Dissatisfied with No, No, No… ? ? ?
When you can’t get a variation order because;
[1] the matter can be objectively “interpreted as a contract requirement”;
[2] after considering the “(incomplete and uncoordinated) design documents”, when “reading the contract as a whole” and, harmonising the “disparate documentation”, to yield a decision that the directed outcome was reasonably foreseeable at time of tender;
it is time to learn how to recognise when the design documents cease to represent what the principal promised they represented, a Coordinated Detail Design capable of Consent and Construction, save for only minor changes.
Detailed Design as the parties intended (The Promise)
A Lump Sum contract based on the Principal providing Design and Consents is where the parties agree the design is finished and the Contractor can build efficiently from start to finish, and finish on time making budgeted margin.
Where trade shop drawings are required, the submission / review process is only concerned about a twice iterative process over a short period of time, for the Principal’s Consultants (as a courtesy) to correct design interpretation errors made by the submitting trades. Then the trades can proceed to ordering and production phase.
Minor clarifications of the Detailed Design are anticipated. Either collectively, a minor number of queries, or individually, issues of a minor scale / importance. Like one or two RFI’s per week, or four – eight RFI’s per month or 45 – 90 per annum. A wider definition of minor is not minor. There must be a reasonable limit applied, before it is time to call it something else. LATE!
Identifying When Detailed Design Disruption occurs (Breaking The Promise)
Detailed Design Disruption occurs after the “For Construction / Building Consent” documents are issued, and any of the following occurs;
[1] An excessive number of red line mark-ups of Shop Drawings that add Consultant’s missing details and correct consultant design coordination errors;
[2] An excessive number of RFI’s are required to add Consultant missing details and correct consultant design coordination errors;
[3] When the excessive number of items for [1] and [2] above are provided in the form of small format Consultant Advice Notes / Engineers Instructions (CAN’s / EI’s) and the plans and specs are NOT updated on the Contractor’s “For Construction / Building Consent” sets and reissued.
[4] When the “Building Consent Set” ceases to be current because the “For Construction Set” has revisions of later issue, that the Contractor has been directed to follow.
Ode to a Completed Detailed Design
There comes a time,
When you are entitled to a design,
That is complete as defined by being,
“Reasonably able to be constructed”,
Without further direction of any substance,
or any effect on the cost of production.
The “Divide and Conquer” status quo
By only addressing each distinct minor correction individually, for variation entitlement status, claims will fail.
[A] When details are clarified or expanded in detail, each missing aspect can have a necessary and foreseeable minimum requirement deemed to have been allowed for, there is no variation.
[B] When one of the two unco-ordinate documents contains an obvious and foreseeable solution, there is no variation.
[C] the contractual interpretation rule to “read the documents as a whole”, harmonising disparate aspects, and applying commercial common sense, knows no limit to the number of CAN’s or EI’s that must be read and understood, when you consider each and every drawing with an older revision date to the dates of the aforementioned small format supplementary documentation, there is no variation.
No matter when any and all minor matters are discovered and resolved, pre-contract, the Contractor has deemed to have allowed for the bricks and mortar in time and in sequence.
But when the promise is that such minor matters shall be limited in scale or quantum, after Consent-able works commence, there are a number of cost and time risks that are not reasonably foreseeable.
Ode to a late direction
It’s late, it’s late, it’s late,
I will have to mitigate.
Delay that start,
Shift that team,
Leave that scaffold standing.
Jump ahead,
then come back,
Without accounting,
or demanding.
Risks of systemically uncoordinated documentation
When the quantum of small format documentation exceeds a minor amount, the Contractor and the Council cannot refer to a single source of concise cross-referenced set of documents, and cannot do their work efficiently or without high risk of error.
Risk of rework goes up after late discovery of incomplete uncoordinated design. All rework premium costs are claimable.
Additional supervision resources to manually check and cross reference systemically uncoordinated documents and processing of excessive RFI’s. Ongoing tasks that require prolonged use of additional resources, are claimable.
