This last year has seen a lot of discussion around contractors having to re-price their work upwards to deal with price pressures on materials.
We have had two great examples not to follow. In both cases the subcontractors were invited to re-price their work upwards to deal with rising costs. In each case the head contractor stated its intention to take those costs to the principal. In each case the revised costs were orally accepted.
…. and then completely denied.
And they got away with it simply because the revised agreement was never put in writing. Honestly, by now if this requirement is not top of mind you ought to take a long soak in an ice bath. The golden rule; what is not written does not exist. You must have two things in writing: Your reprice offer and their acceptance.
Both our clients did not have the acceptance in writing and although they got a good adjudication result, they could only claim the value of work before the reprice. And I have no doubt the head contactors pocketed the difference.
When being invited to reprice, you must approach it as a completely new contract offer. Act as though you are being asked to quote on the project from scratch. This means that your client must accept in writing and the existing contract document MUST be amended to include the revised price.
And don’t just agree on the revised lump sum amount. Break the new price down into the same items as the existing contract.
If the contract sum is broken down into various items or line items, then ensure that each item is repriced. You are essentially doing a complete value substitution and it must be thorough and complete and in writing.
The other common issue is delay. Both our clients were put through a lengthy re-price scenario whilst being told to keep working. And I am talking about months. This is a tactic to make you complete as much work as possible under the existing contract price. In one case the whole thing was a sham to make the subbie think that he’d be allowed to raise prices and when he submitted the new price he was terminated.
These are shark infested waters, so the key is to make the process fast and in writing.
Finally remember that the value of your work under the Security of Payment Act is the same in most states and the same or a close variation of the following with emphasis added.
10 Valuation of construction work and related goods and services
(1) Construction work carried out or undertaken to be carried out under a construction contract is to be valued—
(a) in accordance with the terms of the contract, or
(b) if the contract makes no express provision with respect to the matter, having regard to—
(i) the contract price for the work, and
(ii) any other rates or prices set out in the contract, and
(iii) any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount, and
This should bring home how important the prices in a contract are, and at the end of the day that is all that will be considered if there is ever an adjudication to get your money.
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