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RICS Practice Standards, UK

1st edition, guidance note

Valuing change1st edition, guidance note

This guidance note summarises what is meant by ‘change’ and howit is valued under JCT, NEC and FIDIC forms of contract.

Change is given specific definition within standard forms of contract,for example a Variation, Change of Employer’s Requirements or aCompensation Event. Each of these terms is explained in thedefinition section of the relevant contract conditions.

Guidance is given for each of the main groups of contracts andthe forms in most regular use within those groups, under thefollowing headings which map to the Assessment of ProfessionalCompetence (APC):

• General Principles (Level 1: Knowing)• Practical Application (Level 2: Doing)• Practical Considerations (Level 3: Doing/Advising).

Valuing change

GN 58/2010

Valuing change

RICS guidance note

1st edition (GN 58/2010)

Published by the Royal Institution of Chartered Surveyors (RICS)

Surveyor Court

Westwood Business Park

Coventry CV4 8JE

UK

www.ricsbooks.com

No responsibility for loss or damage caused to any person acting or refraining from action as a result of the material included in this publication canbe accepted by the authors or RICS.

Produced by the Built Environment Professional Group of the Royal Institution of Chartered Surveyors.

ISBN 978 1 84219

Royal Institution of Chartered Surveyors (RICS) May 2010. Copyright in all or part of this publication rests with RICS, and save by prior consent ofRICS, no part or parts shall be reproduced by any means electronic, mechanical, photocopying or otherwise, now known or to be devised.

Typeset by Columns Design Ltd, Reading, Berks

Contents

RICS guidance notes 1

Introduction 3

General principles: Level 1 – Knowing 4

1.1 JCT Standard Building Contract without Quantities 51.2 JCT Standard Building Contract with Quantities 51.3 JCT Standard Building Contract with Approximate Quantities 61.4 JCT Intermediate Building Contract 61.5 JCT Minor Works Building Contract 61.6 JCT Design & Build Contract 61.7 JCT Major Project Construction Contract 71.8 JCT Intermediate Building Contract with Contractors Design 81.9 JCT Minor Works Building Contract with Contractors Design 81.10 NEC Option A – Priced Contract with Activity Schedule 81.11 NEC Option B – Priced Contract with Bills of Quantities 91.12 NEC Option C – Target Contract with Activity Schedule 91.13 NEC Option D – Target Contract with Bills of Quantities 91.14 NEC Option E – Cost Reimbursable Contract 91.15 NEC Option F – Management Contract 91.16 FIDIC Conditions of Contract for Construction 101.17 FICIC Conditions of Contract for Plant and Design-build 10

Practical application: Level 2 – Doing 11

2.1 JCT Standard Building Contract Without Quantities 112.2 JCT Standard Building Contract With Quantities 142.3 JCT Standard Building Contract With Approximate Quantities 142.4 JCT Intermediate Building Contract 152.5 JCT Minor Works Building Contract 152.6 JCT Design & Build Contract 162.7 JCT Major Project Construction Contract 162.8 JCT Intermediate Building Contract with Contractors Design 162.9 JCT Minor Works Building Contract with Contractors Design 162.10 NEC Option A – Priced Contract with Activity Schedule 162.11 NEC Option B – Priced Contract with Bills of Quantities 172.12 NEC Option C – Target Contract with Activity Schedule 172.13 NEC Option D – Target Contract with Bills of Quantities 172.14 NEC Option E – Cost Reimbursable Contract 172.15 NEC Option F – Management Contract 182.16 FIDIC Conditions of Contract for Construction 182.17 FIDIC Conditions of Contract for Plant and Design-Build 18

VALUING CHANGE | iii

Practical considerations: Level 3 – Doing/Advising 19

3.1 Changes in character 193.2 Changes of conditions 193.3 Valuing preliminaries 193.4 Dayworks 203.5 General considerations 20

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RICS guidance notes

This is a guidance note. It provides advice tomembers of RICS on aspects of the profession.Where procedures are recommended for specificprofessional tasks, these are intended to embody‘best practice’, that is, procedures which in theopinion of RICS meet a high standard ofprofessional competence.

Members are not required to follow the advice andrecommendations contained in the guidance note.They should, however, note the following points.

When an allegation of professional negligence ismade against a surveyor, the court is likely to takeaccount of the contents of any relevant guidancenotes published by RICS in deciding whether or notthe surveyor has acted with reasonablecompetence.

In the opinion of RICS, a member conforming tothe practices recommended in this guidance noteshould have at least a partial defence to anallegation of negligence by virtue of having followedthose practices. However, members have theresponsibility of deciding when it is appropriate tofollow the guidance. If it is followed in aninappropriate case, the member will not beexonerated merely because the recommendationswere found in an RICS guidance note.

On the other hand, it does not follow that amember will be adjudged negligent if he or she hasnot followed the practices recommended in thisguidance note. It is for each individual charteredsurveyor to decide on the appropriate procedure tofollow in any professional task. However, wheremembers depart from the good practicerecommended in this guidance note, they shoulddo so only for good reason. In the event oflitigation, the court may require them to explain whythey decided not to adopt the recommendedpractice.

In addition, guidance notes are relevant toprofessional competence in that each surveyorshould be up to date and should have informedhim or herself of guidance notes within areasonable time of their promulgation.

VALUING CHANGE | 1

Acknowledgments

RICS would like to thank the following for their contributions to this guidance note:

Lead author

Andrew Smith (Laing O’Rourke)

Contributors

Stuart Earl (Gleeds)

Michelle Murray (Turner & Townsend)

Daniel Alcon (Currie & Brown)

Graeme Seage (Mace)

Jamie Hillier (Kier)

Colin Foster (Balfour Kilpatrick)

Alpesh Patel (APC Coach)

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Introduction

This guidance note summarises what is meant by‘change’ and how it is valued under JCT, NEC andFIDIC forms of contract. It does not seek to coverevery form within these families, but covers rulesand procedures from the most regularly usedforms.

For the purposes of giving guidance, it is assumedthat a valid change has occurred, and thedocument does not attempt to deal withdemonstrating entitlement to a change.

Change is given specific definition within standardforms of contract, for example a Variation, Changeof Employer’s Requirements or a CompensationEvent. Each of these terms is explained in thedefinition section of the relevant contractconditions. They will all have a common theme andbe associated with valuing either:

+ the carrying out of a different scope of work(addition or omission)

+ the effect of carrying out the same scope ofwork in a different manner (timing, conditions,etc).

Guidance is given for each of the main groups ofcontracts and the forms in most regular use withinthose groups, under the following headings whichmap to the Assessment of ProfessionalCompetence (APC):

+ General Principles (Level 1: Knowing)

+ Practical Application (Level 2: Doing)

+ Practical Considerations (Level 3: Doing/Advising).

