Written Applications and Notices in the HK Government’s GCC’s

This talk goes much further than the limited matters suggested by the title.
This is, in part, because a Works Branch Practice Note on “claims”
signed off by me in January 1997 is apparently still being produced in
evidence in arbitrations/mediations (to what effect I know not) so what
follows also includes my updated comments on the Practice Note which
gives me more discretion than was allowed to me in the original version.

My talk is in three parts. I will first give, very briefly, some general
background on what brings me to this point, then I’ll deal with the
applications and notices referred to in the title of this talk, and which
should of course have been fully explained in the Practice Note and were
not. My oversight. I will then go on to review the Practice Note.

Background
At the time i.e. at the end of 1996/January 1997, the draft Practice Note
was heavily debated by the members of the Conditions of Contract
Committee (which I then chaired). This resulted in some compromises
being made on my part and a less than complete representation of my
views on this very important matter. It was finally issued, as my “parting
gift”, only a couple of days before I retired, with one or two things that
should have been said being either modified or omitted in order to get it
signed and out. In the following years, I have occasionally and informally
been asked about the Practice Note but I have never been called as an
expert witness.

My very late re-entry into this debate was caused by my recent decision
to try to reactivate my status as a Dispute Resolution Advisor on
Government contracts. As a first step to do so, I attended a refresher
course run by the Arbitration Centre. One startling thing (to me) that
came out of the discussions on some of the questions raised for debate
was the interpretation given by some of the attendees to the words in
GCC Clause 64(2). “If the Contractor intends to claim any additional
payment under the provisions of any Clause…”, that it means exactly
what it says and overrules all other GCC Clauses and which conveniently
leads me to the subject matter of the title of my talk.

Written Applications and Notices

On checking with those that should know about such matters i.e.
construction lawyers and claims consultants, I find that those at the DRA
training course who supported the view that a written notice under Clause
64(2) is a condition precedent to any and all claims for more money
(other than claims under Clause 64(1)) are not alone i.e. that the wording
includes all Clauses for which a “written application” by the Contractor
has to be given (e.g. Clauses 54 - suspension of the Works and Clause 63
- disturbance to the progress of the Works).

It was not made clear to me by the supporters of this position if the

Clause 63 notice is also to be sent before any action is taken by the
Engineer/QS (the SO) under the proviso to Clause 61 which refers to the
nature or extent of any variation affecting the rates for any unvaried work
(e.g. a variation that changes the access to unvaried work) and
presumably also for an adjustment in favour of the Contractor under a
fluctuation clause.

I was party to the drafting of the wording of the GCC’s in the early
1980’s, in particular the Building version, so please don’t blame me for
some of the contentious risks put on the Contractor in the Civils version
that seldom if ever apply to the Building version (e.g. ground conditions
and utilities and services). The new edition of the GCC’s was first put to
use on the 1st November 1985. In the ensuing quarter of a century, no
issue that I know of has been raised concerning Clause 64 until just
recently, so it comes as a complete surprise to me that my original intent
appears to have been swept aside.

What now follows represents my “original intent” and of course, and I

cannot stress this enough, it is not necessarily the correct legal
interpretation. If I am not right, then I owe everyone involved an apology
because I’ve allowed a bit of a procedural train wreck to take place.

My “original intent” is based on three main points –

The first is the unavoidable contractual position set out in Clause 5(1) that
all GCC clauses are to be read together and are to be given equal weight
unless of course there are express words to the contrary i.e. only Special
Conditions of Contract prevail over other Contract documents. It
therefore follows that Clause 64 does not overrule the other GCC clauses,
subject to Clause 5(2) which deals with the correction of ambiguities and
discrepancies).

The second is that the Contractor should not have to pay for mistakes
made by the Employer/SO. There is nothing revolutionary about this. It is
the common law position that no one should be able to take advantage of
their own wrong.
The third is that Clause 63 (“not….reimbursed under any other
provision…”) and Clause 64 (“any additional payment..”) are both
written as “sweeper” reimbursement clauses only to be used after all
other contractual remedies (other than the disputes Clause) have been
activated and exhausted i.e. they provide contractual agreed procedures to
reflect my second point.

