Advice on: How to achieve prompt agreement with respect to a Variation or Compensation Event quotation

The notices forewarning of such matters, and documentation seeking compensation will be in place, and yet cashflow imbalances and differences in payment valuations exist. The project team quickly point out the employer is valuing the compensation events unfairly.

Their quotations are issued ahead of work starting, and yet the employer’s valuation is conducted on actual Defined Cost, sometime after the work is finished, and without an appreciation of the pre-work risk allocation – leaving the contractor feeling disincentivised to operate efficiently. 

The ProQS Quantity Surveyor approach to contract dispute

The initial request is for us to implement an improved contractual administrative strategy, commencing with the firing-in of notices left, right and centre, pointing out the employer’s contractual breeches and the contractor’s entitlement to valuations in accordance with the conditions of contract. An increased effort to administer the contract is best practice, and the bedrock of sound commercial management.

If this approach does not include clearly explained and well presented quotations, it can be counter productive as it encourages entrenched positions that erode working relationships, and does not deal with the issues at hand. 

In these circumstances a pragmatic course of action is ideal and nine times out of ten the project team simply need to improve their communication and the presentation of their quotation material. The key principle to hold onto is, ‘how to satisfy the customer and inspire a prompt agreement – a fast ‘yes’?’ 

The main purpose is costing and quantifying the ‘sweet-spot’ between risk allocation and the appropriate levels of resource, in such a way that it delivers permanent benefits for business and budgets on both sides.

Often we are asked to help organisations on NEC3 contracts to improve their project financial performance. Frequently, the operational efficiency is compromised by having to continuously mitigate risks created by a busy, complex, and ever-changing site environment. 

This is best achieved by inviting the employer to join the process and let them see how you value work first-hand. It will be unusual, but it makes them feel part of the decision process, and moves towards working together, preventing the risk of mis-understanding each other’s information and a prolonged journey to agreement.  

The finished quotation is to be a professional document. Take the time to construct and present the information detailing the rationale, evidence, and cost and quantification data, in such a way, that someone without specialist knowledge can understand it. 

Checklist to facilitate a fast ‘yes’;

  1. Invite your client to join the valuation process.
  2. Detail the change and the reason for the change. 

Avoid summarising without clearly stating the scope.

  • Include a programme explaining the time implications, if any. 

Include a narrative, methodology and show allocated resources.

  • The pricing document requires explanations of decision taken for valuation. 

Be sure you explain how the work is valued – stipulate elements that are ‘Forecast Defined Cost’. Confirm how the decisions were taken, the risks included, and information behind the quantities, rates and prices.

  • Index and annex the supporting information and link each document to the relevant portion of the rationale and valuation.
  • Agree a time to discuss the quotation.
  • Promptly provide further information.
  • Set a meeting to settle the valuation together. 

A contractually compliant quotation, with clear understanding of the risks that is professionally constructed with your customers support will shut down preconceived notions of dis-trust. It will forge a ‘yes’ much earlier in the process and remedy project performance incentivising efficiencies without destabilising relationships and balance sheets. 

This approach can be adopted for any project, or type of building contract, for a multitude of relationships in the supply chain. 

The effects bring greater customer satisfaction and improved business performance for everyone.  

Key tips to remember

Treat the valuation of the change as a joint effort between people with a shared vested interest in the work. 

Core skills

Quantification and Costing, Client Care, Communication and Negotiation.