1. Introduction

In a long-term construction project, there will always be challenges or changes that the parties have not taken into account and which impose additional costs on the project.

Which of the parties to a construction or construction contract has the risk of such additional costs is regulated in the standard contracts.

The starting point is that the main/general contractor will not pay more than what has been agreed, while the subcontractor will preferably have paid for all challenges that were not taken into account at the conclusion of the contract.

Since there are situations in which the main/general contractor must be prepared to pay more than originally agreed, the standard contracts contain several provisions on this.

Under the topic”General contractor's services” we have written two articles dealing with situations where the main/general contractor has to incur additional costs, namely the articles on “Physical working surface and ground conditions”, as well as “Main/General Contractor's Design and Transport”.

The provisions of the standard contracts for the services of the main/general contractor can be found in NS 8415 Chapter III, NS 8416 point 18 and NS 8417 chapter V.

In the article “Changes and Irregular Changes” we have reviewed the rules for how the parties should deal, and changes will usually entail the need for remuneration adjustment.

The focus of this article is how the parties should relate to each other when one of the parties — essentially the subcontractor — considers itself entitled to a remuneration adjustment.

2. Overview of the rules

The rules on how the parties should behave in such situations can be found in NS 8415 paragraph 25 and in NS 8417 paragraph 34.

NS 8415 and NS 8417 are more complicated and stringent in their requirements for how the parties should relate to each other, than NS 8416. With that caveat, however, there is much that is similar, and we treat the standards as a whole. As otherwise, we start from NS 8417 since it is probably the standard that is used most often today.

3. The right to adjustment of remuneration

There are three main categories of cases that can give a subcontractor a claim for remuneration adjustment, and we have included these in the matrix below.

4. changes

We have dealt with changes in a separate article under this topic which is “Changes”, and refers to what is said in that article.

5. Failure of the main/general contractor's benefits

regard “Failure of the general contractor's services, etc.” refers the provision of NS 8417 paragraph 34.1.2 to the provisions of paragraph 22 “Participation of the general contractor”, point 23 “The Risks of Relationships in the Ground” and paragraph 24 “The general contractor's choice of solutions and other engineering”.

These are essentially the same conditions referred to in NS 8415 (25.2) (b) and (c), but there is also reference to a separate paragraph 20 “Time of participation of the general contractor”.

In an execution centre, there will normally be much greater interaction between the subcontractor and the general contractor since the latter will provide detailed design to the subcontractor as the latter needs it. Thus, there is also a greater need for rules that regulate this interaction in detail.

6. Increased expenses for rigging and operations, etc.

This section deals with two different types of claims

6.1 Rigging and operation during extended construction

It follows from NS 8417 paragraph 34.1.3, first paragraph, that if a subcontractor receives increased expenses for “capital benefits, rigging, operation and downrigging that are a necessary consequence of” changes or failures in the main/general contractor's benefits, then the subcontractor may require a special adjustment of this remuneration.

Similar provisions are found in NS 8415 paragraph 25.3, second paragraph and NS 8416 paragraph 22.1.

The typical situation is that the subcontractor is entitled to an extension of the deadline, and then rigging/operation is required during the extended construction period. In a number of contracts, the parties will have entered into a special provision for how rigging/operation is to be calculated, often in the form of a mathematical formula. This simplifies the settlement as it may otherwise present major challenges for the subcontractor to provide sufficient documentation for their claim. An alternative to a mathematical formula may be that the parties have agreed a round sum (r.s. item) for the rigging/operation costs per day during the extended construction period.

6.2 Plunder and heft

It follows from NS 8417 paragraph 34.1.3, second paragraph, that the general contractor may”require a special adjustment of remuneration resulting from increased expenditure due to reduced productivity or disruption to other work'; as a result of changes or failures in the main/general contractor's benefits.

This is what is usually referred to as plunder and heft. Similar provisions are found in NS 8415 paragraph 25.3, second paragraph and NS 8416 paragraph 22.1.

