Do not let omissions be valued as savings alone
An omission valued only at the omitted rate usually takes more money out of your account than it should. Check what it does to the rest of your work: lost contribution to preliminaries, uneconomic quantities and materials already ordered.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
Why it matters
An omission arrives as a credit. The rate times the quantity comes off your account, and your main contractor treats that as the whole story. It rarely is. Your preliminaries were spread across the whole job, and the omitted work carried its share. The materials may already be ordered and not returnable. What is left may be too small a quantity to do at the rate.
The rate that comes off was built to cover those things, so taking it off in full takes them out too. Your main contractor will not raise this for you. Check an omission as carefully as an addition, or you will give back more than you actually save.
How to do it
- List what the omitted rate was carrying: its share of preliminaries, overhead and profit, and any materials and supplier commitments.
- Check whether the materials have been ordered, delivered or cut, and what returning or cancelling them costs.
- Check what the omission does to the quantities left, and whether the rate for what is left still holds.
- Value the omission as the rate less the costs already committed and the contribution lost, and set out each line.
Example
Illustrative example. The scenario and figures are invented.
The facts
A subcontractor's £160,000 flooring package has a section omitted: 500 square metres at £40, a credit of £20,000. The material for the whole floor was ordered when the contract was signed, and 300 square metres of it has been delivered to site.
What happens
- The commercial manager checks with the supplier. The 300 square metres delivered can go back for a 20 per cent restocking charge: £1,320 on £6,600 of material.
- The rate carried £6 a square metre of preliminaries and margin. That is £3,000 across the omitted area, which the remaining work now has to absorb.
- The omission is valued at £20,000, less the £1,320 restocking charge and the £3,000 of lost contribution.
Omission valuation
| Item | Amount |
|---|---|
| Omitted work, 500 square metres at £40 | £20,000 |
| Less restocking charge on returned material | £1,320 |
| Less lost contribution, 500 at £6 | £3,000 |
| Net omission | £15,680 |
The outcome
The main contractor agrees a net credit of £15,680 rather than £20,000. The £4,320 difference is money the subcontractor had already spent or still needed. Taken as a plain credit, it would have gone unnoticed.
To have this done for you, see our Variation Claim service.