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Bill Worker

Kortversjonen

Lytt til artikkelen

1. Introduction

The agreement of the parties forms the starting point for what is to be paid.

The standard contracts are nevertheless structured on the principle that the parties agree on a specific sum which, including VAT, constitutes the “contract sum”.

A contract amount may consist of an agreed fixed sum that is not to be regulated, unless there are changes or other circumstances that imply that the contractor is entitled to a remuneration adjustment. An alternative is that the parties have agreed on a contract sum to be regulated. It will be the situation when one has agreed unit prices for all or part of the delivery. Contract sums, in that case, would be the result of unit prices multiplied by assumed quantities. When the work is completed, measure and multiply by the relevant unit prices to determine the amount of remuneration.

In contracts with unit prices, there will often be round sum items for some services such as rigging and operation.

In either case, the parties use prices agreed in advance and perhaps long before a work comes to execution. The subcontractor then assumes the risk that the work may be more costly to perform than anticipated, while the main or general contractor misses out on possible savings.

The principle of invoicing is that the subcontractor shall be paid for everything he adds to the construction site of work and materials added to a markup. The mark-up shall cover the subcontractor's indirect costs plus profits.

In the field of contract law, the principle of invoicing is considered to be the main rule when it comes to calculating remuneration, but it is derogable. That means that the parties can agree alternative remuneration mechanisms, but in the absence of such agreements, it is the principle of reckoning that applies.

2. Overview of the rules

All three standard contracts have provisions on bill work, namely NS 8415 paragraph 31, NS 8416 paragraph 23.4 and NS 8417 paragraph 30.

3. About the calculation of remuneration

The provisions of the standard are virtually identical. Since turnkey contracts are used most often, we take NS 8417 as a starting point.

In NS 8417 paragraph 30.1, one finds the definition of what is meant by bill work, namely that subcontractor shall “have paid for necessary costs”.

In addition, the main/general contractor must pay a mark-up to cover the subcontractor's “indirect costs, risks and profits”.

The mark-up is normally agreed in the form of a percentage of the cost. If such a percentage is not agreed upon, it follows from the provisions of the Standards that the Parties shall use a “customary” percentage rate.

Often, discussion arises about the size of the bill work. The discussion is often related to the question of whether the costs have been “necessary”. One may have objections to the number of workers, the number of hours, whether the use of materials has been necessary, whether it was necessary to have three excavators on the construction site, etc.

If all contract work is done at cost, the contractor will be entitled to the rig cost (rent of barracks, heater), operating costs (such as electricity, fuel for heater), hourly wage of the crew on site, hourly rate of machinery and equipment used, cost of materials, etc.

Another discussion that may arise is where the parties have agreed on a fixed price and then some works are to be done at the expense.

In the fixed price there will normally be some common services such as rigging and operation. When then the bill work is carried out, the subcontractor must use equipment of the same type that is included in the rigging and operation record. An example of this can be heaters and their operation.

If the bill worker makes it necessary to use heaters, the question may become whether the heaters incl operation are “necessary costs” which can be billed as part of the bill work.

Such questions need to be decided in concrete terms.

If the furnaces are not used for the ordinary works for which there is a fixed price, and then they are used for the bill work, you can object that the subcontractor has already been paid for the furnaces through the fixed price. The subcontractor is not entitled to be paid twice.

If, on the other hand, the citation is that the “fixed” heaters are in use and new heaters need to be supplied due to the bill work, it would be natural to consider these costs as “necessary” and thus costs to be paid with the addition of mark-up.

Normally, the largest expense items in bill working will be hourly cost of crew and machinery, material procurement, transportation costs, etc.

When concluding a contract, the parties will often have agreed fixed hourly rates for different job categories such as foreman, carpenter, plumber, helper, etc. The same can be agreed for excavator, dump truck, truck with or without trailer, etc.

Such prices are in effect fixed unit prices to be taken into account when work is to be carried out on account.

We have learned that the parties have nevertheless disagreed on what should be paid per hour when it has subsequently emerged that the subcontractor has hired crew at (substantially) lower hourly rates than the agreed hourly rate.

The argument for not paying the agreed hourly rate has then been that the contractor is only entitled to have his actual costs paid in addition to the agreed markup.

In our view, the decisive factor must be whether the parties have agreed on a fixed hourly rate, or not.

If there is a fixed hourly rate, it is the one that must be paid, but if such an hourly rate is not agreed, the actual (low) hourly rate paid to the landlord is payable, with the addition of the agreed markup.

The parties normally also agree on a mark-up percentage for the case where work is to be carried out on account.

The size of the agreed markup percentage will vary, but for a long time it has been customary to use a 10% mark-up.

This can vary slightly up or down, and the decisive factor will often be the size of the project and the types of work and materials involved.

In large construction contracts with very high volumes, you will probably see mark-up percentages of less than 10%, while in more technically complex buildings with expensive equipment you can experience mark-up percentages above 10%.

That there is a difference between these two types of work is not only the volume differences, but also the purpose of a mark-up. The markup should also cover the subcontractor's costs during the warranty period and possible complaint works.

In addition to this, one would probably have to say that the usual contribution rate will vary depending on the type of work and subject.

As a rule of thumb, a mark-up in the range of 8 — 15% will be acceptable. The subcontractor who requires a mark-up in excess of 15% when nothing has been specifically agreed will have the burden of proving that the level is “customary”.

When works are carried out on account there is also a condition that the costs have been “necessary”.

‍This condition is closely related to the condition that the bill worker “should be operated rationally and justifiably”, see NS 8417 paragraph 30.1, second paragraph.

A side of this condition is that the subcontractor should be vigilant and alert if unexpected circumstances make the work more demanding than expected.

This is to avoid hours and resource claims being rejected on incorrect grounds.

Another piece of advice is to establish a routine of photographing the construction site routinely to ensure that there is documentation that can substantiate the use of resources.

Finally, it is mentioned that it cannot be expected that any bill work should be carried out with only a minimum use of resources. One must enter a certain spaciousness into the rating.

No project is the same, and this also applies to the construction site, weather conditions, transport distances, etc.

One cannot assume that “everything is running smoothly”.

4. Documentation of the bill works

When the works are carried out on account, the subcontractor is obliged to document the cost reduction. What is required to be paid must have gone to the works to be settled.

In light of this, all standard contracts stipulate that the contractor must send “specified tasks over costs incurred, including material consumption and time consumption in the case of crew and machinery” to the total or general contractor and they must be sent “every week”.

It is also stated that the general contractor or general contractor may require the submission of additional documentation and specification if the forwarded does not provide a sufficient explanation.

When such a request is made, it should be specified why such information is requested, cf. NS 8417 paragraph 30.3.1, second paragraph.

Such a claim must be made no later than 14 days after the total or general contractor received the specified tasks in the first place. The subcontractor then has a further deadline of at least 14 days to supplement.

5. Control of the main or general contractor

It follows from NS 8417 paragraph 30.3.2, NS 8415 paragraph 31.4 and NS 8416 paragraph 23.4, third paragraph that the main or general contractor must check the submitted tasks within 14 days of receipt.

The regulations do not say anything about what it is the main/general contractor is to control.

When works are carried out on account, the main/general contractor will normally supervise the works. You can count how many people the subcontractor has on the construction site, that the number is in reasonable proportion to what is to be done, and not least can be led by the subcontractor, that the crew is in business without (unnecessary) dead time, etc.

If the main/general contractor believes that the subcontractor does not perform the work “rationally and justifiably” He should report back as soon as possible, and in writing.

When a work is carried out at the expense of the main/general contractor, the situation will normally also be the same upwards towards the builder. Consequently, the builder will probably also supervise and control. Then it can be tempting for the main/general contractor to hand over control to the builder. However, we would not recommend that the main/general contractor do so. The reason is that one puts oneself in an unfortunate position vis-à-vis a builder who can claim that the works became unnecessarily expensive precisely because they were carried out without the supervision of the main/general contractor.

“Attested timelists” is a well-known term and is used if the subcontractor has submitted continuously to the main/general contractor at the construction site for confirmation or for attestation.

The provisions of NS 8417 paragraph 30.3 on “Control and documentation” safeguard this attestation since the main rule is that timesheets, bills of materials, etc. should be transmitted weekly, cf. paragraph 30.3.1, first paragraph.

Nevertheless, we see examples of the parties agreeing on an arrangement where timelists are also to be certified on a continuous basis at the construction site, and often in combination with the fact that it is these timesheets that are to be transmitted for control.

In our view, this is not a problem in isolation. For a subcontractor that has certified timesheets to submit, it should normally be relatively easy to obtain acceptance of the hours.

The problem arises when timesheets are not attested, and then transmitted in accordance with standard contracts' provisions and then returned because they lack attestation.

If a construction site certification scheme has been agreed, the subcontractor should react relatively quickly if it is found that timelines are not certified.

In the worst case, you should notify formally so that there is written documentation showing that the responsibility does not lie with the subcontractor.

A total or main contractor who does not wish to certify because he has factual objections to the use of costs should, in turn, raise this in writing with the subcontractor in order to ensure timely documentation and contradiction.

Finally, it is mentioned that the documentation submitted by the subcontractor to the main/general contractor shall “be laid as the basis for the settlement” unless the general contractor or general contractor raises objections within 14 days from receipt, cf. NS 8417 paragraph 30.3.2, last paragraph and NS 8415 paragraph 31.4, fourth paragraph.

6. What happens if the subcontractor does not submit documentation?

For subcontractors, it is important to be able to document their time and material use as stated in NS 8417 paragraph 30.3.1, first and second paragraphs.

The general starting point is that whoever demands something from another has the burden of proof that one actually has the claim being made.