I emphasize, the only purpose of having these two “sweeper” clauses is

that the Contractor is not to be put to additional financial loss by the
(in)action(s) of the Employer and/or the SO beyond that already built into
the Contract by the Contractor’s own poor BQ rates.

For Clauses 63 and 64, my intention was (and still is) that the procedure
common to both requires the Contractor and/or the SO to first follow the
requirements set out in the provisions in the relevant other Clause i.e. for
Clause 63(b) it first requires the order of a variation under Clause 60 and
for it to have been valued under Clause 61.

For Clause 64(2) the need for some primary action by the Contractor/SO
is underlined by the words “under the provisions of any other Clause”
which require the Contractor to identify the relevant Clause and then for
“the provisions” set out in it to be followed by the Contractor and of
equal importance, by the SO. Note that all the clauses which require the
Contractor to make a written “application” do not refer to Clause 64(2)
much less confer precedence on it.

It therefore follows that the Contractor is to be notified by the SO of the

Cost/valuation/rate (if any) the SO has made following receipt of the
Contractor’s written application before the Contractor knows that there is
an underpayment that requires the Contractor to make a claim for more
money under Clause 63 or 64.

This is the only reason for the inclusion of Clause 63(b) where it gives the
Contractor the right to make up the peripheral Cost in any undervaluation
(not involving the Contractor’s rates under Clause 61) made by the SO
(e.g. under the proviso to Clause 61 for anything not included by the SO
and should have been and the increased cost of labour and materials not
picked up in a fluctuation clause, if there is one).

In Clause 64(1) for the “top up” of BQ rates, SO must first formally
notify the Contractor of the proposed rate(s) (not the valuation) then,
within the time limit, the Contactor gives the written notice etc. if the
Contractor wants more money.
Under the proviso to Clause 61, the BQ rates affected by the proviso can
be either a partial adjustment (unreasonable rates) reflecting the Cost
difference(s) or a complete revision (inapplicable rates) set at the
appropriate “market” value at the time of tender.

Unlike the other clauses that include a right for the Contractor to claim
more money, the proviso does not refer to the need for a written
application to be given by the Contractor (perhaps it should have done so).
Instead it places the duty on the SO to make the valuation without the
express requirement for a claim from the Contractor. So for reasons of
practical self interest, the Contactor may have to “point the way” to the
SO. This seems to be the only way of making sure the SO considers the
effect(s) of the proviso under a Clause 61 valuation. This has the benefit
of allowing for profit to be included in the valuation. Clause 63(b)
“sweeper” is included should the SO not, or not sufficiently include for
the Cost (only) of the effect(s) on unvaried work under the proviso.

Unlike the Clause 61 proviso, a “pointing the way” action is expressly

included in a number of clauses where the Contractor is first required to
make a written application (not give a written notice) to the SO (e.g.
Clause 54). This procedure was intended to establish a difference
between a “written application” (as in Clause 54) and a “written notice”
under Clause 64. As I hope I’ve made clear, the intention was for an
“application” to be followed by some, possibly interim action, by the SO,
whereas under Clause 64, the SO’s actions are “final” subject only to the
disputes Clause for the Contractor to seek redress. This view is I believe
is supported by the common law rules of interpretation i.e. where
different words are used they are usually ascribed different meanings.

But, if in law there is in fact no difference between a “written

application” and a “written notice”, it begs the question does the “written
application” replace the need for a Clause 64(2) “written notice”? If so,
what happens next is unclear. Does the SO make a valuation (as for a
variation) in accordance with e.g. Clause 54, which refers to Cost, or
await action further action by the Contractor under Clause 64(3) and then
decide on the Cost? This seems to be what is now expected to happen in
practice.

