Variation order is generally issued for both additions and omissions from the contract work scope. However most of the time, contractors or engineers work on behalf of the contractors do not have a proper idea on contractual grounds related to omissions in construction contracts.
Therefore in this post I want to discuss more on errors and omissions in construction contracts which make grounds for variations.
For easy reading and understanding of the term ‘Omissions to the construction contract’, below I try to share the details under sub topics which are mostly discussed during any project execution.
What are omissions?
In practice, a variation to the contract can be in a way of addition or omission. Omission of contract simply means removal of part of the work from the original scope of work. Usually in such situations, the cost of removed work scope is deducted from the original contract value.
Therefore as a contractor, you will see reduced final project sum than the original agreed sum due to the omissions.
However if there are additions to the contract, the final sum will vary again. Overall, omissions are also referred to as variations to the construction contract.
Reasons for omissions in construction contracts
Basically omissions are due to errors and mistakes in design. This can also occur due to mind change of the Employer. Wrong decision making regarding the design concept during the design stage can also make grounds to omissions during the construction stage.
For example, if the employer initially wanted a design of a building which include built in furniture supplied by the contractor, however later he decided to not to do that, this can create an omission to the contract. But there are also limitations provided in the standard conditions of construction contracts regarding the omissions. This is to protect the contractor from his loss of profit due to omissions while delivering the project.
What is a genuine omission?
Usually variation clause of standard conditions of contracts allow for omission. But there are limits on power to issue variation order that creates an omission to the contract.
An omission must be genuine.
Then, what is a genuine omission?
If the work omitted from the contract is with intention of assigning a third party to undertake the same work, then this omission is invalid.
Employer or Architect cannot decide in omissions with such intention in order to employ another contractor to do the same scope of work for a lower cost with intention of saving money from the project cost.
If the omission to the contract is not genuine, then it makes grounds to disputes.
How to do Valuation of omissions?
Valuation of omitted work will be done under the same methods mentioned under valuation of variations.
Read this post on variations in construction contracts for better understanding on how to properly calculate the omission amount.
Consider this situation.
When the rates in BOQ are used to value the omission and if the similar item in the BOQ is with obvious error in pricing, what you can do?
Such obvious error which is accidentally made by the contractor in his tender submission may result in excessive price or inadequate price to the omission amount.
For example, we all know that there are human errors when inking the tender document. Instead of rate $100.00, the QS may have written $10.00 forgetting a zero. But this difference can make an impact to the price if such rates are used for valuation of a variation.
Please note, there is also a stage in tender procedure to correct the errors in bidding document.
In such situation, Quantity Surveyor or Contracts Engineer needs to apply fair and reasonable rates to calculate the omission amount.
Anyway, above is the usual practice. All the time, you need to refer your contract document to find out how omissions can be treated for your specific project.
Do you have experience with VO which are omissions?Please share the experiences below.
If you want any help in understanding your contract document or contractual clause, contact me.