Consequently, a subcontractor who submits only one invoice without supporting documentation, and who has also failed to submit documentation for inspection every week, is taking an unnecessarily high risk because the probability of losing his or her in a subsequent court case will then be relatively high.

Such a situation is also expressly regulated in the standard contracts.

It follows, inter alia, from NS 8417 paragraph 30.3.1, the last paragraph that the general contractor is not obliged to pay more than he “had to understand” that the total subcontractor had costs for the work in question, in addition to the agreed or customary mark-up.

The same rule follows from NS 8415 paragraph 31.4, fifth paragraph and NS 8416 paragraph 23.4, fourth paragraph.

7. About Cost Estimates

All three standard contracts have a provision that the main or general contractor may ask the subcontractor for a cost estimate, cf. NS 8417 paragraph 30.2, NS 8415 paragraph 31.2 and NS 8416 paragraph 23.4, second paragraph.

If he so requests, it follows from the provisions that the subcontractor is obliged to draw up such an estimate.

In the meantime, the main/general contractor has the right to withhold payment for the bill work.

Preparing a cost estimate can be challenging.

One may be doing the work on the bill precisely because it has not been possible to give a fixed price -- at least a price that both parties could accept.

Uncertainties, as a rule, have their counterpart in high risk impact.

On the other hand, contractors are normally used to calculating, and subcontractors are only obliged to prepare an estimate.

The general contractor may depend on such an estimate because the builder requires it, and in any case the general contractor or general contractor needs some cost management.

If the cost estimate is too high, this can be a reason to “cancel” the work in question.

Either way, one will be able to make a more enlightened choice when one has some overview of the supposed future costs.

In conclusion, it is mentioned that the subcontractor is obliged to notify “without undue residence” if he “gets reason to assume” that the cost estimate will be exceeded, cf. NS 8417 paragraph 30.2, second paragraph.

In NS 8415 paragraph 31.2, second paragraph and NS 8416 paragraph 23.4, second paragraph, the notification obligation is related to a materiality requirement, but it does not apply in NS 8417 contracts.

8. Principal/General Contractor's right to object to the total costs

Even if the subcontractor has complied with the provisions and documented the bill work as it should, and the general contractor has followed up on his duties and even approved them in due course, the latter still has an opportunity to claim that the total cost of the bill work was unnecessarily high.

This is a safety valve because it is not always easy to keep control of what becomes the final sum.

Bill work was presumably also chosen because it was difficult to calculate what needed to be performed by works overall.

Once the works have been completed and you have a firm answer to the final total, it is also easier to make an assessment.

However, it is not easy and easy to achieve that the costs have become unnecessarily high.

In order to arrive at such a quotation, the main/general contractor must be able to ascertain that the costs were actually “unnecessary” high, and he must be able to make the probability that it was either due to”irrational drift” or “other indefensible relationship” at the subcontractor, see NS 8415 paragraph 31.4, last paragraph, NS 8416 paragraph 23.4, last paragraph and NS 8417 paragraph 30.3.2, last paragraph.

It normally takes quite a lot to get the court's acceptance of the subcontractor's overall claim to be reduced under this provision.

As we have explained; it is not sufficient that the costs became high. There are a number of individual circumstances in a construction project that make the costs have become higher than what one would assume were “gang”. In any case, it must be assumed that the high costs are due “irrational drift” or “other indefensible relationship” at the subcontractor.

Tilbake

Bill Worker

Kortversjonen

Lytt til artikkelen

1. Introduction

The agreement of the parties forms the starting point for what is to be paid.

The standard contracts are nevertheless structured on the principle that the parties agree on a specific sum which, including VAT, constitutes the “contract sum”.

A contract amount may consist of an agreed fixed sum that is not to be regulated, unless there are changes or other circumstances that imply that the contractor is entitled to a remuneration adjustment. An alternative is that the parties have agreed on a contract sum to be regulated. It will be the situation when one has agreed unit prices for all or part of the delivery. Contract sums, in that case, would be the result of unit prices multiplied by assumed quantities. When the work is completed, measure and multiply by the relevant unit prices to determine the amount of remuneration.

In contracts with unit prices, there will often be round sum items for some services such as rigging and operation.

In either case, the parties use prices agreed in advance and perhaps long before a work comes to execution. The subcontractor then assumes the risk that the work may be more costly to perform than anticipated, while the main or general contractor misses out on possible savings.

The principle of invoicing is that the subcontractor shall be paid for everything he adds to the construction site of work and materials added to a markup. The mark-up shall cover the subcontractor's indirect costs plus profits.

In the field of contract law, the principle of invoicing is considered to be the main rule when it comes to calculating remuneration, but it is derogable. That means that the parties can agree alternative remuneration mechanisms, but in the absence of such agreements, it is the principle of reckoning that applies.

2. Overview of the rules

All three standard contracts have provisions on bill work, namely NS 8415 paragraph 31, NS 8416 paragraph 23.4 and NS 8417 paragraph 30.

3. About the calculation of remuneration

The provisions of the standard are virtually identical. Since turnkey contracts are used most often, we take NS 8417 as a starting point.

In NS 8417 paragraph 30.1, one finds the definition of what is meant by bill work, namely that subcontractor shall “have paid for necessary costs”.

In addition, the main/general contractor must pay a mark-up to cover the subcontractor's “indirect costs, risks and profits”.

The mark-up is normally agreed in the form of a percentage of the cost. If such a percentage is not agreed upon, it follows from the provisions of the Standards that the Parties shall use a “customary” percentage rate.

Often, discussion arises about the size of the bill work. The discussion is often related to the question of whether the costs have been “necessary”. One may have objections to the number of workers, the number of hours, whether the use of materials has been necessary, whether it was necessary to have three excavators on the construction site, etc.

If all contract work is done at cost, the contractor will be entitled to the rig cost (rent of barracks, heater), operating costs (such as electricity, fuel for heater), hourly wage of the crew on site, hourly rate of machinery and equipment used, cost of materials, etc.

Another discussion that may arise is where the parties have agreed on a fixed price and then some works are to be done at the expense.

In the fixed price there will normally be some common services such as rigging and operation. When then the bill work is carried out, the subcontractor must use equipment of the same type that is included in the rigging and operation record. An example of this can be heaters and their operation.

If the bill worker makes it necessary to use heaters, the question may become whether the heaters incl operation are “necessary costs” which can be billed as part of the bill work.

Such questions need to be decided in concrete terms.

If the furnaces are not used for the ordinary works for which there is a fixed price, and then they are used for the bill work, you can object that the subcontractor has already been paid for the furnaces through the fixed price. The subcontractor is not entitled to be paid twice.

If, on the other hand, the citation is that the “fixed” heaters are in use and new heaters need to be supplied due to the bill work, it would be natural to consider these costs as “necessary” and thus costs to be paid with the addition of mark-up.

Normally, the largest expense items in bill working will be hourly cost of crew and machinery, material procurement, transportation costs, etc.

When concluding a contract, the parties will often have agreed fixed hourly rates for different job categories such as foreman, carpenter, plumber, helper, etc. The same can be agreed for excavator, dump truck, truck with or without trailer, etc.

Such prices are in effect fixed unit prices to be taken into account when work is to be carried out on account.

We have learned that the parties have nevertheless disagreed on what should be paid per hour when it has subsequently emerged that the subcontractor has hired crew at (substantially) lower hourly rates than the agreed hourly rate.

The argument for not paying the agreed hourly rate has then been that the contractor is only entitled to have his actual costs paid in addition to the agreed markup.

In our view, the decisive factor must be whether the parties have agreed on a fixed hourly rate, or not.

If there is a fixed hourly rate, it is the one that must be paid, but if such an hourly rate is not agreed, the actual (low) hourly rate paid to the landlord is payable, with the addition of the agreed markup.

The parties normally also agree on a mark-up percentage for the case where work is to be carried out on account.

The size of the agreed markup percentage will vary, but for a long time it has been customary to use a 10% mark-up.

This can vary slightly up or down, and the decisive factor will often be the size of the project and the types of work and materials involved.

In large construction contracts with very high volumes, you will probably see mark-up percentages of less than 10%, while in more technically complex buildings with expensive equipment you can experience mark-up percentages above 10%.

That there is a difference between these two types of work is not only the volume differences, but also the purpose of a mark-up. The markup should also cover the subcontractor's costs during the warranty period and possible complaint works.

In addition to this, one would probably have to say that the usual contribution rate will vary depending on the type of work and subject.

As a rule of thumb, a mark-up in the range of 8 — 15% will be acceptable. The subcontractor who requires a mark-up in excess of 15% when nothing has been specifically agreed will have the burden of proving that the level is “customary”.

When works are carried out on account there is also a condition that the costs have been “necessary”.

‍This condition is closely related to the condition that the bill worker “should be operated rationally and justifiably”, see NS 8417 paragraph 30.1, second paragraph.

A side of this condition is that the subcontractor should be vigilant and alert if unexpected circumstances make the work more demanding than expected.

This is to avoid hours and resource claims being rejected on incorrect grounds.

Another piece of advice is to establish a routine of photographing the construction site routinely to ensure that there is documentation that can substantiate the use of resources.

Finally, it is mentioned that it cannot be expected that any bill work should be carried out with only a minimum use of resources. One must enter a certain spaciousness into the rating.

No project is the same, and this also applies to the construction site, weather conditions, transport distances, etc.

One cannot assume that “everything is running smoothly”.

4. Documentation of the bill works

When the works are carried out on account, the subcontractor is obliged to document the cost reduction. What is required to be paid must have gone to the works to be settled.

In light of this, all standard contracts stipulate that the contractor must send “specified tasks over costs incurred, including material consumption and time consumption in the case of crew and machinery” to the total or general contractor and they must be sent “every week”.