Minimum level of service

The quantity surveyor is expected to fulfil thefollowing duties, notwithstanding the detailed termsof any appointment or contractual obligation:

+ Review the scope of the change and quantify it,in accordance with the provisions of theconstruction contract.

+ Review documents submitted to the client, by acontracting party, which are intended torepresent a quotation or valuation of changeunder the construction contract.

+ Prepare a valuation of the change, inaccordance with the construction contract,where there is a requirement to do so.

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General principles: 1 (Knowing)

Guidance is given within this section in respect ofthe main forms of contract currently in use. There islittle difference between these forms and theirpredecessors, however, the reader is advised tocheck the precise wording if working with earlierversions or forms that are not specifically reviewedin this guidance note.

There are many consistent principles of valuingchange across the range of contracts. Most formsof lump sum contract, i.e. a contract which isneither measured as the works proceed nor basedon a cost reimbursable arrangement, have somecommon basic principles:

+ Additions to, and omissions from, contractedworks are valued by quantifying the change ofscope and using rates and/or prices foridentical or similar work as the basis ofvaluation.

+ Effects on preliminaries, risk allowances, designfees, overheads and profit, etc. should beconsidered as appropriate for thecircumstances.

+ When work is not identical or similar, ratesand/or prices for other work in the contract areused as a basis to form a new rate or price withsuitable adjustments to reflect the difference.This difference could be due to changes inconditions, character, quantity, or other reasonsprovided for by the contract.

+ When it is not possible to produce a new rateor price on this basis, a fair rate or price iscalculated, usually by the employing party, toreflect the changed factors.

+ As a last resort, when a ‘fair’ rate or pricecannot be identified due to specialcircumstances, work is valued on the basis ofthe time taken and resources used to completeit. This may be a ‘daywork’ valuation.

These principles are set out in more detail againsteach of the standard forms reviewed in thisguidance note, and summarised in the table below.

Contract title Generic type Basis of quantification Description ofchange

Standard Building Contract without Quantities Traditional Lump sum Variation

Standard Building Contract with Quantities Traditional Adjustable Variation

Standard Building Contract with ApproximateQuantities Traditional Remeasurable Variation

Intermediate Building Contract Traditional Adjustable Variation

Minor Works Building Contract Traditional Adjustable Variation

Design & Build Contract Design & Build Lump sum Change

Major Project Construction Contract Design & Build Lump sum Change

Intermediate Building Contract withContractors Design Design & Build Lump sum Variation

Minor Works Building Contract withContractors Design Design & Build Lump sum Variation

NEC Option A – Priced Contract with ActivitySchedule Traditional / Design & Build Lump sum Compensation event

NEC Option B – Priced Contract with Bill ofQuantities Lump sum Variation Compensation event

NEC Option C – Target Contract with ActivitySchedule Traditional / Design & Build Target cost Compensation event

NEC Option D – Target Contract with Bill ofQuantities Traditional / Design & Build Target cost Compensation event

NEC Option E – Cost Reimbursable Contract Traditional / Design & Build Cost reimbursable Compensation event

NEC Option F – Management Contract Traditional / Design & Build Cost reimbursable Compensation event

FIDIC Conditions of Contract for Construction Traditional Lump sum Variation

FIDIC Conditions of Contract for Plant andDesign Build Design & Build Lump sum Variation

4 | VALUING CHANGE

1.1 JCT Standard Building ContractWithout Quantities

What constitutes change under this form?

This form of contract is sometimes referred to as a‘spec (specification) and drawings’ or ‘lump sum’contract. The employer does not provide thecontractor with a bill of quantities and thecontractor is required to complete the Works for alump sum. This is broken down in an agreed formatagainst a Work Schedule, Contract Sum Analysis ora Schedule of Rates. These documents are referredto as ‘The Priced Document’ and are used as thebasis for valuing any variations.

The principal characteristic of this contractualarrangement is that the contractor holds the risk ofhaving quantified the scope of work correctly fromthe contract documents. The employer does notprepare a bill of quantities and consequently thereis a limited amount of pricing detail from which tovalue variations. The employer should ensure thatthe pricing information included in the contract is ofappropriate detail for this purpose. This may takethe form of a schedule of rates, which may bequantified.

Change is defined as follows:

(i) the alteration or modification of the design,quantity or quality of the Works

(ii) the imposition by the Employer of any[additional] obligations or restrictions, or theaddition to or alteration or omission of anyobligations or restrictions. These obligationsor restrictions refer specifically to access tothe site, or specific parts of the site,limitations on working space or workinghours, and carrying out of work in a specifiedorder, and create changes in condition and/orcharacter of the work.

How is change valued?

The fundamental premise under this form ofcontract is that the employer and the contractorshall agree the value of a Variation. This reflects thecommon practice in the industry for the parties toexchange information and calculations pertaining tothe value of a Variation and ultimately reach anagreement, which forms part of a rolling finalaccount.

This consensual approach is given further weightby the inclusion of provisions dealing with

contractors’ quotations. The contractor may berequested to submit a quotation, for agreement,prior to actioning an instruction of the architect/contract administrator.

Where agreement has not been reached, thequantity surveyor is obliged to carry out a valuationof the variation in accordance with the ‘ValuationRules’. In reality, the quantity surveyor will often beacting for the employer in reaching mutualagreement. Imposing a valuation is to be a leastfavoured option.

1.2 JCT Standard Building Contractwith Quantities


As the name suggests, this form of contract has acontract sum calculated from a fully priced bill ofquantities. The bill of quantities is referred to as theContract Bills and it is a contract document. Thebills of quantities define the quality and quantity ofthe work to be carried out by the contractor. Theemployer holds the risk that these quantities areaccurate and for any errors in their preparationagainst the stated measurement rules. Any errors inquantity or method of preparation are correctedand treated as variations.

The benefit to the employer of having a priced billof quantities, amongst other things, is that there isfar more information for the quantity surveyor touse for the valuation of variations. The likelihood ofhaving agreed rates for similar work, to use whenvaluing change, increases when compared to lumpsum versions.

The categories of change are the same as for theWithout Quantities form.


The approach here is the same as when workingwith the Without Quantities form.

VALUING CHANGE | 5

1.3 JCT Standard Building Contractwith Approximate Quantities


As the name suggests, this form of contract has acontract sum calculated from a bill of approximatequantities. The bill of quantities is still referred to asthe Contract Bills, is a contract document, anddefines the quality and quantity of the work to becarried out by the contractor. The employer holdsthe risk that these quantities are accurate and forany errors in their preparation against the statedmeasurement rules. Any quantity adjustment orerrors in the method of preparation are correctedand treated as variations.