Claims relating to plunder and heft have in practice proved very difficult to document, and there is a good deal of case law that says something about how one should deal when it becomes appropriate to demand such costs reimbursed.

We have written a separate article on “Plunder and heft”, read more here.

7. Notification “without undue residence”

If the subcontractor will require remuneration adjustment for circumstances that are a consequence of “failure of the general contractor's benefits” or “increased expenses for rigging and operations, etc.”, does he need to notify this “without undue residence” when he “becomes or should have become” aware of the basis for claiming this.

This is the rule under NS 8417 paragraphs 34.1.2 and 34.1.3 and similarly is the rule for such claims in NS 8415, but there this follows from paragraph 25.3.

As pointed out in other articles dealing with provisions where the notification deadline is “without undue residence”, the subcontractor has the opportunity to obtain a certain overview of the situation before notifying that remuneration adjustment will be required. A grounded stay is permitted, but normally no more than a few days may elapse before such notice is made.

The consequence of late notice is that the claim is lost.

We also recall the rule in NS 8417 paragraph 6 and NS 8415 paragraph 8 (third paragraph in both places) that whoever wants to plead that the other has notified or responded too late must advance this quotation “without undue residence” after receiving the notification or reply which is deemed to have been made too late.

The article where we deal with the rule on “Notifications and claims” can be found here.

Note, moreover, that the subcontractor does not lose his claim for remuneration adjustment in the event of changes even if the remuneration claim itself is not made “without undue residence”.

Neither NS 8417 paragraph 34.1.1 nor NS 8415 paragraph 25.3, first paragraph contains such a preclusive notification rule.

8. How is the remuneration for such claims determined?

There is freedom of agreement and the parties can therefore agree on what the remuneration should be. Normally this will be done by the subcontractor submitting an offer which is either accepted or which forms the basis for negotiations, cf. NS 8417 paragraph 34.2.1 and NS 8415 paragraph 25.8.3.

If the parties do not agree, the starting point in both standard contracts is to use the unit prices of the contract where applicable, cf. NS 8417 paragraph 34.3 and NS 8415 paragraph 25.7. Often there will not be as many unit prices in a turnkey contract compared to an execution center where one would like to have postal descriptions (NS 3420) and unit prices.

If the unit prices are not directly applicable, but the additional work “essentially” Similar to unit prices, unit prices can be adjusted so that they are used as a starting point.

In that case, the party wishing to use such adjusted unit prices must notify the other “without undue residence”, cf NS 8417 paragraph 34.3.3 and NS 8415 paragraph 25.7.2, second paragraph. If this is not done, the unit price may only be adjusted to the extent that the counterparty could understand that this could be the case.

The main objective is that the additional remuneration should be at the same price level as at the time the contract was concluded.

If it is not possible to agree on a price or mechanism for finding an acceptable price, the parties may always fall back on the general rule on bills, cf. NS 8417 paragraph 34.4 and NS 8415 paragraph 25.8.1.

In this case, the subcontractor must notify the main/general contractor in advance. The main reason for such notification is that it should be given the opportunity to prepare for supervision and control of the work of bills.

9. Briefly about cancellation

If the subcontractor will have to cancel the work of a co-contractor as a result of a change, he will normally have to pay a cancellation compensation. This compensation may be claimed by the subcontractor covered by the main/general contractor, cf. NS 8417 paragraph 34.5 and NS 8415 paragraph 25.9.

In addition, the scale of negative change orders from the main/general contractor may become so large that the subcontractor would have preferred to claim cancellation compensation for its own profit loss.

Such a right can be found in NS 8415 paragraph 38 and in NS 8417 paragraph 44.

In both contracts, there is a requirement that the total net reduction must be 15% of the contract amount, or greater.

That means you can't look in isolation at how big the reduction of contract work has been seen in isolation. One must also take into account the additional work that has been accrued.

If the total reduction is 14.9% or less, it is not considered that there is no cancellation and the subcontractor is therefore not entitled to compensation for its financial loss (read; loss of profit).

Note, however, that if the total reduction is 15% or more, the profit loss is calculated on the whole.