If there is a difference and, not withstanding the sending of the written

application, a Clause 64 written notice is also required, it doesn’t make
commercial sense to require two separate bits of paper, referring to two
different clauses but otherwise saying the same thing to trigger the one
claim. And what happens to the requirement for a Cost valuation under
e.g. Clause 54? Does it automatically disappear to reappear under Clause
64? Certainly, none of this was within the contemplation of this drafter
but if it is the correct legal interpretation then it’s needlessly bureaucratic
and oppressive and needs to be changed.

It has been suggested to me that under Clause 64(2) the “event (that) may
give rise to a claim” would not include any decision of the SO following
the Contactor’s written application under e.g. Clause 63 i.e. such a
decision would not be construed as an “event” for the purposes of Clause
64(2) on the ground that there would be nothing left to be covered by
Clause 64(2).

(If you don’t follow this line of argument, neither do I, but I include it in
the hope of getting an explanation, for I have obviously missed
something.)

On the wording, I don’t see why the SO’s decision following the written
application cannot be “an event”. It is not fundamentally different than
for a variation where the event starting the process is the issuing of the
instruction by the SO. My reading of this is that it is under exactly the
same circumstances for Clause 64(2) to become effective.

I believe that “my intentions” as I have presented them produce a clear,

commercially sensible contract procedure that I hope would be enforced
by the HK courts. I am encouraged by some recent English Court of
Appeal decisions which favour the robust commercial interpretation of
contracts and by the widening of the rules of civil law evidence to look at
what went before the contract was finally made, though that might be
stretching the point for now.

Now let’s look at the Practice Note

I include the entire PN as published and add comments [within brackets]
where I think it appropriate.

1. Introduction

1.1 This practice note represents the majority of opinion of the Works Branch
Conditions of Contracts Committee on the interpretation of Clauses 61 and 63(b)
of the General Conditions of Contract of the 1985, 1990 and 1993 Editions
(“GCC).

[This reflects my initial “Background” note. To my knowledge, these

Clauses have not been materially changed]
 1.2 The practice note is intended as a guide to those who administer GCC
contracts and not as a directive.

[In the following, “A” means the Architect, “E” means the Engineer and “S”
means the Surveyor.]

2. Clause 61

2.1 GCC 60 empowers the A/E to order variations. GCC 61 requires the S/E to
value those variations so ordered under the stated rules. The valuation under
Clause 61 is “for better or worse”. It is not material that the valuation produces a
profit or a loss to the Contractor.

2.2 The S/E should remember that he is empowered to add as well as deduct such
amounts from the Contract Sum. Thus, where the variation reduces the cost of
executing the Works that should be reflected. This should be kept in mind
throughout the following analysis.

2.3 Valuation of work omitted is straightforward. It is valued under GCC 61(1)(a) at

the same rates(s) set out in the Contract. Where the omitted work impacts on
other rates, e.g. preliminaries, then those rates may (in limited circumstances)
be reduced by reference to the proviso in GCC 61 (see 2.9 below).

2.4 Under GCC 61(1)(b), the valuation of varied work which is the same or similar in
character to work already priced in the Contract is similarly straightforward. It is
valued at the same rate as that already stated for that type of work in the
Contract. “Same as or similar …to” covers work that is exactly the same in all
respects, or very much the same, bearing in mind that the rates for work in the
Bills of Quantities (BQ) are generally averaged for all work of the same or similar
character, conditions and circumstance, regardless of the various physical
positions of the works or the various times when the work is to be carried out.

[This means that additional work of the same physical character but done
out of the time or position envisaged by the Contract may be priced
differently from the BQ rates, up or down. It will be the same approach for
items of work which are changed in position e.g. from low level to a much
higher one.]

2.5 The S/E’s job becomes more difficult where he must decide whether the work
ordered by the variation -

(a) is not the same as or similar in character to work already priced in the
Contract,

or

(b) is the same as or similar in character to work already priced in the contract,
but it is not executed under the same or similar conditions or circumstances.

In these two situations the S/E must, pursuant to GCC 61(1)( c), actually value
the work of the variation.