This form of contract allows the employer toproceed on the basis of having a priced bill ofapproximate quantities, and is most oftenapplicable where there is not time to produce afully detailed design to enable an accurate bill ofquantities to be measured.

The bills of quantities will be the subject ofremeasurement once the design has beencompleted and an accurate quantity of workdetermined. It is important that measurement iscarried out jointly and agreements reached on aprogressive basis. Rates contained in the bills canbe used by the quantity surveyor for the valuationof variations, subject to adjustment wherenecessary for changes in quantity.

The categories of change are the same as for theforms previously discussed.


There is a subtle but important distinction betweenthis form and the earlier forms reviewed in that thequantity surveyor is to value all work carried out,unless the employer and the contractor agreeotherwise. This obligation to value applies not onlyto variations, but to all work carried out inaccordance with the contract. This deals with thequantity surveyors duty to remeasure the workcarried out by the contractor and adjust the bills ofquantities as appropriate.

Remeasurement is not carried out to work which isthe subject of a Contractor’s Quotation, or toContractor’s Design Portion work which is statedas fixed and not for remeasurement.

1.4 JCT Intermediate Building Contact


This is essentially a With Quantities form ofcontract that applies to projects that are of asimple content, utilising standard trades and skills.The employer holds the risk for the accuracy ofquantities used and for their departure from thestated method of preparation.


The approach here is the same as when workingwith the With Quantities form.

1.5 JCT Minor Works Building Contract


The Minor Works form is for work which is simplein character and for which there is no bill ofquantities prepared. The employer is stillresponsible for describing the quality and quantityof the work which the contractor is to complete,and this takes the form of specifications, drawingsand work schedules. The employer holds the riskfor any inconsistency between these documents,the removal of any inconsistency being treated as avariation.


The contractor should endeavour to agree a pricefor any variation with the architect/contractadministrator prior to carrying out the work.

If an agreement is not reached then the architect/contract administrator shall value the variation on afair and reasonable basis, using any relevant pricesfrom the work schedules or schedules of rates. Thisvaluation will include any Loss & Expense incurredby the contractor.

1.6 JCT Design & Build Contract


This form of contract is the principal and mostpopular form of JCT design and build contract. Itrequires the employer to prepare a set ofEmployer’s Requirements, which set the basis ofthe contractor’s scope of work obligation. This is alump sum contract where the contractor completesthe design, based on the Employer’s Requirements,

6 | VALUING CHANGE

in return for the contract sum which is not adjustedexcept for changes to the Employer’sRequirements.

It should be noted that the standard form is draftedon the basis that the employer retains responsibilityfor the design in the Employer’s Requirements. It isquite usual, in some market sectors, for thecontractor to accept responsibility for the designundertaken by the employer within the Employer’sRequirements. This arrangement would be thesubject of bespoke drafting and reference shouldbe made to project specific amendments in suchinstances.

The principal characteristic of this contractualarrangement, in its standard form, is that thecontractor holds the risk of having quantified thescope of work correctly that is needed to completeand construct a design that satisfies the Employer’sRequirements and the Statutory Requirements. Theemployer does not prepare any quantities andconsequently there is a limited amount of pricingdetail from which to value variations, other than theContract Sum Analysis, and the employer shouldensure that the pricing information included is of anappropriate detail for this purpose.


(i) the alteration or modification of the design,quantity or quality of the Works (via a changeof the Employer’s Requirements)

(ii) the imposition by the employer of any[additional] obligations or restrictions, or theaddition to or alteration or omission of anyobligations or restrictions. These obligationsor restrictions refer specifically to access tothe site, or specific parts of the site,limitations on working space or workinghours, and carrying out of work in a specifiedorder.


The approach here is similar to some of the earlierforms reviewed, namely:

(i) The employer and the contractor shallendeavour to agree the value of a variation.

(ii) Where agreement has not been reached, avaluation of the variation is made, inaccordance with the Valuation Rules. It is notclear who undertakes this valuation. It is

probably at the direction of the employer’sagent. Imposing a valuation is to be a leastfavoured option

1.7 JCT Major Project ConstructionContract


This form of contract is for major works, where theemployer regularly procures large scaleconstruction work and where the contractor isexperienced and able to take a greater share ofrisk, including the completion of the design. It isreasonable to envisage therefore that the scope forchange should be restricted to a limited set ofcircumstances.


(i) any alteration in the Requirements and/or theProposals that gives rise to an alteration inthe design, quality or quantity of anything thatis required to be executed in accordance withthe contract.

(ii) any alteration by the employer of anyrestriction or obligation set out in theRequirements and/or Proposals as to themanner in which the contractor is to executethe Project, or the imposition of additionalrestrictions or obligations.

(iii) Any matter that the Contract requires to betreated as giving rise to a change.


An early warning procedure is required, wherebyboth parties are under an obligation to notify theother if a change occurs.

Prior to a change being instructed, the employermay request a quotation. A quotation is required todeal with the valuation of the change itself,including adjustments for preliminaries and designas appropriate, and any necessary extensions oftime together with a pre-estimate of Loss &Expense.

The value of a change is to be agreed prior to aninstruction being issued. If an agreement cannot bereached then a ‘fair valuation’ is to be made inaccordance with the contract.

VALUING CHANGE | 7

1.8 JCT Intermediate Building Contractwith Contractors Design


This form is similar to the main Design & BuildContract in many respects, and reference should bemade to earlier guidance.


The approach here is very similar to the Design &Build Contract. It is possible, when using theIntermediate form, to encounter bills of quantities,or a Contract Sum Analysis, depending on whetherpricing option A or B has been used. Thedocument used is referred to as the PricedDocument.

The employer and the contractor shall endeavour toagree the value of a variation. Where agreementhas not been reached, a valuation of the variation ismade in accordance with the Valuation Rules, usingthe Priced Document as a basis.

1.9 JCT Minor Works Building Contractwith Contractors Design


This form of contract is for work which is simple incharacter, and where the contractor will design onlypart of the work. The contract conditions arerelatively simplistic when compared to some otherJCT forms, and the variation provisions are noexception.

The architect/contract administrator may issueinstructions effecting a change in the Employer’sRequirements relating to:

(i) an alteration or modification of the design ofthe CDP Works

(ii) issuing instructions requiring an addition to,omission from, or other change in the Works

(iii) a change in the order or period in which workis to be carried out.


Consistent with most other JCT Forms, thearchitect/contract administrator shall endeavour toagree a price, prior to the contractor carrying outadditional work.

If an agreement cannot be reached, the architect/contract administrator shall value the variation on afair and reasonable basis, including any direct lossand/or expense incurred by the contractor.