It is also stated that the general contractor or general contractor may require the submission of additional documentation and specification if the forwarded does not provide a sufficient explanation.

When such a request is made, it should be specified why such information is requested, cf. NS 8417 paragraph 30.3.1, second paragraph.

Such a claim must be made no later than 14 days after the total or general contractor received the specified tasks in the first place. The subcontractor then has a further deadline of at least 14 days to supplement.

5. Control of the main or general contractor

It follows from NS 8417 paragraph 30.3.2, NS 8415 paragraph 31.4 and NS 8416 paragraph 23.4, third paragraph that the main or general contractor must check the submitted tasks within 14 days of receipt.

The regulations do not say anything about what it is the main/general contractor is to control.

When works are carried out on account, the main/general contractor will normally supervise the works. You can count how many people the subcontractor has on the construction site, that the number is in reasonable proportion to what is to be done, and not least can be led by the subcontractor, that the crew is in business without (unnecessary) dead time, etc.

If the main/general contractor believes that the subcontractor does not perform the work “rationally and justifiably” He should report back as soon as possible, and in writing.

When a work is carried out at the expense of the main/general contractor, the situation will normally also be the same upwards towards the builder. Consequently, the builder will probably also supervise and control. Then it can be tempting for the main/general contractor to hand over control to the builder. However, we would not recommend that the main/general contractor do so. The reason is that one puts oneself in an unfortunate position vis-à-vis a builder who can claim that the works became unnecessarily expensive precisely because they were carried out without the supervision of the main/general contractor.

“Attested timelists” is a well-known term and is used if the subcontractor has submitted continuously to the main/general contractor at the construction site for confirmation or for attestation.

The provisions of NS 8417 paragraph 30.3 on “Control and documentation” safeguard this attestation since the main rule is that timesheets, bills of materials, etc. should be transmitted weekly, cf. paragraph 30.3.1, first paragraph.

Nevertheless, we see examples of the parties agreeing on an arrangement where timelists are also to be certified on a continuous basis at the construction site, and often in combination with the fact that it is these timesheets that are to be transmitted for control.

In our view, this is not a problem in isolation. For a subcontractor that has certified timesheets to submit, it should normally be relatively easy to obtain acceptance of the hours.

The problem arises when timesheets are not attested, and then transmitted in accordance with standard contracts' provisions and then returned because they lack attestation.

If a construction site certification scheme has been agreed, the subcontractor should react relatively quickly if it is found that timelines are not certified.

In the worst case, you should notify formally so that there is written documentation showing that the responsibility does not lie with the subcontractor.

A total or main contractor who does not wish to certify because he has factual objections to the use of costs should, in turn, raise this in writing with the subcontractor in order to ensure timely documentation and contradiction.

Finally, it is mentioned that the documentation submitted by the subcontractor to the main/general contractor shall “be laid as the basis for the settlement” unless the general contractor or general contractor raises objections within 14 days from receipt, cf. NS 8417 paragraph 30.3.2, last paragraph and NS 8415 paragraph 31.4, fourth paragraph.

6. What happens if the subcontractor does not submit documentation?

For subcontractors, it is important to be able to document their time and material use as stated in NS 8417 paragraph 30.3.1, first and second paragraphs.

The general starting point is that whoever demands something from another has the burden of proof that one actually has the claim being made.

Consequently, a subcontractor who submits only one invoice without supporting documentation, and who has also failed to submit documentation for inspection every week, is taking an unnecessarily high risk because the probability of losing his or her in a subsequent court case will then be relatively high.

Such a situation is also expressly regulated in the standard contracts.

It follows, inter alia, from NS 8417 paragraph 30.3.1, the last paragraph that the general contractor is not obliged to pay more than he “had to understand” that the total subcontractor had costs for the work in question, in addition to the agreed or customary mark-up.

The same rule follows from NS 8415 paragraph 31.4, fifth paragraph and NS 8416 paragraph 23.4, fourth paragraph.

7. About Cost Estimates

All three standard contracts have a provision that the main or general contractor may ask the subcontractor for a cost estimate, cf. NS 8417 paragraph 30.2, NS 8415 paragraph 31.2 and NS 8416 paragraph 23.4, second paragraph.

If he so requests, it follows from the provisions that the subcontractor is obliged to draw up such an estimate.

In the meantime, the main/general contractor has the right to withhold payment for the bill work.

Preparing a cost estimate can be challenging.

One may be doing the work on the bill precisely because it has not been possible to give a fixed price -- at least a price that both parties could accept.

Uncertainties, as a rule, have their counterpart in high risk impact.

On the other hand, contractors are normally used to calculating, and subcontractors are only obliged to prepare an estimate.

The general contractor may depend on such an estimate because the builder requires it, and in any case the general contractor or general contractor needs some cost management.

If the cost estimate is too high, this can be a reason to “cancel” the work in question.

Either way, one will be able to make a more enlightened choice when one has some overview of the supposed future costs.

In conclusion, it is mentioned that the subcontractor is obliged to notify “without undue residence” if he “gets reason to assume” that the cost estimate will be exceeded, cf. NS 8417 paragraph 30.2, second paragraph.

In NS 8415 paragraph 31.2, second paragraph and NS 8416 paragraph 23.4, second paragraph, the notification obligation is related to a materiality requirement, but it does not apply in NS 8417 contracts.

8. Principal/General Contractor's right to object to the total costs

Even if the subcontractor has complied with the provisions and documented the bill work as it should, and the general contractor has followed up on his duties and even approved them in due course, the latter still has an opportunity to claim that the total cost of the bill work was unnecessarily high.

This is a safety valve because it is not always easy to keep control of what becomes the final sum.

Bill work was presumably also chosen because it was difficult to calculate what needed to be performed by works overall.

Once the works have been completed and you have a firm answer to the final total, it is also easier to make an assessment.

However, it is not easy and easy to achieve that the costs have become unnecessarily high.

In order to arrive at such a quotation, the main/general contractor must be able to ascertain that the costs were actually “unnecessary” high, and he must be able to make the probability that it was either due to”irrational drift” or “other indefensible relationship” at the subcontractor, see NS 8415 paragraph 31.4, last paragraph, NS 8416 paragraph 23.4, last paragraph and NS 8417 paragraph 30.3.2, last paragraph.

It normally takes quite a lot to get the court's acceptance of the subcontractor's overall claim to be reduced under this provision.

As we have explained; it is not sufficient that the costs became high. There are a number of individual circumstances in a construction project that make the costs have become higher than what one would assume were “gang”. In any case, it must be assumed that the high costs are due “irrational drift” or “other indefensible relationship” at the subcontractor.

Tilbake

Bill Worker

Kortversjonen

Lytt til artikkelen

1. Introduction

The agreement of the parties forms the starting point for what is to be paid.

The standard contracts are nevertheless structured on the principle that the parties agree on a specific sum which, including VAT, constitutes the “contract sum”.

A contract amount may consist of an agreed fixed sum that is not to be regulated, unless there are changes or other circumstances that imply that the contractor is entitled to a remuneration adjustment. An alternative is that the parties have agreed on a contract sum to be regulated. It will be the situation when one has agreed unit prices for all or part of the delivery. Contract sums, in that case, would be the result of unit prices multiplied by assumed quantities. When the work is completed, measure and multiply by the relevant unit prices to determine the amount of remuneration.

In contracts with unit prices, there will often be round sum items for some services such as rigging and operation.

In either case, the parties use prices agreed in advance and perhaps long before a work comes to execution. The subcontractor then assumes the risk that the work may be more costly to perform than anticipated, while the main or general contractor misses out on possible savings.

The principle of invoicing is that the subcontractor shall be paid for everything he adds to the construction site of work and materials added to a markup. The mark-up shall cover the subcontractor's indirect costs plus profits.

In the field of contract law, the principle of invoicing is considered to be the main rule when it comes to calculating remuneration, but it is derogable. That means that the parties can agree alternative remuneration mechanisms, but in the absence of such agreements, it is the principle of reckoning that applies.

2. Overview of the rules

All three standard contracts have provisions on bill work, namely NS 8415 paragraph 31, NS 8416 paragraph 23.4 and NS 8417 paragraph 30.

3. About the calculation of remuneration

The provisions of the standard are virtually identical. Since turnkey contracts are used most often, we take NS 8417 as a starting point.

In NS 8417 paragraph 30.1, one finds the definition of what is meant by bill work, namely that subcontractor shall “have paid for necessary costs”.

In addition, the main/general contractor must pay a mark-up to cover the subcontractor's “indirect costs, risks and profits”.

The mark-up is normally agreed in the form of a percentage of the cost. If such a percentage is not agreed upon, it follows from the provisions of the Standards that the Parties shall use a “customary” percentage rate.

Often, discussion arises about the size of the bill work. The discussion is often related to the question of whether the costs have been “necessary”. One may have objections to the number of workers, the number of hours, whether the use of materials has been necessary, whether it was necessary to have three excavators on the construction site, etc.

If all contract work is done at cost, the contractor will be entitled to the rig cost (rent of barracks, heater), operating costs (such as electricity, fuel for heater), hourly wage of the crew on site, hourly rate of machinery and equipment used, cost of materials, etc.

Another discussion that may arise is where the parties have agreed on a fixed price and then some works are to be done at the expense.

In the fixed price there will normally be some common services such as rigging and operation. When then the bill work is carried out, the subcontractor must use equipment of the same type that is included in the rigging and operation record. An example of this can be heaters and their operation.

If the bill worker makes it necessary to use heaters, the question may become whether the heaters incl operation are “necessary costs” which can be billed as part of the bill work.

Such questions need to be decided in concrete terms.

If the furnaces are not used for the ordinary works for which there is a fixed price, and then they are used for the bill work, you can object that the subcontractor has already been paid for the furnaces through the fixed price. The subcontractor is not entitled to be paid twice.