[i.e. calculating a new rate starting with the BQ rates where possible.]
2.6 Where the work ordered by the variation is not the same or similar in character
to other work already priced in the contract

It is a question of fact in each case. The S/E should carefully consider the facts
against the wording of GCC 61(1)(b) and ( c) and against the documents that
form the Contract, in particular the descriptions(s) of the items of work in the
Specification and BQ.

[Work described in the General Specification but not expressly referred to

in the BQ falls into this category. It also includes work which is the subject
of a Provisional Sum because no tender rates exist for such work.]

“Similar in character” means “the same (or very much the same) type, sort or
style” as the description of the work in the BQ/Spec. The S/E can compare the
work of the variation with the items of work that are similar or analogous to the
items already in the Contract. If not, the items of work are not the same or
similar in character.

An example would be an item of new work which is basically the same

dimensions as an item in the BQ, but has a different detailed profile, which will
produce a different cost.

2.7 Where the work is the same as or similar in character to work already priced in
the Contract but it is not executed under the same or similar conditions or
circumstances.

Again, it is a question of fact in each case. The S/E should carefully consider
the facts against the wording of GCC 61(1)(b) and (c) and against the
documents that form the Contract, in particular the Specification and BQ.

The two words to consider are “conditions” and “circumstances”.

(a) “Conditions” means “the state of being (of the thing itself)”. It is usually
described in text books as referring to physical conditions in which the work of
the variations is to be performed.

An example would be altering the course (line and/or depth) of a length of pipe
from an area of easy ground (or introducing an entirely new length in) to difficult
ground. The excavation work is the same in “character” (unless rock is
measured separately). The Contractor priced on the basis of the work being
easily performed. The “conditions” have changed. The work is now more
difficult.

It may be argued that where the Contract does not specify the ground conditions,
the Contractor has take this risk under GCC 13, but the Contractor’s liability is
limited by GCC 10. If the contractor could not reasonably have foreseen the
need for the work in the more difficult ground, then the Contractor would not
have provided for such work in the rates.

In the reverse, where a pipe goes from hard ground to easy ground, a similar
exercise to reduce the rates may need to be done so that the rates reflect that.
 (b) “Circumstances” means conditions other than physical conditions, i.e. other
matters which impact on the performance, such as changes to the sequence,
method or timing of construction.

This category may be considered as being “Contractor’s risk, but only as far as
can reasonably be implied by the Contract. If the tender did not include for such
work to be carried out under the circumstances of the variation, or if the
averaged rate has been materially affected by the variation, then it is likely that
GCC 61(1)( c) applies.

An example of this would be where a variation is issued to add work of the same
or similar character, to be carried out at a time different from that implied by the
Contract, e.g. all foundation work is completed before more is ordered under a
Provisional Sum.

[Note - the difference between GCC 60(1)(b) which refers to ordered

changes in sequence etc. in how the planned work is to be carried out
and an order under GCC 60(1)(c) which is likely to affect the whole work
site. The former is valued under GCC 61(1)(c) and the latter under the
proviso to GCC 61(1).]

(c ) What about a variation which affects the programme? Under GCC 16,
the programme is a non-binding indication of the Contract’s intentions, but the
same considerations apply as for conditions and circumstances, i.e. have they
been changed? The proviso to GCC 61(1) also may apply. But if the
programme is incorporated as a contract document, then any change to it may
be a variation, depending upon the circumstances.

2.8 Determination of the new rate

Where the S/E considers that GCC 61(1)( c) is applicable, then the procedure
for valuing the variation is as follows -

(a) The variation is valued at a rate based on the rates in the Contract, so far as
may be reasonable.

It is clear [as a general rule] that the S/E is required (except where it is
unreasonable) to value the variation in keeping with the general level of pricing
of the Contract and not on any evidence provided by the Contractor as to
the ”actual cost” of performing the work.

(b) However where it is unreasonable to value on the basis of the rates in the
Contract, then the variation is to be valued at a rate agreed between the S/E and
the Contractor (and where there is no agreement, it is to be determined by the
S/E)

When is it not “reasonable”?