1.10 NEC Option A – Priced Contractwith Activity Schedule


This contract has a contract sum calculated from aseries of lump sums for each of the activities onthe Activity Schedule.

Change is implemented via the occurrence of anyof the Compensation Events which are defined inthe contract. These events cover a range ofsituations which are agreed to be at the Employer’sRisk. Compensation Events deal with the costeffect of the ‘change’ together with any extensionof time and loss and/or expense that is due.


Change is valued by considering changes to theactivity schedule caused by a Compensation Event.These changes could, for example, include scopeof work addition or omission, design fees,preliminary type items, as well as changes insequence or timing. The prices (specific parts ofthe contract sum) are assessed (valued) as theeffect on:

(i) the Defined Cost of the work already done

(ii) the forecast Defined Cost of the work not yetdone

(iii) the resulting fee (fee percentage applied tothe amount of Actual Cost covering specificcosts, mainly head office overheads andprofit).

The change to the activity schedule is valued byidentifying resources that are affected by thechange, by reference to the Schedule of CostComponents, and establishing their cost or forecastcost. Effectively the contractor is put back in theposition he or she would have been in had theCompensation Event not occurred. This approachis used for both the contractors direct costs andalso those of the sub-contracted supply chain.

8 | VALUING CHANGE

1.11 NEC Option B – Priced Contractwith Bills of Quantities


This contract has a contract sum based on a seriesof lump sums calculated by multiplying the rates bythe quantities for the items in the bill of quantities.

Change is implemented via the occurrence of anyof the Compensation Events which are defined inthe contract. The following Compensation Eventsare specifically included in Option B to deal withthe following circumstances should they arise:

+ a difference between the final total quantity andthe quantity stated in the Bills of Quantities(inaccurate quantities)

+ any such inaccurate quantity causes theDefined Cost per unit to change

+ an item in the Bill of Quantities comprises morethan 0.5% of the Prices at the Contract Date(contract sum)

+ correction of departures from the adoptedmethod of measurement

+ correction of an inconsistency between the Billof Quantities and another document.


Change is valued by considering changes to the billof quantities caused by a Compensation Event.This can be on a Defined Cost basis, as Option A,or based on the use of rates and lump sums fromthe bill of quantities (if the project manager andcontractor agree).

1.12 NEC Option C – Target Contractwith Activity Schedule


This contract has a contract sum calculated from aseries of lump sums against each of the activities inthe activity schedule.

Change is implemented via the occurrence of anyof the Compensation Events which are defined inthe contract. See Option A above for furtherguidance.


Change is valued by considering changes to theactivity schedule caused by a Compensation Event.See Option A above for further guidance.

1.13 NEC Option D – Target Contractwith Bills of Quantities


This contract has a contract sum based on a seriesof lump sums calculated by multiplying the rates bythe quantities for the items in the bill of quantities.

Change is implemented via the occurrence of anyof the Compensation Events which are defined inthe contract, reference Option B above for furtherguidance.


Change is valued by considering changes to the billof quantities caused by a Compensation Event.This can be on an actual cost basis, as Option A,or based on the use of rates and lump sums fromthe bill of quantities (if the project manager andcontractor agree).

1.14 NEC Option E – Cost ReimbursableContract


This contract does not have a contract sum, theprices being based on the Defined Cost plus thefee.

Change is implemented via the occurrence of anyof the Compensation Events which are defined inthe contract. See Option A above for furtherguidance.


Change is valued by considering the actual cost ofchange caused by a Compensation Event. SeeOption A above for further guidance.

1.15 NEC Option F – ManagementContract


This contract does not have a contract sum, theprices being based on the Defined Cost plus thefee.

Change is implemented via the occurrence of anyof the Compensation Events which are defined inthe contract. See Option A for above for furtherguidance.

VALUING CHANGE | 9


Change is valued by considering the Defined Costof change caused by a Compensation Event. SeeOption A above for further guidance.

1.16 FIDIC Conditions of Contract forConstruction


This form of contract comprises a set of conditionsfor building and civil engineering constructionworks, intended for international application, whereworks are designed by the Employer.

The contract sum is usually derived from a pricedbill of quantities or other schedule which may eitherbe remeasured, or form the basis of a lump sum orseries of lump sums.

The engineer designs the Works and administersthe contract, acting for the employer. The engineermay instruct the contractor to undertake a variationin the Works or request the contractor to submit aproposal. There is no provision for the contractor toundertake a variation unless and until the engineerinstructs or approves. A variation may comprise:

(i) an increase or decrease in the quantity ofwork

(ii) a change in the quality and othercharacteristics of any item of work

(iii) changing the levels, positions and/ordimensions of any part of the Works

(iv) omission of any work (unless it is to becarried out by others)

(v) execution of additional work

(vi) changes in a specified sequence or timing ofconstruction of any part of the Work, i.e.where the sequence or timing has beenprescribed and is at the employer’s risk.


Change is valued under this form by the engineer inthe following manner:

(i) the contractor, if requested by the engineer,prepares a contractors proposal for theevaluation of the variation. This evaluationshall follow the Valuation Rules unless theengineer instructs or approves otherwise.

(ii) the engineer instructs the contractor tocommence the variation and may require thecontractor to record the costs in connectionwith the variation.

(iii) the engineer fixes new rates or prices forvariations which are not the subject of acontractor’s proposal.

All rates and prices used to value the variation, byeither the contractor or the engineer, should bederived by application of the Valuation Rules withinthe contract.

1.17 FIDIC Conditions of Contract forPlant and Design-Build


This form of contract comprises a set of conditionsfor building and civil engineering constructionworks that are delivered under a design and buildarrangement, intended for international application.Design is carried out by the contractor.

The contract sum is a lump sum, based in thecontractor holding full responsibility for design.

A Variation is described as a change to theEmployer’s Requirements which is instructed orapproved as a variation.


The contractor can be directed by the engineer toprovide a proposal prior to implementing avariation. The proposal shall comprise a descriptionof the proposed design, and adjustments to theContract Price or Time for Completion. Theengineer shall consult with the contractor and eitherapprove, disapprove or pass comment on theproposal.

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Practical application: 2 (Doing)

This section looks in more detail at the ValuationRules that govern how change is valued, andbegins to look at the practical application of thesegeneral principles. The same forms of contractdiscussed in section 1 are reviewed here also.

2.1 JCT Standard Building ContractWithout Quantities

What are the Valuation Rules?

The Valuation Rules are set out in the ContractConditions and reflect a sliding scale of options,based on how closely the varied work resembleswork that is part of the Contract Documents.