If, on the other hand, the citation is that the “fixed” heaters are in use and new heaters need to be supplied due to the bill work, it would be natural to consider these costs as “necessary” and thus costs to be paid with the addition of mark-up.

Normally, the largest expense items in bill working will be hourly cost of crew and machinery, material procurement, transportation costs, etc.

When concluding a contract, the parties will often have agreed fixed hourly rates for different job categories such as foreman, carpenter, plumber, helper, etc. The same can be agreed for excavator, dump truck, truck with or without trailer, etc.

Such prices are in effect fixed unit prices to be taken into account when work is to be carried out on account.

We have learned that the parties have nevertheless disagreed on what should be paid per hour when it has subsequently emerged that the subcontractor has hired crew at (substantially) lower hourly rates than the agreed hourly rate.

The argument for not paying the agreed hourly rate has then been that the contractor is only entitled to have his actual costs paid in addition to the agreed markup.

In our view, the decisive factor must be whether the parties have agreed on a fixed hourly rate, or not.

If there is a fixed hourly rate, it is the one that must be paid, but if such an hourly rate is not agreed, the actual (low) hourly rate paid to the landlord is payable, with the addition of the agreed markup.

The parties normally also agree on a mark-up percentage for the case where work is to be carried out on account.

The size of the agreed markup percentage will vary, but for a long time it has been customary to use a 10% mark-up.

This can vary slightly up or down, and the decisive factor will often be the size of the project and the types of work and materials involved.

In large construction contracts with very high volumes, you will probably see mark-up percentages of less than 10%, while in more technically complex buildings with expensive equipment you can experience mark-up percentages above 10%.

That there is a difference between these two types of work is not only the volume differences, but also the purpose of a mark-up. The markup should also cover the subcontractor's costs during the warranty period and possible complaint works.

In addition to this, one would probably have to say that the usual contribution rate will vary depending on the type of work and subject.

As a rule of thumb, a mark-up in the range of 8 — 15% will be acceptable. The subcontractor who requires a mark-up in excess of 15% when nothing has been specifically agreed will have the burden of proving that the level is “customary”.

When works are carried out on account there is also a condition that the costs have been “necessary”.

‍This condition is closely related to the condition that the bill worker “should be operated rationally and justifiably”, see NS 8417 paragraph 30.1, second paragraph.

A side of this condition is that the subcontractor should be vigilant and alert if unexpected circumstances make the work more demanding than expected.

This is to avoid hours and resource claims being rejected on incorrect grounds.

Another piece of advice is to establish a routine of photographing the construction site routinely to ensure that there is documentation that can substantiate the use of resources.

Finally, it is mentioned that it cannot be expected that any bill work should be carried out with only a minimum use of resources. One must enter a certain spaciousness into the rating.

No project is the same, and this also applies to the construction site, weather conditions, transport distances, etc.

One cannot assume that “everything is running smoothly”.

4. Documentation of the bill works

When the works are carried out on account, the subcontractor is obliged to document the cost reduction. What is required to be paid must have gone to the works to be settled.

In light of this, all standard contracts stipulate that the contractor must send “specified tasks over costs incurred, including material consumption and time consumption in the case of crew and machinery” to the total or general contractor and they must be sent “every week”.

It is also stated that the general contractor or general contractor may require the submission of additional documentation and specification if the forwarded does not provide a sufficient explanation.

When such a request is made, it should be specified why such information is requested, cf. NS 8417 paragraph 30.3.1, second paragraph.

Such a claim must be made no later than 14 days after the total or general contractor received the specified tasks in the first place. The subcontractor then has a further deadline of at least 14 days to supplement.

5. Control of the main or general contractor

It follows from NS 8417 paragraph 30.3.2, NS 8415 paragraph 31.4 and NS 8416 paragraph 23.4, third paragraph that the main or general contractor must check the submitted tasks within 14 days of receipt.

The regulations do not say anything about what it is the main/general contractor is to control.

When works are carried out on account, the main/general contractor will normally supervise the works. You can count how many people the subcontractor has on the construction site, that the number is in reasonable proportion to what is to be done, and not least can be led by the subcontractor, that the crew is in business without (unnecessary) dead time, etc.

If the main/general contractor believes that the subcontractor does not perform the work “rationally and justifiably” He should report back as soon as possible, and in writing.

When a work is carried out at the expense of the main/general contractor, the situation will normally also be the same upwards towards the builder. Consequently, the builder will probably also supervise and control. Then it can be tempting for the main/general contractor to hand over control to the builder. However, we would not recommend that the main/general contractor do so. The reason is that one puts oneself in an unfortunate position vis-à-vis a builder who can claim that the works became unnecessarily expensive precisely because they were carried out without the supervision of the main/general contractor.

“Attested timelists” is a well-known term and is used if the subcontractor has submitted continuously to the main/general contractor at the construction site for confirmation or for attestation.

The provisions of NS 8417 paragraph 30.3 on “Control and documentation” safeguard this attestation since the main rule is that timesheets, bills of materials, etc. should be transmitted weekly, cf. paragraph 30.3.1, first paragraph.

Nevertheless, we see examples of the parties agreeing on an arrangement where timelists are also to be certified on a continuous basis at the construction site, and often in combination with the fact that it is these timesheets that are to be transmitted for control.

In our view, this is not a problem in isolation. For a subcontractor that has certified timesheets to submit, it should normally be relatively easy to obtain acceptance of the hours.

The problem arises when timesheets are not attested, and then transmitted in accordance with standard contracts' provisions and then returned because they lack attestation.

If a construction site certification scheme has been agreed, the subcontractor should react relatively quickly if it is found that timelines are not certified.

In the worst case, you should notify formally so that there is written documentation showing that the responsibility does not lie with the subcontractor.

A total or main contractor who does not wish to certify because he has factual objections to the use of costs should, in turn, raise this in writing with the subcontractor in order to ensure timely documentation and contradiction.

Finally, it is mentioned that the documentation submitted by the subcontractor to the main/general contractor shall “be laid as the basis for the settlement” unless the general contractor or general contractor raises objections within 14 days from receipt, cf. NS 8417 paragraph 30.3.2, last paragraph and NS 8415 paragraph 31.4, fourth paragraph.

6. What happens if the subcontractor does not submit documentation?

For subcontractors, it is important to be able to document their time and material use as stated in NS 8417 paragraph 30.3.1, first and second paragraphs.

The general starting point is that whoever demands something from another has the burden of proof that one actually has the claim being made.

Consequently, a subcontractor who submits only one invoice without supporting documentation, and who has also failed to submit documentation for inspection every week, is taking an unnecessarily high risk because the probability of losing his or her in a subsequent court case will then be relatively high.

Such a situation is also expressly regulated in the standard contracts.

It follows, inter alia, from NS 8417 paragraph 30.3.1, the last paragraph that the general contractor is not obliged to pay more than he “had to understand” that the total subcontractor had costs for the work in question, in addition to the agreed or customary mark-up.

The same rule follows from NS 8415 paragraph 31.4, fifth paragraph and NS 8416 paragraph 23.4, fourth paragraph.

7. About Cost Estimates

All three standard contracts have a provision that the main or general contractor may ask the subcontractor for a cost estimate, cf. NS 8417 paragraph 30.2, NS 8415 paragraph 31.2 and NS 8416 paragraph 23.4, second paragraph.

If he so requests, it follows from the provisions that the subcontractor is obliged to draw up such an estimate.

In the meantime, the main/general contractor has the right to withhold payment for the bill work.

Preparing a cost estimate can be challenging.

One may be doing the work on the bill precisely because it has not been possible to give a fixed price -- at least a price that both parties could accept.

Uncertainties, as a rule, have their counterpart in high risk impact.

On the other hand, contractors are normally used to calculating, and subcontractors are only obliged to prepare an estimate.

The general contractor may depend on such an estimate because the builder requires it, and in any case the general contractor or general contractor needs some cost management.

If the cost estimate is too high, this can be a reason to “cancel” the work in question.

Either way, one will be able to make a more enlightened choice when one has some overview of the supposed future costs.

In conclusion, it is mentioned that the subcontractor is obliged to notify “without undue residence” if he “gets reason to assume” that the cost estimate will be exceeded, cf. NS 8417 paragraph 30.2, second paragraph.

In NS 8415 paragraph 31.2, second paragraph and NS 8416 paragraph 23.4, second paragraph, the notification obligation is related to a materiality requirement, but it does not apply in NS 8417 contracts.

8. Principal/General Contractor's right to object to the total costs

Even if the subcontractor has complied with the provisions and documented the bill work as it should, and the general contractor has followed up on his duties and even approved them in due course, the latter still has an opportunity to claim that the total cost of the bill work was unnecessarily high.

This is a safety valve because it is not always easy to keep control of what becomes the final sum.

Bill work was presumably also chosen because it was difficult to calculate what needed to be performed by works overall.

Once the works have been completed and you have a firm answer to the final total, it is also easier to make an assessment.

However, it is not easy and easy to achieve that the costs have become unnecessarily high.

In order to arrive at such a quotation, the main/general contractor must be able to ascertain that the costs were actually “unnecessary” high, and he must be able to make the probability that it was either due to”irrational drift” or “other indefensible relationship” at the subcontractor, see NS 8415 paragraph 31.4, last paragraph, NS 8416 paragraph 23.4, last paragraph and NS 8417 paragraph 30.3.2, last paragraph.

It normally takes quite a lot to get the court's acceptance of the subcontractor's overall claim to be reduced under this provision.

As we have explained; it is not sufficient that the costs became high. There are a number of individual circumstances in a construction project that make the costs have become higher than what one would assume were “gang”. In any case, it must be assumed that the high costs are due “irrational drift” or “other indefensible relationship” at the subcontractor.

