Valuing variations in advance
Valuing variations under JCT
The use of quotations is optional in many of the JCT standard forms. Under the JCT Standard Building Contract with Quantities (JCT SBC/Q 2016) form the contractor may be asked to provide a Schedule 2 quotation. There are 8 Schedules at the back of this form of contract; the second sets the procedure for the use of quotations in connection with variations.
The procedure in Schedule 2 aims to regulate the prices of quotations submitted by the contractor. The contractor's quotation must cross reference, where relevant, to the rates and prices in the contract bills. Therefore, the contractor cannot simply disregard its tender rates and offer inflated prices when quoting for variations.
Where appropriate, the contractor's quotation for a variation can include adjustments to the amounts in the preliminaries. Therefore, if a variation requires an additional foreman or supervisor or additional plant items or scaffold the contractor can include these and other additional preliminaries in its quotation. This will, therefore, not be considered in any separate claim for loss and expense.
In addition to the basic costs, quotations must include details of any delays and/or loss and expense that may arise from carrying out the variation. Delays and loss and expense can be difficult to assess, particularly in advance of encountering the impacts. It is not uncommon for parties to exclude the assessment of loss and expense from quotations and to deal with them separately later.
If the quotation is accepted, the contract sum is adjusted by the amount of the quotation.
Preparing the quotation
The contractor is entitled to be paid the cost of preparing the quotation, even if the quotation is not ultimately accepted. This acts as an incentive to the contractor to encourage them to submit quotations. This might seem to be a bonus for the contractor, because recovery of costs for valuing variations retrospectively is not allowed, despite the fact that the input for the contractor may be very similar. The reason for this apparent anomaly is that, under the contract, the employer's quantity surveyor is responsible for valuing variations retrospectively. Therefore, the contractor should not incur any costs in valuing variations retrospectively.
When submitting quotations the contractor will be required to provide details of any additional resources to be deployed and the planned methodology for implementing the variation. The aim of this is to make the quotation all-embracing, with the full time and costs consequences known and agreed before the instruction to proceed is given. If the quotation is not accepted the variation may still be instructed, however, all parties will then be subject to a valuation process with an uncertain commercial outcome. In these circumstances the variation would be valued retrospectively.