1 Where work is of similar ‘character’ to work inthe original Contract Documents then thevaluation of the Variation shall be consistentwith rates, prices or amounts for work in thePriced Document, which could be a bill ofquantities or a schedule of rates. The valuationshall include a ‘fair allowance’ to reflect anychange in conditions or change to the quantityof work carried out. It should also makeappropriate allowance for any addition to orreduction of preliminary items.

The application of these various factors issometimes referred to as ‘re-rating’ or ‘starrating’. These rules apply to all rates, eventhose that a contractor may have over or underpriced at tender stage. There are many quitecomplex issues to deal with when valuing avariation and these are considered below.

+ Character. The character of an item of workis what distinguishes it from other, possiblysimilar, specifications of work. An exampleof this could be in the specification offinishes such as joinery or stonework. Apiece of stone may be bedded in the samematerial and attract the same labours interms of cutting and grouting, but thespecification of the material itself will effectcost greatly. Joinery is the same. Acarpenter may take more time to hang ahardwood door then a softwood door andthe material itself will be more expensive.

These operations may be carried out underthe same conditions but the charactermeans that the rates are not relevant andneed to be adjusted.

+ Conditions. The stage at which work isprogrammed into the contract period willaffect the cost of execution. This could bedue to the timing in the year, such ascarrying out groundworks in winter asopposed to summer, or constraints dueimpinged access or productivity impactssuch as completing cladding works oncescaffolding has been struck.

+ Quantity. At tender stage, the contractorwill assess the economies of scale that canbe achieved by carrying out the quantity ofwork indicated in the Contract Documents.The estimator will make judgments such asprocurement volume discounts, labour gangefficiencies and supervision ratios. If thesequantities change, up or down, then thesefactors need to be revisited and adjusted.There should not automatically be a rateadjustment if the quantity of work changesand these, or other, factors need to beconsidered relative to the particularoperation in question.

+ Preliminaries. It is usual for a contractor toprepare a bill of preliminaries for a project,which should follow the structure of theStandard Method of Measurement/NewRules of Measurement (NRM). Thesepreliminary resources may include siteaccommodation and set up, staff,scaffolding and access equipment,craneage, power, and many other items thatare not included in rates for work items. It isnecessary to review these resources foreach variation to assess if allowances aredue to be made (in addition or omission) tocater for the impacts on the contractor’spreliminaries by execution of the change. Itis not the case that adjustments should bemade automatically, and in fact theconditions state ‘where appropriate’. Thecontractor is not required to evidence his or

VALUING CHANGE | 11

her cost in connection with additionalpreliminaries (these are value basedadjustments to contract rates as opposedto ascertainment of costs or losses) butthere should be evidence provided ofadditional resources being used, such asprolonged use of staff, additional staff,additional or prolonged attendant labour,plant, access equipment etc. The contractorshould be prepared to demonstrate wherecosts are fixed (a single one-off cost) ortime related (where the costs vary with time,such as rental, maintenance and the like).Increased preliminaries due to thecumulative effect of multiple changes ismost likely to be dealt with as Loss &Expense.

2 ‘Fair rates and Prices.’ In instances wherework is not of a similar character then it shouldbe valued at ‘fair rates and prices’. Therequirements of this form of valuation are opento debate and interpretation. Case law does notprovide a definitive position. For the purposesof this guidance note it is assumed that theterms ‘fair rates and prices’ and ‘fair valuation’are the same.

3 Daywork. This is a method of valuing additionalor substituted work which cannot properly bevalued by measurement. Records, or vouchers,need to be prepared by the contractorrecording the labour, plant and materials usedin the operation. These records are to besubmitted to the architect/contractadministrator for verification. The valuation ofwork on daywork is made by using the verifiedrecords and applying rates derived by referenceto the ‘Definition of Prime Cost of Dayworkcarried out under a Building Contract’ current atthe Base Date, together with the percentagedefinitions set out in the Priced Document.

Examples of daywork activities could beopening up works for inspection, testingoperations, repair of damage etc. It is intendedfor short duration, limited scope activities.Significant works, or works of a prolongedduration, should be capable of valuation bymeasurement, either using a contract rate as abasis or preparing a new rate based on fairrates and prices. Daywork is a last resort basisof valuing works and care should be taken thata daywork valuation is not covering the

payment of resources that are already beingrecovered via the valuation of other variationsor Loss & Expense.

4 Contractor’s Designed Portion. The valuationof changes to the CDP works broadly followsthe same process as other works under thecontract. There are, however, some key pointsto highlight:

+ Allowance is to be made for the addition oromission of design work. This is likely to beprofessional fees from consultants engagedby the contractor, or fees from specialistsub-contractors.

+ The CDP analysis is used as the basis fordetermining the contract baseline, uponwhich allowances should be made forchanges of condition, character, etc. It isnot uncommon for a CDP analysis to be asummary level breakdown or a series oflump sums. This is obviously of little use forvaluing changes and it is thereforenecessary to include as much pricinginformation as possible into the CDPanalysis. This would normally include aschedule of rates, possibly quantified, whichdetails the most common items as aminimum.

5 Change of Conditions for other work. Theconditions state that where there is asubstantial change in the conditions underwhich other work is executed, then that otherwork shall be treated as if it had been thesubject of a variation instruction. It is likely fromthe use of the word ‘substantial’ that it is notintended that this provision should by operatedregularly. Substantial is a subjective term andthis clause, like any other provision of acontract, should be operated fairly. An exampleof such an instance could be a change inceiling design having a serious effect on theway the mechanical and electrical servicesinstallation is installed and commissioned, orsome additional external drainage workimpacting on the method of supportingscaffolding for cladding works. Where asubstantial change of conditions has occurredthen those effects on other work can be valuedas well, in accordance with the Valuation Rules.

6 Additional Provisions. Where a valuation doesnot relate to carrying out additional or

12 | VALUING CHANGE

substituted work, or the omission of work, orwhere the Valuation Rules cannot effectivelydeal with the valuation of a variation, then a fairvaluation shall be made. These provisionsprovide a very wide authority to the effects ofchange to be valued as part of a variation. Ifused properly, then there is likely to be lessneed to invoke the Loss & Expense provisionsof the contract.

When valuing work on a fair basis it isnecessary to understand how the contractor’scosts are generated. The contractor will employa series of resources, some directly engagedsuch as labour, plant, materials, staff and otherpreliminaries, while other resources areprovided by sub-contractors. The contractor willhave limited choices as to how to execute workimposed by a variation. In many cases thecontractor will be in breach of his or her sub-contracting arrangements if the contractorbrings in other companies to do substitutedworks. It is also not desirable, from amanagement and programming perspective, tointroduce additional trades or companies intothe supply chain unless absolutely essential.These constraints mean that the contractor’scost for executing a variation are, in reality,quite fixed.