Tilbake

Bill Worker

Kortversjonen

Lytt til artikkelen

1. Introduction

The agreement of the parties forms the starting point for what is to be paid.

The standard contracts are nevertheless structured on the principle that the parties agree on a specific sum which, including VAT, constitutes the “contract sum”.

A contract amount may consist of an agreed fixed sum that is not to be regulated, unless there are changes or other circumstances that imply that the contractor is entitled to a remuneration adjustment. An alternative is that the parties have agreed on a contract sum to be regulated. It will be the situation when one has agreed unit prices for all or part of the delivery. Contract sums, in that case, would be the result of unit prices multiplied by assumed quantities. When the work is completed, measure and multiply by the relevant unit prices to determine the amount of remuneration.

In contracts with unit prices, there will often be round sum items for some services such as rigging and operation.

In either case, the parties use prices agreed in advance and perhaps long before a work comes to execution. The subcontractor then assumes the risk that the work may be more costly to perform than anticipated, while the main or general contractor misses out on possible savings.

The principle of invoicing is that the subcontractor shall be paid for everything he adds to the construction site of work and materials added to a markup. The mark-up shall cover the subcontractor's indirect costs plus profits.

In the field of contract law, the principle of invoicing is considered to be the main rule when it comes to calculating remuneration, but it is derogable. That means that the parties can agree alternative remuneration mechanisms, but in the absence of such agreements, it is the principle of reckoning that applies.

2. Overview of the rules

All three standard contracts have provisions on bill work, namely NS 8415 paragraph 31, NS 8416 paragraph 23.4 and NS 8417 paragraph 30.

3. About the calculation of remuneration

The provisions of the standard are virtually identical. Since turnkey contracts are used most often, we take NS 8417 as a starting point.

In NS 8417 paragraph 30.1, one finds the definition of what is meant by bill work, namely that subcontractor shall “have paid for necessary costs”.

In addition, the main/general contractor must pay a mark-up to cover the subcontractor's “indirect costs, risks and profits”.

The mark-up is normally agreed in the form of a percentage of the cost. If such a percentage is not agreed upon, it follows from the provisions of the Standards that the Parties shall use a “customary” percentage rate.

Often, discussion arises about the size of the bill work. The discussion is often related to the question of whether the costs have been “necessary”. One may have objections to the number of workers, the number of hours, whether the use of materials has been necessary, whether it was necessary to have three excavators on the construction site, etc.

If all contract work is done at cost, the contractor will be entitled to the rig cost (rent of barracks, heater), operating costs (such as electricity, fuel for heater), hourly wage of the crew on site, hourly rate of machinery and equipment used, cost of materials, etc.

Another discussion that may arise is where the parties have agreed on a fixed price and then some works are to be done at the expense.

In the fixed price there will normally be some common services such as rigging and operation. When then the bill work is carried out, the subcontractor must use equipment of the same type that is included in the rigging and operation record. An example of this can be heaters and their operation.

If the bill worker makes it necessary to use heaters, the question may become whether the heaters incl operation are “necessary costs” which can be billed as part of the bill work.

Such questions need to be decided in concrete terms.

If the furnaces are not used for the ordinary works for which there is a fixed price, and then they are used for the bill work, you can object that the subcontractor has already been paid for the furnaces through the fixed price. The subcontractor is not entitled to be paid twice.

If, on the other hand, the citation is that the “fixed” heaters are in use and new heaters need to be supplied due to the bill work, it would be natural to consider these costs as “necessary” and thus costs to be paid with the addition of mark-up.

Normally, the largest expense items in bill working will be hourly cost of crew and machinery, material procurement, transportation costs, etc.

When concluding a contract, the parties will often have agreed fixed hourly rates for different job categories such as foreman, carpenter, plumber, helper, etc. The same can be agreed for excavator, dump truck, truck with or without trailer, etc.

Such prices are in effect fixed unit prices to be taken into account when work is to be carried out on account.

We have learned that the parties have nevertheless disagreed on what should be paid per hour when it has subsequently emerged that the subcontractor has hired crew at (substantially) lower hourly rates than the agreed hourly rate.

The argument for not paying the agreed hourly rate has then been that the contractor is only entitled to have his actual costs paid in addition to the agreed markup.

In our view, the decisive factor must be whether the parties have agreed on a fixed hourly rate, or not.

If there is a fixed hourly rate, it is the one that must be paid, but if such an hourly rate is not agreed, the actual (low) hourly rate paid to the landlord is payable, with the addition of the agreed markup.

The parties normally also agree on a mark-up percentage for the case where work is to be carried out on account.

The size of the agreed markup percentage will vary, but for a long time it has been customary to use a 10% mark-up.

This can vary slightly up or down, and the decisive factor will often be the size of the project and the types of work and materials involved.

In large construction contracts with very high volumes, you will probably see mark-up percentages of less than 10%, while in more technically complex buildings with expensive equipment you can experience mark-up percentages above 10%.

That there is a difference between these two types of work is not only the volume differences, but also the purpose of a mark-up. The markup should also cover the subcontractor's costs during the warranty period and possible complaint works.

In addition to this, one would probably have to say that the usual contribution rate will vary depending on the type of work and subject.

As a rule of thumb, a mark-up in the range of 8 — 15% will be acceptable. The subcontractor who requires a mark-up in excess of 15% when nothing has been specifically agreed will have the burden of proving that the level is “customary”.

When works are carried out on account there is also a condition that the costs have been “necessary”.

‍This condition is closely related to the condition that the bill worker “should be operated rationally and justifiably”, see NS 8417 paragraph 30.1, second paragraph.

A side of this condition is that the subcontractor should be vigilant and alert if unexpected circumstances make the work more demanding than expected.

This is to avoid hours and resource claims being rejected on incorrect grounds.

Another piece of advice is to establish a routine of photographing the construction site routinely to ensure that there is documentation that can substantiate the use of resources.

Finally, it is mentioned that it cannot be expected that any bill work should be carried out with only a minimum use of resources. One must enter a certain spaciousness into the rating.

No project is the same, and this also applies to the construction site, weather conditions, transport distances, etc.

One cannot assume that “everything is running smoothly”.

4. Documentation of the bill works

When the works are carried out on account, the subcontractor is obliged to document the cost reduction. What is required to be paid must have gone to the works to be settled.

In light of this, all standard contracts stipulate that the contractor must send “specified tasks over costs incurred, including material consumption and time consumption in the case of crew and machinery” to the total or general contractor and they must be sent “every week”.

It is also stated that the general contractor or general contractor may require the submission of additional documentation and specification if the forwarded does not provide a sufficient explanation.

When such a request is made, it should be specified why such information is requested, cf. NS 8417 paragraph 30.3.1, second paragraph.

Such a claim must be made no later than 14 days after the total or general contractor received the specified tasks in the first place. The subcontractor then has a further deadline of at least 14 days to supplement.

5. Control of the main or general contractor

It follows from NS 8417 paragraph 30.3.2, NS 8415 paragraph 31.4 and NS 8416 paragraph 23.4, third paragraph that the main or general contractor must check the submitted tasks within 14 days of receipt.

The regulations do not say anything about what it is the main/general contractor is to control.

When works are carried out on account, the main/general contractor will normally supervise the works. You can count how many people the subcontractor has on the construction site, that the number is in reasonable proportion to what is to be done, and not least can be led by the subcontractor, that the crew is in business without (unnecessary) dead time, etc.

If the main/general contractor believes that the subcontractor does not perform the work “rationally and justifiably” He should report back as soon as possible, and in writing.

When a work is carried out at the expense of the main/general contractor, the situation will normally also be the same upwards towards the builder. Consequently, the builder will probably also supervise and control. Then it can be tempting for the main/general contractor to hand over control to the builder. However, we would not recommend that the main/general contractor do so. The reason is that one puts oneself in an unfortunate position vis-à-vis a builder who can claim that the works became unnecessarily expensive precisely because they were carried out without the supervision of the main/general contractor.

“Attested timelists” is a well-known term and is used if the subcontractor has submitted continuously to the main/general contractor at the construction site for confirmation or for attestation.

The provisions of NS 8417 paragraph 30.3 on “Control and documentation” safeguard this attestation since the main rule is that timesheets, bills of materials, etc. should be transmitted weekly, cf. paragraph 30.3.1, first paragraph.

Nevertheless, we see examples of the parties agreeing on an arrangement where timelists are also to be certified on a continuous basis at the construction site, and often in combination with the fact that it is these timesheets that are to be transmitted for control.

In our view, this is not a problem in isolation. For a subcontractor that has certified timesheets to submit, it should normally be relatively easy to obtain acceptance of the hours.

The problem arises when timesheets are not attested, and then transmitted in accordance with standard contracts' provisions and then returned because they lack attestation.

If a construction site certification scheme has been agreed, the subcontractor should react relatively quickly if it is found that timelines are not certified.

In the worst case, you should notify formally so that there is written documentation showing that the responsibility does not lie with the subcontractor.

A total or main contractor who does not wish to certify because he has factual objections to the use of costs should, in turn, raise this in writing with the subcontractor in order to ensure timely documentation and contradiction.

Finally, it is mentioned that the documentation submitted by the subcontractor to the main/general contractor shall “be laid as the basis for the settlement” unless the general contractor or general contractor raises objections within 14 days from receipt, cf. NS 8417 paragraph 30.3.2, last paragraph and NS 8415 paragraph 31.4, fourth paragraph.

6. What happens if the subcontractor does not submit documentation?

For subcontractors, it is important to be able to document their time and material use as stated in NS 8417 paragraph 30.3.1, first and second paragraphs.

The general starting point is that whoever demands something from another has the burden of proof that one actually has the claim being made.

