Split the rise by cause before you claim it
A rise claimed as one figure on the account is the easiest claim to refuse. Sort it by the route that could pay each part, and the part that is yours stops dragging down the part that is not.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
Why it matters
Faced with one figure, your main contractor has an easy reply: the subcontract is fixed price, or the clause pays by its own method, not a percentage. Either answer kills the whole claim, including the parts you could have recovered. Most rises have several causes. The market part stays with you on a fixed price unless a clause moves it. Work your main contractor changed can be valued as a variation. And the extra cost of its delay pushing your purchases into dearer months can go into a loss and expense claim. Each part has its own route, its own evidence and its own method.
How to do it
- Read the subcontract for a fluctuations option or price adjustment clause, and note its base date, what it covers, its method and any notice condition.
- List each rise from the tender prices, the supplier increase notices and the invoices, with the date it took effect.
- Sort each rise by cause: market movement, work the main contractor changed, or work its delay pushed into later months.
- Value each part by its own route: the clause's method for market rises and current prices for changed work. For delay, set the invoiced price against the price at the programmed date.
- Check that no rise is counted under two routes, and state in the claim which part you accept as your own risk.
Example
Illustrative example. The scenario and figures are invented.
The facts
A mechanical subcontractor on a £640,000 fixed-price package, with no fluctuations clause, sees its pipework and copper costs rise by £18,000. Its site team wants to claim the whole £18,000 on the next application.
What happens
- The rise is listed from the tender prices, the supplier increase notices and the invoices, and sorted by cause.
- £3,800 relates to plant room pipework redesigned after tender and instructed in month 5. It is valued as a variation at current prices.
- £6,400 relates to a riser installation the main contractor's late slab pushed back 10 weeks. It is claimed as loss and expense, with the 10 weeks taken from the main contractor's own letters.
- £7,800 relates to work bought and installed on programme, and is stated in the claim as the subcontractor's own risk.
The rise, split by cause
| Part of the rise | Amount |
|---|---|
| Changed work, valued at current prices | £3,800 |
| Work pushed back by the main contractor | £6,400 |
| Work on programme, own risk | £7,800 |
| Total rise | £18,000 |
The outcome
The variation is agreed at £3,800. The delay head is agreed at £5,900, after 1 week is shown to be the subcontractor's own. £9,700 of the rise is recovered, where the whole £18,000 claimed as a price rise would have been refused under the fixed price.
To have this done for you, see our Price Rise Claim service.