A ‘fair valuation’ or one based on ‘fair rates andprices’ should therefore be cognisant of thecontractor’s cost of carrying out the works.Where new resources are brought to the howthese are procured, then it is not unreasonableto expect the contractor to demonstrate marketcompetitiveness (where this does not causedelay to the execution of the variation). Whereexisting resources are used, either directly orvia existing sub-contracting arrangements, thenthe valuation should reflect these costs. Anallowance should be made for the contractor’soverheads and profit as part of any ‘fairvaluation’ or computation of ‘fair rates andprices’. Any costs associated with putting rightdefective work should not be included in anyvaluation.

7 Contractor’s Quotations. The JCT describethis valuation approach as a ‘Schedule 2Quotation’. It applies when the architect/contract administrator requests that thecontractor provides a quotation.

The contractor may notify the architect/contractadministrator, within a defined time period,identifying disagreement with the approach ofproducing a quotation. The contractor is thennot obliged to proceed unless instructed further,in which case the variation will be valued by thequantity surveyor in accordance with theValuation Rules. A reason for the contractorrefusing to provide a quotation could be thatthere is insufficient information to provide alump sum and take the financial and/or timerisks of invoking the change. For example, alack of design information, inability to accessthe affected area, unknown ground conditionsetc

Schedule 2 of the Conditions provides adetailed procedure for the submission andacceptance of a quotation. The key issues forinclusion and consideration in a quotation are:

+ sufficient information must be provided tothe contractor to enable preparation of aquotation

+ prescriptive time periods exist for thepreparation and acceptance of a quotation

+ the quotation must include the value of thevaried work and the effects on any otherwork

+ supporting calculations should besubmitted, with appropriate reference to theValuation Rules

+ any requirements for an Extension of Time

+ any amounts to be paid in lieu ofascertaining Loss & Expense

+ a fair and reasonable amount in respect ofthe cost of preparing the quotation shouldbe included. This fair and reasonableamount is to be paid even if the quotation isnot accepted

+ method statements and resourcerequirements should be included if askedfor by the instruction to provide thequotation.

Provisional Sums

A Provisional Sum is a financial allowance, includedwithin the Contract Sum, for work which is notsufficiently designed to allow the contractor to offera firm price at tender stage.

VALUING CHANGE | 13

A provisional sum should be stated to be eitherDefined or Undefined, based on its compliance withthe applicable measurement rules. Where aprovisional sum is included for Defined work thecontractor will be deemed to have made dueallowance in programming, planning and pricingpreliminaries. A provisional sum for Undefined workmay entitle the contractor to be paid additionalpreliminaries (assessed in accordance with theValuation Rules) and to an extension of time if theprovisional sum work causes a delay to completion.

The architect/contract administrator will issueinstructions to the contractor for omission of theProvisional Sum. Once sufficient design informationis available to enable a firm valuation to be made,the contractor will be instructed either to prepare aquotation or for the work to be valued as avariation in accordance with the Valuation Rules.

The Provisional Sum is omitted from the adjustedContract Sum and the valuation of the variationadded back. A Provisional Sum is therefore only anallowance for work which may or may not becarried out. The contractor bears no risk inconnection with the adequacy of the ProvisionalSum.

When does Loss & Expense apply?

Loss & Expense becomes payable to thecontractor, on satisfactory demonstration ofentitlement in accordance with the Conditions, thatdirect loss and/or expense has been incurred forwhich no reimbursement would be made by apayment under any other provision of theConditions.

There are many tools on the quantity surveyor’sworkbench for valuing all sorts of changes to work,the introduction of new work, and effects on otherwork caused by change. If these tools are usedproperly, and to their full extent, there are likely tobe limited occasions where the contractor needs toseek ascertainment of Loss & Expense.

For more detailed guidance please refer to therelevant section of the Black Book which relates toAscertaining Loss & Expense.

2.2 JCT Standard Building ContractWith Quantities


The Valuation Rules under this form of contract aresimilar to the Without Quantities form. The followingpoints should be noted.

+ Variation work should be measured andquantified using the same rules of measurementas the bills of quantities.

+ Allowance shall be made for any lump sum orpercentage adjustments applicable from thebills of quantities. This could be a maincontractors/directors discount, expressed aseither a lump sum or percentage.

+ Adjustment is to be made for preliminary items,where appropriate.

+ If an approximate quantity is a reasonableforecast of the quantity of work required thenthe rate in the bills of quantities shall be usedto determine the valuation. Work which is thesubject to an approximate quantity is measuredfully in accordance with the chosenmeasurement rules. The quantity is thenremeasured once the design has beencompleted, and the quantity is adjusted (ifnecessary).

+ If an approximate quantity is not a reasonableforecast of the actual quantity then the rate inthe bills of quantities is used as the basis forthe valuation and a fair allowance is made forthe change in quantity.

2.3 JCT Standard Building ContractWith Approximate Quantities


The Valuation Rules under this form of contract areconsistent with the With Quantities form, with theexception that there are no provisions dealingexclusively with approximate quantities. This is dueto the whole contract being subject toremeasurement/revalidation that the approximatequantities are accurate.

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2.4 JCT Intermediate Building Contract


Valuation Rules for this form are consistent with theStandard Building Contract with Quantities.

2.5 Minor Works Building Contract


There are no specific rules included within thisform. The guidance that can be reasonably takenfrom the general obligations is that:

+ Contract rates or prices should be used as abasis where relevant. When considering if a rateor price is relevant, it is considered reasonablethat cognisance should be given to changes ofconditions, character, quantity, preliminaries etc.There is however no specific obligation toadjust for these factors, potentially movingstraight to a fair and reasonable valuation.

+ A valuation on a fair and reasonable basis islikely to be consistent with the use of fair ratesand prices, or conducting a fair valuation.

Contractor’s quotation

There are no specific provisions in this formgoverning the process of preparing and submittinga quotation. It is likely, however, in practice, thatthe process of the contractor and the architect/contract administrator agreeing prices for variationswill involve the submission of quotations, albeit notin a structured way.

Provisional Sums

The valuation of provisional sum work is carried outin accordance with the same rules as othervariations.

2.6 JCT Design & Build Contract


The following rules apply to the valuation of workunder this form:

+ Allowance must be made for the addition oromission of relevant design work. This is likelyto be professional fees from consultantsengaged by the contractor, or fees fromspecialist sub-contractors.

+ If varied work is of similar character, carried outunder similar conditions, and is of similarquantity to, work in the contract sum analysis(i.e. it is practically the same item of work), thenthe valuation of the variation shall be consistentwith such values in the contract sum analysis.