Consequently, a subcontractor who submits only one invoice without supporting documentation, and who has also failed to submit documentation for inspection every week, is taking an unnecessarily high risk because the probability of losing his or her in a subsequent court case will then be relatively high.

Such a situation is also expressly regulated in the standard contracts.

It follows, inter alia, from NS 8417 paragraph 30.3.1, the last paragraph that the general contractor is not obliged to pay more than he “had to understand” that the total subcontractor had costs for the work in question, in addition to the agreed or customary mark-up.

The same rule follows from NS 8415 paragraph 31.4, fifth paragraph and NS 8416 paragraph 23.4, fourth paragraph.

7. About Cost Estimates

All three standard contracts have a provision that the main or general contractor may ask the subcontractor for a cost estimate, cf. NS 8417 paragraph 30.2, NS 8415 paragraph 31.2 and NS 8416 paragraph 23.4, second paragraph.

If he so requests, it follows from the provisions that the subcontractor is obliged to draw up such an estimate.

In the meantime, the main/general contractor has the right to withhold payment for the bill work.

Preparing a cost estimate can be challenging.

One may be doing the work on the bill precisely because it has not been possible to give a fixed price -- at least a price that both parties could accept.

Uncertainties, as a rule, have their counterpart in high risk impact.

On the other hand, contractors are normally used to calculating, and subcontractors are only obliged to prepare an estimate.

The general contractor may depend on such an estimate because the builder requires it, and in any case the general contractor or general contractor needs some cost management.

If the cost estimate is too high, this can be a reason to “cancel” the work in question.

Either way, one will be able to make a more enlightened choice when one has some overview of the supposed future costs.

In conclusion, it is mentioned that the subcontractor is obliged to notify “without undue residence” if he “gets reason to assume” that the cost estimate will be exceeded, cf. NS 8417 paragraph 30.2, second paragraph.

In NS 8415 paragraph 31.2, second paragraph and NS 8416 paragraph 23.4, second paragraph, the notification obligation is related to a materiality requirement, but it does not apply in NS 8417 contracts.

8. Principal/General Contractor's right to object to the total costs

Even if the subcontractor has complied with the provisions and documented the bill work as it should, and the general contractor has followed up on his duties and even approved them in due course, the latter still has an opportunity to claim that the total cost of the bill work was unnecessarily high.

This is a safety valve because it is not always easy to keep control of what becomes the final sum.

Bill work was presumably also chosen because it was difficult to calculate what needed to be performed by works overall.

Once the works have been completed and you have a firm answer to the final total, it is also easier to make an assessment.

However, it is not easy and easy to achieve that the costs have become unnecessarily high.

In order to arrive at such a quotation, the main/general contractor must be able to ascertain that the costs were actually “unnecessary” high, and he must be able to make the probability that it was either due to”irrational drift” or “other indefensible relationship” at the subcontractor, see NS 8415 paragraph 31.4, last paragraph, NS 8416 paragraph 23.4, last paragraph and NS 8417 paragraph 30.3.2, last paragraph.

It normally takes quite a lot to get the court's acceptance of the subcontractor's overall claim to be reduced under this provision.

As we have explained; it is not sufficient that the costs became high. There are a number of individual circumstances in a construction project that make the costs have become higher than what one would assume were “gang”. In any case, it must be assumed that the high costs are due “irrational drift” or “other indefensible relationship” at the subcontractor.

Bill Worker

Kortversjonen

Lytt til artikkelen

1. Introduction

The agreement of the parties forms the starting point for what is to be paid.

The standard contracts are nevertheless structured on the principle that the parties agree on a specific sum which, including VAT, constitutes the “contract sum”.

A contract amount may consist of an agreed fixed sum that is not to be regulated, unless there are changes or other circumstances that imply that the contractor is entitled to a remuneration adjustment. An alternative is that the parties have agreed on a contract sum to be regulated. It will be the situation when one has agreed unit prices for all or part of the delivery. Contract sums, in that case, would be the result of unit prices multiplied by assumed quantities. When the work is completed, measure and multiply by the relevant unit prices to determine the amount of remuneration.

In contracts with unit prices, there will often be round sum items for some services such as rigging and operation.

In either case, the parties use prices agreed in advance and perhaps long before a work comes to execution. The subcontractor then assumes the risk that the work may be more costly to perform than anticipated, while the main or general contractor misses out on possible savings.

The principle of invoicing is that the subcontractor shall be paid for everything he adds to the construction site of work and materials added to a markup. The mark-up shall cover the subcontractor's indirect costs plus profits.

In the field of contract law, the principle of invoicing is considered to be the main rule when it comes to calculating remuneration, but it is derogable. That means that the parties can agree alternative remuneration mechanisms, but in the absence of such agreements, it is the principle of reckoning that applies.

2. Overview of the rules

All three standard contracts have provisions on bill work, namely NS 8415 paragraph 31, NS 8416 paragraph 23.4 and NS 8417 paragraph 30.

3. About the calculation of remuneration

The provisions of the standard are virtually identical. Since turnkey contracts are used most often, we take NS 8417 as a starting point.

In NS 8417 paragraph 30.1, one finds the definition of what is meant by bill work, namely that subcontractor shall “have paid for necessary costs”.

In addition, the main/general contractor must pay a mark-up to cover the subcontractor's “indirect costs, risks and profits”.

The mark-up is normally agreed in the form of a percentage of the cost. If such a percentage is not agreed upon, it follows from the provisions of the Standards that the Parties shall use a “customary” percentage rate.

Often, discussion arises about the size of the bill work. The discussion is often related to the question of whether the costs have been “necessary”. One may have objections to the number of workers, the number of hours, whether the use of materials has been necessary, whether it was necessary to have three excavators on the construction site, etc.

If all contract work is done at cost, the contractor will be entitled to the rig cost (rent of barracks, heater), operating costs (such as electricity, fuel for heater), hourly wage of the crew on site, hourly rate of machinery and equipment used, cost of materials, etc.

Another discussion that may arise is where the parties have agreed on a fixed price and then some works are to be done at the expense.

In the fixed price there will normally be some common services such as rigging and operation. When then the bill work is carried out, the subcontractor must use equipment of the same type that is included in the rigging and operation record. An example of this can be heaters and their operation.

If the bill worker makes it necessary to use heaters, the question may become whether the heaters incl operation are “necessary costs” which can be billed as part of the bill work.

Such questions need to be decided in concrete terms.

If the furnaces are not used for the ordinary works for which there is a fixed price, and then they are used for the bill work, you can object that the subcontractor has already been paid for the furnaces through the fixed price. The subcontractor is not entitled to be paid twice.

If, on the other hand, the citation is that the “fixed” heaters are in use and new heaters need to be supplied due to the bill work, it would be natural to consider these costs as “necessary” and thus costs to be paid with the addition of mark-up.

Normally, the largest expense items in bill working will be hourly cost of crew and machinery, material procurement, transportation costs, etc.

When concluding a contract, the parties will often have agreed fixed hourly rates for different job categories such as foreman, carpenter, plumber, helper, etc. The same can be agreed for excavator, dump truck, truck with or without trailer, etc.

Such prices are in effect fixed unit prices to be taken into account when work is to be carried out on account.

We have learned that the parties have nevertheless disagreed on what should be paid per hour when it has subsequently emerged that the subcontractor has hired crew at (substantially) lower hourly rates than the agreed hourly rate.

The argument for not paying the agreed hourly rate has then been that the contractor is only entitled to have his actual costs paid in addition to the agreed markup.

In our view, the decisive factor must be whether the parties have agreed on a fixed hourly rate, or not.

If there is a fixed hourly rate, it is the one that must be paid, but if such an hourly rate is not agreed, the actual (low) hourly rate paid to the landlord is payable, with the addition of the agreed markup.

The parties normally also agree on a mark-up percentage for the case where work is to be carried out on account.

The size of the agreed markup percentage will vary, but for a long time it has been customary to use a 10% mark-up.

This can vary slightly up or down, and the decisive factor will often be the size of the project and the types of work and materials involved.

In large construction contracts with very high volumes, you will probably see mark-up percentages of less than 10%, while in more technically complex buildings with expensive equipment you can experience mark-up percentages above 10%.

That there is a difference between these two types of work is not only the volume differences, but also the purpose of a mark-up. The markup should also cover the subcontractor's costs during the warranty period and possible complaint works.

In addition to this, one would probably have to say that the usual contribution rate will vary depending on the type of work and subject.

As a rule of thumb, a mark-up in the range of 8 — 15% will be acceptable. The subcontractor who requires a mark-up in excess of 15% when nothing has been specifically agreed will have the burden of proving that the level is “customary”.

When works are carried out on account there is also a condition that the costs have been “necessary”.

‍This condition is closely related to the condition that the bill worker “should be operated rationally and justifiably”, see NS 8417 paragraph 30.1, second paragraph.

A side of this condition is that the subcontractor should be vigilant and alert if unexpected circumstances make the work more demanding than expected.

This is to avoid hours and resource claims being rejected on incorrect grounds.

Another piece of advice is to establish a routine of photographing the construction site routinely to ensure that there is documentation that can substantiate the use of resources.

Finally, it is mentioned that it cannot be expected that any bill work should be carried out with only a minimum use of resources. One must enter a certain spaciousness into the rating.

No project is the same, and this also applies to the construction site, weather conditions, transport distances, etc.

One cannot assume that “everything is running smoothly”.

4. Documentation of the bill works

When the works are carried out on account, the subcontractor is obliged to document the cost reduction. What is required to be paid must have gone to the works to be settled.

In light of this, all standard contracts stipulate that the contractor must send “specified tasks over costs incurred, including material consumption and time consumption in the case of crew and machinery” to the total or general contractor and they must be sent “every week”.

