates and prices used to evaluate the varied work.
  3. Has the variation caused the contractor to deploy additional non-productive resources to carry out the work? If so, the contractor may claim reimbursement of such costs for the same reasons.
  4. Has the variation caused the contractor to defer the demobilisation of time-related resources? The additional time such resources require are not compensated through the rates and prices so there is likely entitlement for additional payment here.

As you will hopefully see from the above examples, there is no blanket yes or no answer to the question. In each case, we must examine the matter carefully. Therefore it is not always easy to ascertain whether the contractor may claim additional payment for ‘preliminary’ items.

Looking for further advice on how to measure additional preliminary costs? This article from our friends at Decipher Consulting might be helpful.

We also cover the topic of preliminaries and variations extensively in The Perfect Claim e-course.