+ If varied work is of similar character, but is notcarried out under similar conditions or is not ofsimilar quantity to, work in the contract sumanalysis, then the values in the contract sumanalysis shall be used as the basis for thevaluation of the variation and a ‘due’ allowanceshall be made for the change in quantity orconditions. There is no further detail in thecontract conditions as to what constitutes a‘due allowance’. It is considered, for thepurposes of this guidance, that such allowancewill consist of a ‘fair valuation’ of thoseelements that have changed, as an add or omitto the original value taken from the contractsum analysis.

+ If varied work is not of similar character to workin the contract sum analysis then fair rates andprices shall be used as the basis for valuing thevariation.

+ Omission of work set out in the contract sumanalysis shall be in accordance with the valuesin the contract sum analysis for such work. Inreality it is unlikely that the item of work to beomitted will be exactly identifiable from thecontract sum analysis and the employer andthe contractor need to act fairly in agreeing thevalue of an omission. Reference should bemade to the Valuation Rules to assist indetermining the value to be omitted.

+ Any valuation shall make due allowance for theaddition or omission of site administrationcosts, site facilities (i.e. preliminaries type items)and temporary works. No further information isgiven in the conditions as to how theseadjustments should be calculated.

+ Daywork. This method of valuation is for workwhich cannot properly be valued bymeasurement. More detailed guidance is givenagainst the Without Quantities form.

+ Contractor’s Quotation. The provisions dealingwith contractor’s quotations are included withinSchedule 2 to the contract conditions, in asimilar may to other JCT forms, however thisschedule is introduced as a set of supplemental

VALUING CHANGE | 15

provisions and as such is optional. Reference tothe contract particulars will determine if thesesupplemental provisions apply. Thesupplemental provisions should be consultedfor specific information.

Provisional Sums

The employer can include provisional sums withinthe Employer’s Requirements which will then formpart of the Contract Sum and should be identifiedin the contract sum analysis.

Once the employer has sufficient informationavailable he or she will issue instructions to thecontractor to proceed with the provisional sumwork, including elements of design as required. Thecontractor will either be instructed to issue aquotation prior to proceeding or the works will bevalued in accordance with the Valuation Rules.

The Provisional Sum is omitted from the adjustedContract Sum and the valuation of the variationadded back. A Provisional Sum is therefore only anallowance for work which may or may not becarried out. The contractor bears no risk inconnection with the adequacy of the ProvisionalSum.

2.7 JCT Major Project ConstructionContract


The employer may initially provide details of aproposed change and request that the contractorprovides a quotation. The quotation should includea valuation of the proposed change, having regardto the following points:

+ the nature and timing of the change

+ the effect of the change on other parts of theproject

+ the prices and principles set out in the PricingDocument

+ any loss and/or expense that will be incurred asa consequence of the change

+ any adjustment to the Completion Dateconsidered necessary as a consequence of thechange.

The employer can accept the quotation, reject it, orrequest that a revised one is prepared andsubmitted.

Where agreement of a quotation is not reached, buta change has occurred or an Instruction is issuedfor a change, then a fair valuation shall be made bythe employer. A fair valuation should also haveregard for the points listed above. The term ‘fairvaluation’ is discussed in more detail within theValuation Rules for the Without Quantities form.

2.8 JCT Intermediate Building Contractwith Contractors Design


The Valuation Rules are almost identical to theDesign & Build form and reference should be madeto the guidance above.

It should be noted that the Intermediate Form doesmake provision for approximate quantities andthese should be adjusted as necessary, inaccordance with the conditions.

2.9 JCT Minor Works Building Contractwith Contractors Design


There are no specific Valuation Rules in this form ofcontract, other than for the architect/contractadministrator to value variations on a fair andreasonable basis.

It is considered that it is likely that a fair andreasonable valuation will embrace many of thecomponents referred to in the more detailedstandard forms, particularly the Without Quantitiesversion reviewed at the beginning of this section.

2.10 NEC Option A – Priced Contractwith Activity Schedule


Assessments for changed Prices (adjustments tothe contract sum) are valued based on the DefinedCost of changes to the activity schedule. DefinedCost is costs based on rates and percentagesstated in the Contract Data and other amounts atopen market or competitively tendered prices.Alternatively the contractor and the projectmanager can adopt a more traditional approach tovaluation and agree rates and lump sums instead ofDefined Cost. In practice it will be necessary to

16 | VALUING CHANGE

utilise a combination of these approaches tofacilitate the smooth running of the project.

To the extent that Defined Cost is used as the basisfor valuing change, the Shorter Schedule of CostComponents is used to identify the resources thatmay be costed. This is the method of valuing allresources, whether they are directly engaged by thecontractor or by his or her sub-contractors. In otherwords, the contractor cannot just submit sub-contractors’ quotations to the project manager(where the Defined Cost approach is being used).

The contractor cannot recover his or her own costsor the sub-contractors’ costs for preparingquotations.

The Contractor’s Fee is added to the Defined Costof any change or should be included in any lumpsum adjustment accepted by the project manager.All costs which are not included in the Defined Costare treated as included in the Fee. Typical examplesare head office overheads, profit, insurancepremiums and insurance excesses.

2.11 NEC Option B – Priced Contractwith Bills of Quantities


The guidance in Option A applies here also unlessstated otherwise.

Assessments for changed Prices (adjustments tothe contract sum) are valued based on the DefinedCost of changes to the Bill of Quantities.

If there is a Compensation Event changing an itemwithin the Bill of Quantities, it is valued on the basisof a changed rate, quantity or lump sum.

If there is a Compensation Event for which there isno item in the Bill of Quantities then, unless thecontractor and the project manager agreeotherwise, a new priced item is compiled inaccordance with the adopted method ofmeasurement. They can also agree to use ratesand lump sums to assess a Compensation Eventinstead of Defined Cost.

2.12 NEC Option C – Target Contractwith Activity Schedule


The guidance in Option A applies here also unlessstated otherwise.

Assessments for changed Prices (adjustments tothe contract sum) are valued based on the DefinedCost of changes to the Activity Schedule.Assessments are made based on the Schedule ofCost Components, unless the contractor and theproject manager agree to use the Shorter Scheduleof Cost Components.

Defined costs, under this form, permit the paymentof the cost of preparing quotations. The definitionof Defined Cost is more extensive under this form,and a new term ‘disallowed cost’ is introduced.These points are considered outside the scope ofthis guidance as they relate principally to theregular valuing of work completed, and due forpayment, as opposed to the valuation of change. Anote of caution, if amounts paid to sub-contractorsfor Compensation Events that are in excess ofamounts included in agreed quotations under theMain Option contract then the excess amount paidto sub-contractors is treated as disallowable.