It is also stated that the general contractor or general contractor may require the submission of additional documentation and specification if the forwarded does not provide a sufficient explanation.

When such a request is made, it should be specified why such information is requested, cf. NS 8417 paragraph 30.3.1, second paragraph.

Such a claim must be made no later than 14 days after the total or general contractor received the specified tasks in the first place. The subcontractor then has a further deadline of at least 14 days to supplement.

5. Control of the main or general contractor

It follows from NS 8417 paragraph 30.3.2, NS 8415 paragraph 31.4 and NS 8416 paragraph 23.4, third paragraph that the main or general contractor must check the submitted tasks within 14 days of receipt.

The regulations do not say anything about what it is the main/general contractor is to control.

When works are carried out on account, the main/general contractor will normally supervise the works. You can count how many people the subcontractor has on the construction site, that the number is in reasonable proportion to what is to be done, and not least can be led by the subcontractor, that the crew is in business without (unnecessary) dead time, etc.

If the main/general contractor believes that the subcontractor does not perform the work “rationally and justifiably” He should report back as soon as possible, and in writing.

When a work is carried out at the expense of the main/general contractor, the situation will normally also be the same upwards towards the builder. Consequently, the builder will probably also supervise and control. Then it can be tempting for the main/general contractor to hand over control to the builder. However, we would not recommend that the main/general contractor do so. The reason is that one puts oneself in an unfortunate position vis-à-vis a builder who can claim that the works became unnecessarily expensive precisely because they were carried out without the supervision of the main/general contractor.

“Attested timelists” is a well-known term and is used if the subcontractor has submitted continuously to the main/general contractor at the construction site for confirmation or for attestation.

The provisions of NS 8417 paragraph 30.3 on “Control and documentation” safeguard this attestation since the main rule is that timesheets, bills of materials, etc. should be transmitted weekly, cf. paragraph 30.3.1, first paragraph.

Nevertheless, we see examples of the parties agreeing on an arrangement where timelists are also to be certified on a continuous basis at the construction site, and often in combination with the fact that it is these timesheets that are to be transmitted for control.

In our view, this is not a problem in isolation. For a subcontractor that has certified timesheets to submit, it should normally be relatively easy to obtain acceptance of the hours.

The problem arises when timesheets are not attested, and then transmitted in accordance with standard contracts' provisions and then returned because they lack attestation.

If a construction site certification scheme has been agreed, the subcontractor should react relatively quickly if it is found that timelines are not certified.

In the worst case, you should notify formally so that there is written documentation showing that the responsibility does not lie with the subcontractor.

A total or main contractor who does not wish to certify because he has factual objections to the use of costs should, in turn, raise this in writing with the subcontractor in order to ensure timely documentation and contradiction.

Finally, it is mentioned that the documentation submitted by the subcontractor to the main/general contractor shall “be laid as the basis for the settlement” unless the general contractor or general contractor raises objections within 14 days from receipt, cf. NS 8417 paragraph 30.3.2, last paragraph and NS 8415 paragraph 31.4, fourth paragraph.

6. What happens if the subcontractor does not submit documentation?

For subcontractors, it is important to be able to document their time and material use as stated in NS 8417 paragraph 30.3.1, first and second paragraphs.

The general starting point is that whoever demands something from another has the burden of proof that one actually has the claim being made.

Consequently, a subcontractor who submits only one invoice without supporting documentation, and who has also failed to submit documentation for inspection every week, is taking an unnecessarily high risk because the probability of losing his or her in a subsequent court case will then be relatively high.

Such a situation is also expressly regulated in the standard contracts.

It follows, inter alia, from NS 8417 paragraph 30.3.1, the last paragraph that the general contractor is not obliged to pay more than he “had to understand” that the total subcontractor had costs for the work in question, in addition to the agreed or customary mark-up.

The same rule follows from NS 8415 paragraph 31.4, fifth paragraph and NS 8416 paragraph 23.4, fourth paragraph.

7. About Cost Estimates

All three standard contracts have a provision that the main or general contractor may ask the subcontractor for a cost estimate, cf. NS 8417 paragraph 30.2, NS 8415 paragraph 31.2 and NS 8416 paragraph 23.4, second paragraph.

If he so requests, it follows from the provisions that the subcontractor is obliged to draw up such an estimate.

In the meantime, the main/general contractor has the right to withhold payment for the bill work.

Preparing a cost estimate can be challenging.

One may be doing the work on the bill precisely because it has not been possible to give a fixed price -- at least a price that both parties could accept.

Uncertainties, as a rule, have their counterpart in high risk impact.

On the other hand, contractors are normally used to calculating, and subcontractors are only obliged to prepare an estimate.

The general contractor may depend on such an estimate because the builder requires it, and in any case the general contractor or general contractor needs some cost management.

If the cost estimate is too high, this can be a reason to “cancel” the work in question.

Either way, one will be able to make a more enlightened choice when one has some overview of the supposed future costs.

In conclusion, it is mentioned that the subcontractor is obliged to notify “without undue residence” if he “gets reason to assume” that the cost estimate will be exceeded, cf. NS 8417 paragraph 30.2, second paragraph.

In NS 8415 paragraph 31.2, second paragraph and NS 8416 paragraph 23.4, second paragraph, the notification obligation is related to a materiality requirement, but it does not apply in NS 8417 contracts.

8. Principal/General Contractor's right to object to the total costs

Even if the subcontractor has complied with the provisions and documented the bill work as it should, and the general contractor has followed up on his duties and even approved them in due course, the latter still has an opportunity to claim that the total cost of the bill work was unnecessarily high.

This is a safety valve because it is not always easy to keep control of what becomes the final sum.

Bill work was presumably also chosen because it was difficult to calculate what needed to be performed by works overall.

Once the works have been completed and you have a firm answer to the final total, it is also easier to make an assessment.

However, it is not easy and easy to achieve that the costs have become unnecessarily high.

In order to arrive at such a quotation, the main/general contractor must be able to ascertain that the costs were actually “unnecessary” high, and he must be able to make the probability that it was either due to”irrational drift” or “other indefensible relationship” at the subcontractor, see NS 8415 paragraph 31.4, last paragraph, NS 8416 paragraph 23.4, last paragraph and NS 8417 paragraph 30.3.2, last paragraph.

It normally takes quite a lot to get the court's acceptance of the subcontractor's overall claim to be reduced under this provision.

As we have explained; it is not sufficient that the costs became high. There are a number of individual circumstances in a construction project that make the costs have become higher than what one would assume were “gang”. In any case, it must be assumed that the high costs are due “irrational drift” or “other indefensible relationship” at the subcontractor.

Bill Worker

Kortversjonen

1. Introduction

The agreement of the parties forms the starting point for what is to be paid.

The standard contracts are nevertheless structured on the principle that the parties agree on a specific sum which, including VAT, constitutes the “contract sum”.

A contract amount may consist of an agreed fixed sum that is not to be regulated, unless there are changes or other circumstances that imply that the contractor is entitled to a remuneration adjustment. An alternative is that the parties have agreed on a contract sum to be regulated. It will be the situation when one has agreed unit prices for all or part of the delivery. Contract sums, in that case, would be the result of unit prices multiplied by assumed quantities. When the work is completed, measure and multiply by the relevant unit prices to determine the amount of remuneration.

In contracts with unit prices, there will often be round sum items for some services such as rigging and operation.

In either case, the parties use prices agreed in advance and perhaps long before a work comes to execution. The subcontractor then assumes the risk that the work may be more costly to perform than anticipated, while the main or general contractor misses out on possible savings.

The principle of invoicing is that the subcontractor shall be paid for everything he adds to the construction site of work and materials added to a markup. The mark-up shall cover the subcontractor's indirect costs plus profits.

In the field of contract law, the principle of invoicing is considered to be the main rule when it comes to calculating remuneration, but it is derogable. That means that the parties can agree alternative remuneration mechanisms, but in the absence of such agreements, it is the principle of reckoning that applies.

2. Overview of the rules

All three standard contracts have provisions on bill work, namely NS 8415 paragraph 31, NS 8416 paragraph 23.4 and NS 8417 paragraph 30.

3. About the calculation of remuneration

The provisions of the standard are virtually identical. Since turnkey contracts are used most often, we take NS 8417 as a starting point.

In NS 8417 paragraph 30.1, one finds the definition of what is meant by bill work, namely that subcontractor shall “have paid for necessary costs”.

In addition, the main/general contractor must pay a mark-up to cover the subcontractor's “indirect costs, risks and profits”.

The mark-up is normally agreed in the form of a percentage of the cost. If such a percentage is not agreed upon, it follows from the provisions of the Standards that the Parties shall use a “customary” percentage rate.

Often, discussion arises about the size of the bill work. The discussion is often related to the question of whether the costs have been “necessary”. One may have objections to the number of workers, the number of hours, whether the use of materials has been necessary, whether it was necessary to have three excavators on the construction site, etc.

If all contract work is done at cost, the contractor will be entitled to the rig cost (rent of barracks, heater), operating costs (such as electricity, fuel for heater), hourly wage of the crew on site, hourly rate of machinery and equipment used, cost of materials, etc.

Another discussion that may arise is where the parties have agreed on a fixed price and then some works are to be done at the expense.

In the fixed price there will normally be some common services such as rigging and operation. When then the bill work is carried out, the subcontractor must use equipment of the same type that is included in the rigging and operation record. An example of this can be heaters and their operation.

If the bill worker makes it necessary to use heaters, the question may become whether the heaters incl operation are “necessary costs” which can be billed as part of the bill work.

Such questions need to be decided in concrete terms.

If the furnaces are not used for the ordinary works for which there is a fixed price, and then they are used for the bill work, you can object that the subcontractor has already been paid for the furnaces through the fixed price. The subcontractor is not entitled to be paid twice.

