Civil Engineering Reference
In-Depth Information
Schedule Part 7 of the SBC/DB. Schedule Part 7 provides three alternatives for deal-
ing with fluctuations. The parties should choose which alternative is to be employed
at the time of entering into the contract and the choice should be inserted in Part 1 of
the Contract Particulars.
If no choice is made, then Part 1 of the Contract Particulars stipulates that Option
A is to apply. It should be noted that, in terms of clause 4.22 of the SBC, the fluctuation
in cost provisions do not apply to Variations where a price has been agreed in advance
under Schedule Part 2, see Section 8.2.3.
Of the three options, Option A provides for adjustment in the contract price as a
result of changes in contributions, levies and taxes; Option B provides for adjustment
in the contract price as a result of fluctuations in the cost of labour and materials
and as a result of tax changes; and Option C provides for adjustment using a price
adjustment formula.
The NEC3 addresses potential price adjustment for inflation in Secondary Option
X1(tobeusedonlywithMainOptionsA,B,CorD).OptionX1allowspartiesto
factor in a mechanism for increasing the contractor's right to payment in line with
inflation. The Option places the risk of inflation on the Employer and the risk, if
any, of deflation on the Contractor. If the Option is selected, the parties must select a
base index in the Contract Data (B), which will be used as the measure of inflation as
againstthelatestindexavailable(L)beforethedateofassessmentofanamountdue.A
priceadjustmentfactorisdeterminedbycalculatingthetotaloftheproductsofeach
of the proportions stated in the Contract Data multiplied by (L-B)/B for the index
linked to it (see clause X1.1). Clause X1.5 provides that each time the amount due is
assessed, an amount for price adjustment is added to the total of the Prices, which is
the sum of the change in Price for Work Done to date since the last assessment of the
amount due multiplied by the Price Adjustment Factor/Price Adjustment Factor
1
and correcting amounts not included elsewhere, which arise from changes to indices
used for assessing previous amounts for price adjustment.
If either party is to rely on the fluctuation provisions, then it is important that they
fully comply with any prerequisites contained within the relevant option, see
John
Laing Construction Ltd
v.
County and District Properties Ltd
(1983).
+
8.3 Loss and expense
In building contracts, it is not uncommon for the contractor's progress of the works to
be affected by events that are within the control of the employer or the architect. This
can significantly increase the cost to the contractor in carrying out the works. Clauses
4.23-4.26 of the SBC contain a mechanism that, in certain circumstances, entitles
the Contractor to recover direct loss and/or expense where the regular progress of
the Works has been materially affected by certain specified Relevant Matters or where
there has been a deferment of giving possession of the site to the Contractor, under
clause 2.5.
As soon as the Contractor becomes aware, or should reasonably have become
aware, that the regular progress has been affected, they need to make written
