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 builder will not pay more than what has been agreed, while the contractor would rather have paid for all challenges that were not taken into account at the conclusion of the contract.
Since, from experience, situations arise where the builder must be prepared to pay more than originally agreed, the standard contracts contain several provisions on this.
Under the topic”Builder's benefits” we have written two articles dealing with situations where the builder has to incur additional costs, namely the articles on “Physical working surface and ground conditions” and if “Builder's engineering and transportation”.
The provisions of the Standard Contracts on “Builder's benefits” can be found in NS 8407 chapter V, NS 8405 chapter III and NS 8406 paragraph 18.
In the article “Changes and Irregular Changes” have we reviewed the rules for how the parties should deal when there is a basis for claiming this.
Changes etc. can have consequences for progress, and we have written about this in the article regarding the extension of the deadline. Most often, changes will also impose additional costs on the contractor and that is the topic of this article.
The focus here is how the parties should relate to each other when the contractor considers himself entitled to remuneration adjustment.
2. Overview of the rules
The rules on how the parties should behave in such situations can be found in NS 8407 paragraph 34. Below we also see where the corresponding provisions are found in NS 8405 and NS 8406.
As is known from other articles, NS 8407 and NS 8405 contain preclusive deadlines which mean that claims are lost if they are not notified in time.
With that precision, much of what we write about NS 8407 and NS 8405 is quite similar in I NS 8406. We therefore treat the standards as a whole, but as always we take NS 8407 as a starting point.
3. The right to adjustment of remuneration
There are three main categories of cases that can give the main/general contractor 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 on “Changes and Irregular Changes”, and refers to the.
5. Failure of builder's benefits
regard “Failure of the builder's performance, etc.” refers the provision of NS 8407 paragraph 34.1.2 to the provisions of paragraph 22 “Builder's complicity”, point 23 “The Risks of Relationships in the Ground” and paragraph 24 “Builder's choice of solutions and other engineering”.
These are essentially the same conditions referred to in NS 8405 paragraphs 25.2 (b) and (c), but there is also reference to a separate paragraph 20 “Time of participation of the builder”.
In an execution centre, there will normally be far greater interaction between the general contractor and the builder during the implementation phase since the latter will provide detailed design to the main contractor as the construction progresses. Thus, there is also a need for rules that regulate the consequences of the developer's failure to participate.
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 8407 paragraph 34.1.3, first paragraph that the contractor receives increased expenses for “capital benefits, rigging, operation and downrigging that are a necessary consequence of” changes or failures in the builder's benefits, he may require special adjustment of this remuneration.
Similar provisions are found in NS 8405 paragraph 25.3, second paragraph and NS 8406 paragraph 22.1.
The typical situation is that the contractor is entitled to a deadline extension, and requires reimbursed his costs to rig/operate during the extended construction period.
Today, it is common for the parties to agree on how rigs/operations will be calculated in the form of a mathematical formula.
An alternative to such a formal arrangement may be that the parties have agreed how much the cost of rigging and operation should be per day if the contractor is entitled to an extension of the deadline. In this case, it is customary to agree a round sum amount (one r.s. post)
Both options represent a simplification as it can otherwise present great challenges to document this type of claim.
In the past, a third method was used to calculate such additional costs. The contractor's offer was based on the rigging and operating record, and assumed that half of this was up-and-down rigging. The other half was considered to be operation, and then this was divided by the original number of days of construction time. Then we got a starting point for what the rig cost per day. This was no watertight method for finding a correct result, since a contractor may have chosen to price such a record low for tactical reasons.
6.2 Plunder and heft
It follows from NS 8407 paragraph 34.1.3, second paragraph that the 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 builder's performance.
This is what is usually referred to as plunder and heft. Similar provisions are found in NS 8405 paragraph 25.3, second paragraph and NS 8406 paragraph 22.1.
Claims relating to plunder and heft have in practice proved very difficult to document, and case law has previously shown that these types of claims create many challenges.
Over the past few years, we have received good clarifications in the judicial apparatus. The topic is important and it takes a lot of space to explain it thoroughly enough. We have therefore written a separate article on “Plunder and heft”, read more here.
7. Notification “without undue residence”
If the entrepreneur will require remuneration adjustment for circumstances that are a consequence of “failure of builder's benefits” and/ or have inflicted upon him “increased expenses for rigging and operations, etc.”, the contractor must notify “without undue residence” when he “becomes or should have become” aware of the basis for claiming remuneration adjustment.
This is the rule after NS 8407 paragraphs 34.1.2 and 34.1.3 and correspondingly is the rule in NS 8405 paragraph 25.3.
As pointed out in other articles, the entrepreneur has the opportunity to obtain a certain overview of the situation before notifying. For that reason, a grounded stay may be allowed, but no more. As pointed out earlier, the deadline for notifying is counted in days, and not in weeks or months.
The consequence of late notice is that the claim is lost in contracts governed by NS 8407 or NS 8405, but not in NS 8406 contracts.
We also remind you of the rule in NS 8407 paragraph 6 and NS 8405 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” having received the notification or reply which is deemed to have been made too late, read more here.
8. How is the remuneration 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 contractor making an offer which is either accepted or which forms the basis for negotiations, cf. NS 8407 paragraph 34.2.1 and NS 8405 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 8407 paragraph 34.3 and NS 8405 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”, see NS 8407 paragraphs 34.3.2 and 34.3.3 and NS 8405 paragraphs 25.7.2 and 25.7.3.
If no notification is made, the unit price can only be adjusted to the extent that the counterparty understands could be applicable.
The purpose of these mechanisms is that the additional remuneration should be at the same price level as at the time the contract was concluded.
If the parties are unable to agree on a price or mechanisms for finding an acceptable price, the parties may always fall back on the general rule of contract law that the works are carried out on account- Before such works are commenced, the contractor must notify the builder, cf. NS 8407, paragraph 34.4 and NS 8405, paragraph 25.8.1.
We have written a separate article on bill work, read more here.
9. Briefly about cancellation
There is a separate provision for cancellation in NS 8407 paragraph 44, in NS 8405 paragraph 38 and in NS 8406 paragraph 28.
It is a condition for considering something as a cancellation that the net negative change equals 15% of the contract amount, or more.
If the condition is met, the entrepreneur is entitled to reimbursement of his profit loss.
Negative change order requirements from the builder may, however, result in a total or general contractor having to cancel the work of a contract assistant who is entitled to reimburse his profit loss from his client.
This compensation may be claimed by the general contractor or the general contractor to be replaced by the builder, cf. NS 8407 paragraph 34.5 and NS 8405 paragraph 25.9.
