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18/06/20

I’m in control and I think I like it…

I’m in control and I think I like it…

I’m in control and I think I like it…

Michael Neill looks at common challenges encountered by contractors when dealing with change on construction projects.

The management of change can be challenging for all parties involved in the construction process.

Sadly, unlike other sectors, such as the automotive industry, the bespoke nature of construction creates an environment where it would be considered peculiar for the design to remain unaltered throughout the life of a project.

Dealing with the effect of change can often result in the expenditure of significant time and resource and lead to the creation of sizable disputes.

This article considers common challenges encountered by contractors when dealing with the control of change on construction projects.

Types of Change

Whilst change can take various forms, they typically arise from the following:

  • Change in client requirements;
  • Change in statutory requirements;
  • Change in quantities;
  • Design development;
  • Change in working environment (weather, unforeseen impediments, delayed access, etc).

Clearly, it is in the interests of all Parties to be fully aware of the likely impact that changes will have upon the profitability of the project. Or in the Client’s case, the impact upon their financial outlay.

Standard Forms

Many standard forms of contract, are amended to include a ‘change control’ procedure (if not included in the standard form).

Typically, this is to allow the Client the opportunity to seek quotations from Contractors to assist the decision-making process prior to Instruction.

The idea being that the cost (and time) implications of potential changes are assessed and agreed prior to Instruction. In theory this should also aide the final account process by removing the need for protracted negotiations at the end of the project.

The NEC takes this approach further with a detailed and prescriptive approach to change control.

Common Issues

Clients often place cost certainty high on their list of requirements and the desire to manage and control change is entirely sensible and should be encouraged.

Cost certainty is also highly desirable for Contractors. However, in our experience, issues that commonly arise, include:

  • Contractors being used as pricing or budgeting service;
  • Contracts being awarded based on limited design leading to large volume of change;
  • Insufficient resource to comply with Change Control Requirements;
  • Reluctance of parties to agree costs up front;
  • Disputes regarding the inclusion of risk allowances or contingency;
  • Stringent timescales;
  • Finality (Inclusion of loss and expense).

Burden placed upon Main Contractors

Clients can often, particularly on design and build projects, seek to limit the scope of services of its advisers once a project enters the construction phase.

The cost consultant’s obligations are often limited to the valuation and certification of payments as Clients do not wish to incur additional fees for the exploration of potential variations.

Further, we also often see that the client often does not want to incur any additional design fees relative to proposed changes. 

The result of this can be that there is an expectation that Contractors are required to provide detailed cost estimates for proposed changes that are:

  1. Extremely sketchy from a design perspective; and
  2. Are not accompanied by Bills of Quantities or schedules to aid the pricing process.

It is also common for amended contracts to place stringent timescales on the turnaround of these quotations. This places pressure on the project team and can lead to strained relationships with the client if quotes are not submitted on time or in full. If the project is not suitably resourced to deal with a large volume of requested change, then inevitably issues will arise.

Reluctance of either party to agree costs up front

The goal of achieving early cost certainty on a construction project is not without difficulty.

The Contractors must consider whether they have included for all matters relative to the Instruction such as prelims, allowances for any loss and expense, and risk. This will inevitably involve various assumptions to be made and elements of risk to be included.

Conversely, the Employer is faced with the dilemma of agreeing to the Contractor’s quotation when they have suspicions that the Contractor may have overstated the valuation.

Ultimately, what usually ends up happening is that the works are instructed, both parties adopt a ‘wait and see’ approach and end up slugging it out at the end of the project which in many ways defeats the purpose of having a change control process in the first place.

Practical Considerations

For Contractors engaging in projects with change control obligations, the following steps should be considered:

  • Be aware of contractual requirements (timescales & implications);
  • Be aware of the quality of design information you will be getting;
    • Make provision (time and cost) for getting proposed work designed to a mutually acceptable stage;
    • State assumptions and list provisional items which cannot be committed to;Make provision (time and cost) for getting proposed work quantified (especially if client cost consultants are not instructed to take an active role in preparation of documents);
    • Allow enough time for dialogue;
    • Ensure any time restrictions are stepped down to Sub-Contracts;
    • Seek suitable extensions where reasonable (seek amended wording to cater for extensions);
    • Be clear about what elements can be revisited and on what basis;
  • Encourage client to engage its own consultants to play a positive role in the process (it's about teamwork);
  • Consider resource requirements if there is likely to be a large amount of change control requests. It can often be a full-time job in itself, never mind the various other commercial functions required on a large project;
  • On D&B projects, project managers, designers, and planners should all feed into this process;
  • For significant large change control (millions of pounds) internal management sign off may be required depending on level of risk (or at least meeting to de-risk should be considered).

Summary

It is unlikely that perfection will be achieved when administering a change control process, but it is certainly desirable to have mechanisms in place to manage change.

However, for any system to work as well and efficiently as it possibly can it is essential that Contractors and Clients implement a system that is realistic and manageable to allow it to achieve its intended purpose.

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