If, on the other hand, the citation is that the “fixed” heaters are in use and new heaters need to be supplied due to the bill work, it would be natural to consider these costs as “necessary” and thus costs to be paid with the addition of mark-up.

Normally, the largest expense items in bill working will be hourly cost of crew and machinery, material procurement, transportation costs, etc.

When concluding a contract, the parties will often have agreed fixed hourly rates for different job categories such as foreman, carpenter, plumber, helper, etc. The same can be agreed for excavator, dump truck, truck with or without trailer, etc.

Such prices are in effect fixed unit prices to be taken into account when work is to be carried out on account.

We have learned that the parties have nevertheless disagreed on what should be paid per hour when it has subsequently emerged that the subcontractor has hired crew at (substantially) lower hourly rates than the agreed hourly rate.

The argument for not paying the agreed hourly rate has then been that the contractor is only entitled to have his actual costs paid in addition to the agreed markup.

In our view, the decisive factor must be whether the parties have agreed on a fixed hourly rate, or not.

If there is a fixed hourly rate, it is the one that must be paid, but if such an hourly rate is not agreed, the actual (low) hourly rate paid to the landlord is payable, with the addition of the agreed markup.

The parties normally also agree on a mark-up percentage for the case where work is to be carried out on account.

The size of the agreed markup percentage will vary, but for a long time it has been customary to use a 10% mark-up.

This can vary slightly up or down, and the decisive factor will often be the size of the project and the types of work and materials involved.

In large construction contracts with very high volumes, you will probably see mark-up percentages of less than 10%, while in more technically complex buildings with expensive equipment you can experience mark-up percentages above 10%.

That there is a difference between these two types of work is not only the volume differences, but also the purpose of a mark-up. The markup should also cover the subcontractor's costs during the warranty period and possible complaint works.

In addition to this, one would probably have to say that the usual contribution rate will vary depending on the type of work and subject.

As a rule of thumb, a mark-up in the range of 8 — 15% will be acceptable. The subcontractor who requires a mark-up in excess of 15% when nothing has been specifically agreed will have the burden of proving that the level is “customary”.

When works are carried out on account there is also a condition that the costs have been “necessary”.

‍This condition is closely related to the condition that the bill worker “should be operated rationally and justifiably”, see NS 8417 paragraph 30.1, second paragraph.

A side of this condition is that the subcontractor should be vigilant and alert if unexpected circumstances make the work more demanding than expected.

This is to avoid hours and resource claims being rejected on incorrect grounds.

Another piece of advice is to establish a routine of photographing the construction site routinely to ensure that there is documentation that can substantiate the use of resources.

Finally, it is mentioned that it cannot be expected that any bill work should be carried out with only a minimum use of resources. One must enter a certain spaciousness into the rating.

No project is the same, and this also applies to the construction site, weather conditions, transport distances, etc.

One cannot assume that “everything is running smoothly”.

4. Documentation of the bill works

When the works are carried out on account, the subcontractor is obliged to document the cost reduction. What is required to be paid must have gone to the works to be settled.

In light of this, all standard contracts stipulate that the contractor must send “specified tasks over costs incurred, including material consumption and time consumption in the case of crew and machinery” to the total or general contractor and they must be sent “every week”.

It is also stated that the general contractor or general contractor may require the submission of additional documentation and specification if the forwarded does not provide a sufficient explanation.

When such a request is made, it should be specified why such information is requested, cf. NS 8417 paragraph 30.3.1, second paragraph.

Such a claim must be made no later than 14 days after the total or general contractor received the specified tasks in the first place. The subcontractor then has a further deadline of at least 14 days to supplement.

5. Control of the main or general contractor

It follows from NS 8417 paragraph 30.3.2, NS 8415 paragraph 31.4 and NS 8416 paragraph 23.4, third paragraph that the main or general contractor must check the submitted tasks within 14 days of receipt.

The regulations do not say anything about what it is the main/general contractor is to control.

When works are carried out on account, the main/general contractor will normally supervise the works. You can count how many people the subcontractor has on the construction site, that the number is in reasonable proportion to what is to be done, and not least can be led by the subcontractor, that the crew is in business without (unnecessary) dead time, etc.

If the main/general contractor believes that the subcontractor does not perform the work “rationally and justifiably” He should report back as soon as possible, and in writing.

When a work is carried out at the expense of the main/general contractor, the situation will normally also be the same upwards towards the builder. Consequently, the builder will probably also supervise and control. Then it can be tempting for the main/general contractor to hand over control to the builder. However, we would not recommend that the main/general contractor do so. The reason is that one puts oneself in an unfortunate position vis-à-vis a builder who can claim that the works became unnecessarily expensive precisely because they were carried out without the supervision of the main/general contractor.

“Attested timelists” is a well-known term and is used if the subcontractor has submitted continuously to the main/general contractor at the construction site for confirmation or for attestation.

The provisions of NS 8417 paragraph 30.3 on “Control and documentation” safeguard this attestation since the main rule is that timesheets, bills of materials, etc. should be transmitted weekly, cf. paragraph 30.3.1, first paragraph.

Nevertheless, we see examples of the parties agreeing on an arrangement where timelists are also to be certified on a continuous basis at the construction site, and often in combination with the fact that it is these timesheets that are to be transmitted for control.

In our view, this is not a problem in isolation. For a subcontractor that has certified timesheets to submit, it should normally be relatively easy to obtain acceptance of the hours.

The problem arises when timesheets are not attested, and then transmitted in accordance with standard contracts' provisions and then returned because they lack attestation.

If a construction site certification scheme has been agreed, the subcontractor should react relatively quickly if it is found that timelines are not certified.

In the worst case, you should notify formally so that there is written documentation showing that the responsibility does not lie with the subcontractor.

A total or main contractor who does not wish to certify because he has factual objections to the use of costs should, in turn, raise this in writing with the subcontractor in order to ensure timely documentation and contradiction.

Finally, it is mentioned that the documentation submitted by the subcontractor to the main/general contractor shall “be laid as the basis for the settlement” unless the general contractor or general contractor raises objections within 14 days from receipt, cf. NS 8417 paragraph 30.3.2, last paragraph and NS 8415 paragraph 31.4, fourth paragraph.

6. What happens if the subcontractor does not submit documentation?

For subcontractors, it is important to be able to document their time and material use as stated in NS 8417 paragraph 30.3.1, first and second paragraphs.

The general starting point is that whoever demands something from another has the burden of proof that one actually has the claim being made.

Consequently, a subcontractor who submits only one invoice without supporting documentation, and who has also failed to submit documentation for inspection every week, is taking an unnecessarily high risk because the probability of losing his or her in a subsequent court case will then be relatively high.

Such a situation is also expressly regulated in the standard contracts.

It follows, inter alia, from NS 8417 paragraph 30.3.1, the last paragraph that the general contractor is not obliged to pay more than he “had to understand” that the total subcontractor had costs for the work in question, in addition to the agreed or customary mark-up.

The same rule follows from NS 8415 paragraph 31.4, fifth paragraph and NS 8416 paragraph 23.4, fourth paragraph.

7. About Cost Estimates

All three standard contracts have a provision that the main or general contractor may ask the subcontractor for a cost estimate, cf. NS 8417 paragraph 30.2, NS 8415 paragraph 31.2 and NS 8416 paragraph 23.4, second paragraph.

If he so requests, it follows from the provisions that the subcontractor is obliged to draw up such an estimate.

In the meantime, the main/general contractor has the right to withhold payment for the bill work.

Preparing a cost estimate can be challenging.

One may be doing the work on the bill precisely because it has not been possible to give a fixed price -- at least a price that both parties could accept.

Uncertainties, as a rule, have their counterpart in high risk impact.

On the other hand, contractors are normally used to calculating, and subcontractors are only obliged to prepare an estimate.

The general contractor may depend on such an estimate because the builder requires it, and in any case the general contractor or general contractor needs some cost management.

If the cost estimate is too high, this can be a reason to “cancel” the work in question.

Either way, one will be able to make a more enlightened choice when one has some overview of the supposed future costs.

In conclusion, it is mentioned that the subcontractor is obliged to notify “without undue residence” if he “gets reason to assume” that the cost estimate will be exceeded, cf. NS 8417 paragraph 30.2, second paragraph.

In NS 8415 paragraph 31.2, second paragraph and NS 8416 paragraph 23.4, second paragraph, the notification obligation is related to a materiality requirement, but it does not apply in NS 8417 contracts.

8. Principal/General Contractor's right to object to the total costs

Even if the subcontractor has complied with the provisions and documented the bill work as it should, and the general contractor has followed up on his duties and even approved them in due course, the latter still has an opportunity to claim that the total cost of the bill work was unnecessarily high.

This is a safety valve because it is not always easy to keep control of what becomes the final sum.

Bill work was presumably also chosen because it was difficult to calculate what needed to be performed by works overall.

Once the works have been completed and you have a firm answer to the final total, it is also easier to make an assessment.

However, it is not easy and easy to achieve that the costs have become unnecessarily high.

In order to arrive at such a quotation, the main/general contractor must be able to ascertain that the costs were actually “unnecessary” high, and he must be able to make the probability that it was either due to”irrational drift” or “other indefensible relationship” at the subcontractor, see NS 8415 paragraph 31.4, last paragraph, NS 8416 paragraph 23.4, last paragraph and NS 8417 paragraph 30.3.2, last paragraph.

It normally takes quite a lot to get the court's acceptance of the subcontractor's overall claim to be reduced under this provision.

As we have explained; it is not sufficient that the costs became high. There are a number of individual circumstances in a construction project that make the costs have become higher than what one would assume were “gang”. In any case, it must be assumed that the high costs are due “irrational drift” or “other indefensible relationship” at the subcontractor.

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