Risk of excessive minor items eroding float throughout the programme, increasing the number of potential critical paths, requiring increased constant mitigation measures, inefficient use of all manner of resources. Classic production disruption costs are all claimable.
Mitigate - make (something bad) less severe, serious, or painful.
“If you are required to mitigate, any unavoidable loss or cost, goes to the party responsible.
It could be you (the Contractor), the Subcontractor, or the Principal.
NZCIC Design Guidelines – Definition of Detailed Design
The documents produced in Detailed Design have a critical use in Consenting and Procurement and should, with only minor amendment or clarification, be able to be:
• submitted and achieve a Building Consent, and therefore should be able to be reasonably constructed.
• accompanied by Tender and General and Special Conditions and Contract documentation, and used to Procure a Construction Contract.
Download NZCIC Design Guidelines
Detailed Design Definition is an Implied Term of Contract
Any Entitlement to a Detailed Design Disruption Claim turns, in part, on the NZCIC Design Guidelines definition of Detailed Design being an implied term of the contract. The two commonly expressed tests of an Implied term are;
1. the implied term is so obvious there is no need to express it;
2. the implied term is necessary to make the contract work in a business context.
It should go without saying that the requirements of the Building Act are also implied terms by law, including;
1. The need to comply with the building code in all projects;
2. The need to demonstrate compliance with the building code with design documentation for those projects requiring a Building Consent before works are commenced;
3. The need for works to be inspected, as compliant with the consented documents on issue and not otherwise.
Noting that staged consents are commonplace and affords some relief towards when a design should meet the Detailed Design standard test.
A building Inspector may grant a Minor Variation and usually only does so upon receiving updated drawings and specifications in like format to those already stamped as consented. There is little appetite for small formatted un-cross-referenced CAN’s and EI’s and a practical limit to how many Minor Variations a Building Inspector will grant before he insists the project no longer be inspected on the current documentation and an Amended Consent be applied for. Amendments to consents follow the full process of processing a building consent, taking all current stamped documents, all newly submitted documents and reading them as a whole, and the entire process is subject to RFI’s, costs and time for the Council’s pleasure.
It seems the implication of NZCIC Guidelines, as a term of the contract, goes without saying to the extent where the Building Act implied terms in law, matches the same requirement, i.e. to the extent the design documentation must demonstrate compliance with the building code. Given there is little we build that does not relate to structure, moisture, fire, access or egress requirements of the building code, there will be little that escapes the NZCIC definition for Detail Design.
The test that the implied term is necessary to make the contract work in a business context, also works in this case. A minimum amount of design must be complete before works can be reasonable planned for and costed. The NZCIC sets out an industry agreed definition for that minimum amount of design. It makes no business sense that this can be undone by an endless stream of late design nibbles that cause unforeseeable abortive costs, unnecessary administration and diminished capacity to solve ordinary problems due to lost float.
Detailed Design Disruption Claim
In NZS3910:2013 section 2.7.7 the second sentence makes it clear, that delay, or additional cost is not a variation, if the effect of a clarification was reasonably foreseeable at time of tendering. Bricks and mortar and time related P&G are deemed allowed for.
But if the design clarification is necessary for the design to be able to be reasonably constructed and arrives late, (after BC issue and after a minor number of clarifications) and this lateness causes any additional delay or cost;
1. activity delay / disruption, efficiency losses;
2. mitigation re-planning, activity disestablishment / reestablishment costs;
3. supervisor / admin cost;
then those additional delays and costs are a variation per the first sentence of 2.7.7.
A Measurable Standard and Timing is everything. The parties must have contemplated that a design, to a standard that is reasonably able to be constructed, be provided prior to construction. We have set out to highlight the definition of that design standard and when it is to be provided in all cases. A concept long overdue for testing.
Let the claims begin!
By Matthew Ensoll
Life Member NZIQS. Reg.QS.
Editor New Zealand Building Economist.
Comments