There are two main situations viz -

Firstly, when there are no rates in the Contract which can be used to value the
work which is the subject of the variation, e.g. where the variation is so different,
e.g. the introduction of an air conditioning system where there was not one
 before, i.e. no item(s) of the same or similar character, or (items) which can be
used to assess the new rates(s) pro rata.

Secondly, where the conditions or circumstances under which the varied work is
carried out is so significantly different from work of the same or similar character
in the Contract, e.g. an additional piece of imported equipment that is by then no
longer a standard product or the agent has changed and with it the price.

(c) One of the main purposes of the BQ is for the assessment of variations and
the Contractor contractually acknowledges the sufficiency of his tender and the
rates therein (GCC 14). Accordingly the S/E should make every attempt to
value the variation by reference to the Contract documents.

(d) Where the S/E cannot base the valuation by reference to the Contract
documents, the S/E receives advice from the Contractor as to the cost of the
variation and negotiates as to the reasonableness of that amount. Where there
is no agreement, the S/E is obliged by GCC 61(2) to determine the amount. That
determination must be based on the “reasonable actual” cost of performing the
work of the variation and reasonable overheads and profit are to be allowed,
based on their level in the Contract. Notification of the rate to the Contractor
triggers GCC 64(1). [Note: simply sending the Contractor large portions of
the final account to go through is not good enough. There must be
specific notification.]

(e) Where the Contractor is unhappy with that determination he has the right to
make representations under GCC 64. This Clause is a very important notice
mechanism of dissatisfaction with the rate(s). The record-keeping requirement
is only to evidence the degree of change between the contract situation and that
of the varied work. In order for GCC 64(1) to operate, the S/E must first make it
clear that he is expressly fixing the rate(s) under GCC 61(2). An example might
be an additional back-up pump ordered late. The S/E values it at BQ rate plus
some “disturbance” allowance. The Contractor claims under GCC 64(1) and
provides invoices, etc. under GCC 64(3) and (4) that show the pump is no longer
standard and also requires more complex installations work.

(f) In making the adjustment(s), the S/E is not expressly empowered to take into
consideration that the valuation may result in the payment of an additional
overhead element, already deemed included elsewhere in the contract rates by
virtue of GCC 14, i.e. there is no express power to “claw-back” overheads “lost”
somewhere in the contract rates, unless the proviso to GCC 61(1) can be called
upon i.e. the nature or extent of overheads included in work (not included in the
variation) is affected by the variation.

(g) On the other hand, if the rate(s) in the BQ clearly under-retrieve, then the
Contract cannot claim any “topping up” except under the limited circumstances
of GCC 63(b) or the proviso to GCC 61(1).

2.9 The Proviso to Clause 61(1)

(a) This proviso (and GCC 63(b)) deals with the effect a variation has on the rest
of the work not included in the variation. (The proviso focuses on the nature and
extent of the effect of the varied work itself, as opposed to GCC 63(b) which
focuses exclusively on the effect on the progress of the work.)
 (i) If the nature, i.e. kind, sort or class of the work of the variation,

(ii) or the extent, i.e. the width of application or scope of the work of the
variation,

(iii) compared to that of the whole or any part of the Works,

makes the using of any contract rate unreasonable or inapplicable, then the S/E
shall adjust the contract rate(s) as may be appropriate, i.e. apply the rules of
GCC 61(1)( c) to the unvaried work.

(b) Apart from the permanent work measured in the BQ, there are general
overhead items, which are often included in the BQ as specific “contractor’s risk”
allowances, and which are priced (or not) at the discretion of the tenderer. In
any event, the Contractor is deemed to have made full allowance for overheads
somewhere in the rates (GCC 14 applies).