2.13 NEC Option D – Target Contractwith Bills of Quantities


Guidance here is identical to Option B, with theexception that payment of the cost of preparingquotations is permitted.

2.14 NEC Option E – Cost ReimbursableContract


Guidance here is identical to Option C, with theexception that there is no Activity Schedule and thecost of preparing quotations is permitted.

VALUING CHANGE | 17

2.15 NEC Option F – ManagementContract


Guidance here is identical to Option C, with theexception that there is no Activity Schedule and thecost of preparing quotations is permitted.

2.16 FIDIC Conditions of Contract forConstruction


The Valuation Rules, to be followed by thecontractor and/or the engineer, comprise a set ofoptions which closely match the general principles,namely:

(i) variations to be valued at the same rates andprices set out in the contract

(ii) use the relevant rates and prices set out inthe contract as a basis for valuation, withreasonable adjustments for changes inquantity, conditions and character

(iii) new rates or prices to be derived from thereasonable cost of executing the work,together with reasonable profit

(iv) the engineer can determine a provisional rateor price until such time as an appropriate rateor price is agreed or determined

(v) use of daywork, for work of a minor orincidental nature, if the engineer agrees.

Rates are adjusted for quantity variance if thequantity increases or decreases by more than 10%from the quantity in the Bill of Quantities or otherschedule, the value of the item comprises morethan 0.01% of the Accepted Contract Amount, orthe Variation directly changes the unit cost by morethan 1%. This provides some useful objectiveanalysis.

There is also provision for the contractor topropose Value Engineering, which is valued inaccordance with the evaluation procedure set outabove. The contractor shares in the savings thatare generated at a share range set out in thecontract.

Provisional Sums are valued in accordance with theevaluation procedure.

2.17 FIDIC Conditions of Contract forPlant and Design-Build


The Conditions do not offer detail as to theValuation Rules to be followed by the contractorand/or the engineer, other than adjustments to theContact Price should include reasonable profit. Theengineer can direct the contractor to keep recordsof costs in connection with a variation. Cognisanceto the general principles, set out at the beginning ofthis guidance note, would be a useful startingpoint.

18 | VALUING CHANGE

3 Practical considerations: (Doing/Advising)

This section uses a checklist approach to look atmany of the practical considerations that have tobe made when valuing specific items orcircumstances, in accordance with the ValuationRules discussed in section 2.

A chartered surveyor should consider theseaspects when advising on the likely valuation ofchange under the contract in question.

3.1 Changes in character

The following list gives an indication to the sorts ofvariations which may give rise to a change incharacter:

+ change of material – i.e. type of timber(hardwood, softwood, sourcing of timbers etc)or choice of brick or block (supply price,density/weight), change of mortar or change ofconcrete finish (brushed, power floated ortamped)

+ change of method of fixing to other work – i.e.a skirting is plugged and screwed as opposedto pelleted or glued, or a conduit being chasedinto a wall as opposed to being surface fixed

+ change of background of other work – i.e.emulsion paint is applied to new render in lieuof plaster.

3.2 Changes in conditions

The following list gives an indication to the sorts ofvariations which may give rise to a change inconditions:

+ work carried out at varied depth – e.g. deeperexcavation causing lower productivity forremoval of arisings

+ seasonal variation for work compared withagreed programme – e.g. increased winterworking

+ working in completed areas – requirements forprotection

+ working with varied access constraints – e.g.use of staircase in lieu of hoisting, access viacompleted areas, increased number of tradesworking in an area

+ changed material distribution strategy – e.g.tower crane removed or utilisation changed

+ attendances – ability to share cost of specificattendant items across other operations mayhave changed based on timing

+ reduced or increased quantities of work mayaffect outputs and ratios of attendant costs

+ plant utilisation allowances

+ height at which work is carried out at

+ size of components relative to weight changes,e.g. steelwork.

3.3 Valuing preliminaries

The following list gives an indication to the sorts ofitems which should be considered when adjustingPreliminaries in connection with a variation. Not allitems will be applicable to every situation and careshould be taken to establish if such items arealready covered in rates used to value the change:

+ access equipment, including extended hire –craneage, scaffolding, hoisting, mobile towers,etc

+ temporary protection – hoardings, fans,walkways, etc.

+ insurances (sometimes turnover relatedcharges)

+ staffing

+ attendant labour – access control, welfare,loading and distribution etc

+ hired plant and small tools

+ temporary power and water – consumptioncharges

+ temporary electrics – changes to the installation

+ waste removal – labour, skips, disposal etc

+ safety

+ supervision – non working labour and staff

+ document control

+ out of hours working

+ whether the work is the subject of a DefinedProvisional Sum, in which case due allowance

VALUING CHANGE | 19

for preliminaries are deemed to have alreadybeen made by the contractor in the ContractSum

+ possible duplication with additionalpreliminaries resources that have already beenvalued under variations for adjacent work oradjacent work carried out on a daywork basis

+ whether the cost is a fixed allowance price ortime related

+ ‘head office’ overheads and profit – the caselaw on this topic is constantly evolving, so itwould be prudent to examine the currentsituation before proceeding.

3.4 Dayworks

The following list gives an indication to the sorts ofvariations which may be valued on a Dayworkbasis:

+ minor additions of quantity to completed works

+ disjointed operations with extreme changes ofconditions

+ opening up the works (subsequently found tobe in accordance with the contract)

+ emergency works immediately proceeding lossor damage to the works

+ cleaning and clearance operations

+ testing

+ repair and reinstatement of damage (assumingthat large scale reinstatement will usually beseparately measured and priced).

3.5 General considerations

+ Consider the effects on other work caused bythe variation in question. This can be ‘collateral’effects on other work.

+ Are costs being claimed as Loss & Expensewhich should reasonably from part of thevaluation of the variation?

+ Any ‘exclusions’ and ‘assumptions’ to anagreement or a valuation should be clearly setout. For example certain risk items may bevalued later, once the events have unfolded onthe project.

20 | VALUING CHANGE

rics.org

RICS Practice Standards, UK

1st edition, guidance note

Valuing change1st edition, guidance note

This guidance note summarises what is meant by ‘change’ and howit is valued under JCT, NEC and FIDIC forms of contract.

Change is given specific definition within standard forms of contract,for example a Variation, Change of Employer’s Requirements or aCompensation Event. Each of these terms is explained in thedefinition section of the relevant contract conditions.

Guidance is given for each of the main groups of contracts andthe forms in most regular use within those groups, under thefollowing headings which map to the Assessment of ProfessionalCompetence (APC):

• General Principles (Level 1: Knowing)• Practical Application (Level 2: Doing)• Practical Considerations (Level 3: Doing/Advising).

Valuing change

GN 58/2010