Where the A/E changes the conditions and/or circumstances by ordering a

variation, and/or the proviso to GCC 61(1) applies, the Contractor is entitled (or
must submit) to an appropriate adjustment in the rate(s), up or down, for any
“knock-on” effect on the unvaried work. What is “appropriate” depends upon the
facts of each individual case. Examples would be the cost of maintaining site
offices and stores, temporary power and water, and the “risk” (i.e. the conditions
and/or circumstances) of protecting the Site and the Works under GCC 20, 21
and 22. If valued under GCC 61(1)(b) and ( c) , the basis of the valuation is by
reference to the contract documents [but see at 3.0 for GCC 63(b) ]

(c) If the variation omits work, there is in theory and practice the possibility for
both increasing and reducing rates under the proviso. But the contractual terms
of the preamble to GCC 60(1) (and the rules by FB/FC) do not permit substantial
changes to scope of the Works [without their express prior approval].
Variations must be “necessary” or “desirable” for the satisfactory completion of
the Works (as described in the Contract).

An example of the knock-on effect is where a variation reduces the size/length of

work not intended to be varied, thereby making the non-varied work more
difficult/uneconomic to carry out.

[Clearly this is not correct. All the original contract work changed by the
instruction is part of the variation and Clause 61 applies.]

(d) Whether the variation adds, changes or omits work, the impact that is to be
valued for the work not included in the variation is in the context of ‘the nature or
extent’ of the work or the Works affected by the variation. The S/E’s power
under the proviso to be able to assess the change(s) in risk benefit gained by
the Contractor by reason of the variation are not expressly excluded. But the
risk elements included by the Contractor will vary according to the level of risk
(e.g. high for unknown ground conditions, low for a piece of equipment) and the
E/S has no way of assessing/measuring the risk.

[Again this implies no “claw-back” to reduce the BQ allowances.]

3.0 Clause 63(b)

(a) GCC 63(b) becomes effective whenever the Contractor’s progress is

materially affected by varied work, i.e. whenever there is delay or disruption
to other work whether or not it is on the “critical path”.

[Note: the in GCC 63 the important relevant words are “progress …having
been materially affected” [see para (b) immediately following. The
words ”delay” and ”disruption” do not appear in GCC 63. These words
only provide a non contractual “shorthand” to differentiate between a
delay to the progress of the Works that affects the critical path and one
that does not. Both may entitle the Contractor to more money under GCC
63.]

It is generally in the Contractor’s best interests to have the direct knock-on effect
of variations valued under GCC 61 because, unlike GCC 63(b), it allows for
profit to be included. The wording of and the split of responsibilities in the two
clauses makes it clear that the valuer has a duty to value under GCC 61
independent of a claim from the Contractor under GCC 63 and therefore must
value as fully as possible, i.e. no deliberate omission of any affected element,
just because the Contractor has rights under GCC 63. The Contractor does not
have to invoke GCC 63(b) until all debate over the rates under GCC 61 is
exhausted, i.e. GCC 61(2) has been invoked and action under GCC 64(1)
completed. It is then up to the valuer to form an opinion on whether the
Contractor has incurred expenditure not reimbursed elsewhere under the
Contract.

(b) When the Contractor claims that the variation involves work which at
(appropriately adjusted) BQ rates, still under-retrieves the total cost of
performing the variation, the relevant words in GCC 63 read “….the Contractor is
involved in expenditure ….. by reason of the progress of …. any part of (the
Works) ….. having been materially affected by any variation …..”. This wording
makes it clear that it is the effect the variation has upon the otherwise
undisturbed progress, i.e. the financial effect the varied work has on work other
than that included under the variation, that is valued under GCC 63(b).
Therefore, this clause cannot help the Contractor should the GCC 61 valuation
fail to recover the actual cost of carrying out the variation [in so far as it is
based on BQ rates.]

(c) The basic question is - what should be valued under GCC 63(b)? The value
of the varied work is dealt with under GCC 61 and is deemed to include an
adequate allowance for on-site overheads (and profit) by virtue of GCC 14.
GCC 63(b) clearly covers activities, the progress of which are disrupted by
carrying out of the varied work and if this is not picked up under the GCC 61
valuation, the GCC 63(b) applies. The decision the S/E must reach is, how
much, if any, the allowance for the disruption to the on-site overheads included
under the GCC 61 valuation under-retrieves their Cost? [E.g. the knock on
effect of the increased cost of carrying delayed unvaried work, insurances
and warranties. Once decided by the S/E and the Contractor notified, the
critical time limits in GCC 64(1) and 64(2) become effective.}

(d) GCC 63 only deals with expenditure, not money forgone and not savings
brought by the effect on other work by any variation and therefore cannot be
 used to “claw-back” any “windfall” price benefits to the Contractor. Further, the
wording does not permit any “topping-up” of under-retrieval in the valuing of any
variation under the rules of GCC 61 when compared to the Contractor’s actual
cost of carrying out the varied work. But, having said this, and if agreed by the
S/E and the Contractor, one practical solution to the problem of valuing as for
para 2.9( c) above is to identify the total cost of the affected on-site overheads
and deduct the GCC 61 valuation element.

(e) The calculation is generally as for damages, i.e. putting the Contractor back
into the same financial position as if the event had not occurred (but see para
2.9(d)). There are limits on the extent of this right, which are set by the case of
“Hadley v. Baxendale”, in that the Cost cannot be too remote from the event, in
this case, the [work ordered by the] variation.

(f) Examples of items that may fall within GCC 63(b) are non-productive time for
plant and equipment, and the inefficient use of labour. It would also include the
cost of on-site overheads incurred by reason of staying on site longer than would
otherwise have been necessary, and the effects of inflation brought by any delay
to completion of the Works, not picked up under the proviso to GCC 61(1).

(g) Insofar as the Contractor complies with the notice provisions and provides
the necessary details for prolongation expenditure not included in the GCC 61
valuation, the valuer calculates and includes the Cost of the prolongation at the
time the prolongation occurs, i.e. when the additional work is done, and not
calculated at the end of the contract period. (Note: this approach also assists in
the early identification and settlement of disputes.)

(h) Whilst on the face of it GCC 63(b) deals with the indirect time-related
impact(s) of variations, it can also be used to “collect” claims arising from
disruption under the proviso to GCC 61(1) which cannot be easily
accommodated under any re-rating exercises.

(i) The requirements of GCC 64 [and GCC 79(1)(a) and(e)] make it clear that all
variations must be measured and valued very soon after the work has been
completed. If left to the end of the construction period, it is not possible to
operate GCC 64(3) and (4) [i.e. the required notifications from the S/E will
not have been delivered to the Contractor. It is not clear what constitutes
the required notifications under GCC 64(2). It is possible that a
specifically identified sum in the breakdown of the A/E’s certificate may be
enough to protect the Employer’s interests.]

4.0 Head office overheads

Are paid under GCC 63(b) but have their own particular proofs to be established
before being paid. The basis is loss of opportunity. The Contractor must show
that the variations (etc) to the Works caused delay to the completion of the
Works which tied up critical resources that would otherwise have been free to
earn the contribution to head office overheads. The Contractor must show that
the resources held on site were critical and that they lost the opportunity to
tender successfully for other work as a consequence. This is one area where
formulae are often used to pay the Contractor, if the case is proven.

5.0 Miscellaneous
(a) The valuing of work is also affected by GCC 59(4)(b) [provisional quantities.]
The valuer is only allowed to adjust the rate if the quantity change on its own
leads to a different rate. The fact that the Contractor is making a profit or loss on
the item of work is not material. The “officious bystander” test may usefully be
applied. This test is, had the Contractor known the final figure when pricing the
tender, would a different rate have been used? If the answer is “of course”, then
the rate should be amended.

(b) The method by which the S/E achieves this is left open to the S/E to decide,
but the basis must be the BQ [rates}.

(c) The need to use different working methods or a difference in the nett
purchase priced of materials would indicate the possibility of re-rating the item of
work.

(d) The valuer is not allowed to amend any other rate including separately priced
preliminaries or to include prolongation costs under this sub-clause except for
the overheads included in the rate for the item of work being re-rated. There is
no claim under GCC 63.

(e) For substantial increases GCC 50(1)(b)(v) is relevant. For substantial

decreases GCC 50(2) first proviso is relevant.

END