Variation Orders in Contractual Claims on Building in Lagos

Introduction

It is seen that in the context of Lagos, the contractual claims on building projects Is a major issue for the following reasons:

• Lagos does not have the infrastructure that could cater to large multi-storied building projects for the burgeoning population in terms of budget allocation and funds availability.

“Its population has been growing at around 6% annually since the 1980s, and growth rates are projected to be between 4% to 5% till 2015. With a current estimated population of 11.14 million, and is expected to be home to over 17 million by 2015.” (Lagos Metropolitan Development Project-Final ESIA Introduction: Background).

• Rising population and pressures on socio-economic constraints have made Lagos a densely populated country “Among these are the problems of the liveability of the city and its sustainable growth and development, including problems of unemployment, and the emergence of an increasingly marginalized and economically pauperized group.” (Peil M).
• Due to the lack of proper administration and governmental funding, most of the construction is now concentrated in the hands of private entrepreneurs who often resort to questionable means in acquiring and sustaining large landholdings and building settlements there. Since economic motivation is present, it is often the poor and underprivileged sections of society who are not able to invest heavily in real estate or housing projects who turn out to be the ultimate sufferers.
• In the case of well-structured and implemented Governmental projects, the question of time or cost overruns are manageable and could be funded through government channels, and state budget resources. But otherwise, when market dominion is the integral factor, aspects like time and cost overruns, quality considerations and compliances with state norms and strictures on construction activity would receive lower priority.
• Under such circumstances with private consolidation in property management, it is necessary that greater monitoring and supervision at the grassroots levels, need to be undertaken in order to ensure that all aspects of property management are carried out in optimum methods.

Aspects of VO

It is under this backdrop that this study has been undertaken in order to ensure that contractual claims resulting out of variation orders (VO) are genuine, ethical and within the framework of contractual obligations.

In this context, it could be seen that contractual claims may arise due to many aspects. In some cases, lower performance on the part of the main contractor or sub-contractor could lead to a delay in receiving a clean inspection or certification report from the Surveyor or inspector. These officials may require amendments to the original drawings and blueprints to meet legal or safety requirements. Thus, in such cases, VO needs to be passed and rework needs to be complied with. The main aspect that needs to be considered in variation orders is the underlying reasons for such orders. This may arise due to:

The owner or his engineer required changes that were not envisaged in the original drawings. In such cases, the contractor or subcontractor may not be at fault, and therefore in such cases, any claims that would occur, in terms of cost build-up, or extension in time needs to be allowed, since the delays and cost overruns are occasioned by the owner, or his agent or servant. “An unfortunate aspect of the variation clause is that it tends to encourage clients to change their minds and embark on building projects without having properly thought through their project requirements.” (Ndihokubwayo R and Haupt T. C).

Sometimes the quality of materials used, or the construction process may be faulty or defective, or it may be difficult to carry on the construction process due to extraneous reasons, or reworking may become necessary. Under such circumstances, it becomes necessary to enforce the relevant provisions of JCT 80. This may be in terms of Acts of God, Third-party influences or even material changes that may affect the construction process or delay the project

“Arbitration in disputes involving late payment and time scales is also included in JCT80.” (Helps and Dominick).

In the case of claims, it needs to be ensured that relevant and required procedures need to be adhered to, in accordance with the laws in force. For example, most construction contracts in the UK are of the kind of main contractors with assigned subcontractors. The work process needs to adhere to architectural design and main drawings.

The role of the quantity surveyor is important in construction projects since the responsibility of receiving and processing claims is placed on him. He has to pass options and certify the claim documents raised by the contractor, if and when it arises, after examining, analyzing and authenticating produced documents.

Next, it is necessary that contractors or sub-contractors produce clear-cut and quantifiable claim documents, along with the supporting documents in substantiation of their claims. “The form of Conditions of Contract that follows has been developed on the basis of considerable international experience in the drafting and management of contracts, bearing in mind a trend in the construction industry towards simpler, more straightforward language.” (Section IV Conditions Of Contract: Notes On Conditions Of Contract).

The nature of claims needs to be within the framework of contractual obligation and not arise out of the negligence of the concerned parties, or matters which do not fall within the jurisdiction of the covenant. For instance, delays and material cost accretions arising out of natural causes not previously envisaged or predetermined, acts of Third parties and factors outside the jurisdiction of the contractors, or this agent, or employees, could be construed as passable, as determined by parties.

Scope of this study

The government of Lagos state, through a government agency, formulated a large renovation and reconstruction program to make available the best technological up-gradation education that could be ensured to the next generations of the State. The scope of this program could be to facilitate a more convenient, state-of-the-art education system designed to provide job-oriented technical education to young people to stem the scourge of rising unemployment levels with its various ramifications on the socio-economic fabric of the country. The delivery system that was envisaged was in terms of a contracting and sub-contracting basis where specialized parties performed pre-arranged and contracted jobs. The building promoter was the government of Lagos state.

This research project focused on the institutional projects towards renovation and reconstruction of large building programs in Lagos state.

This research study was mainly focused on respondents who were employed in the promoter government agency.

This study is part of a larger research study that is being carried out in Lagos state for gaining knowledge and insight into the benefits of variation orders in the various contractual claims that emanate from building projects in the State. The sources from which the database could be prepared and assimilated were through the process of questionnaire surveys and personal interviews with promoters, developers, consultants and contractors along with the professional consultants who were actively involved, in one way or other in the building project.

Research methodology

It has been ascertained that there are sixteen salient factors that provide material and relevant data r for the study and this has formed the basis for a set of two questionnaires that were to be individually answered by the respondents.

This survey focused on the respondent employees in the organization comprising of responsible architects, engineers and other support staff who were selected to address the various aspects presented in this survey as respondents.

The selection procedure was unbiased and done through lots. A total of 50 respondents, formed a cross-section of the various professions that were involved in this building project, to ensure equal representation for all.

The questionnaires that form the core of this study is being next dealt with.

Questionnaires

Section A

1. What are seen to be the main reasons for the delay in the completion of the project?
2. If it is due to events beyond the powers of the contractors or subcontractors – Force majeure, etc., has the architect given a fair and reasonable extension as enunciated under Clause 25.4.1-3 of JCT 80?
3. Are there aspects of Clause 25.4.4-16 (Third Party Claims) of JCT 80?
4. With regard to the role of the quantity surveyor, has the claim been determined according to existing laws?
5. Are the claimants’ bills cogent and quantifiable and in line with the contractual agreement?
6. Have accepted practices in terms of interim valuation covering the level of work completed + the amount of certified unfixed materials been carried out?
7. In the Lagos context, has it been ensured that the building construction or modifications have been duly approved and permitted by local bodies?
8. Have limits to contract in terms of time, valuation and overruns are determined by the concerned authority and agreed upon by all parties?

Questionnaire

Section B

1. Whether during the course of the improvements or renovating, there has been a delay in work progress which may not have been deemed to affect the final completion?
2. Have there been increases in project costs due to delay factors? From the side of the owners? Contractors? Elucidate
3. Has the hiring of new specialized functionaries affected the course of work?
4. Has there been an increase in the overhead expenses over the course of the completion of work?
5. Have there been undue delays in payments and why?
6. Has there been a degradation of quality in the project and why?
7. Have procurement delays due to needing new materials or new processing machinery crippled the ultimate delivery system?
8. Has there been a degradation of productivity in the project and why?
9. Have the issues of reversals and demolition affected the final delivery?
10. Have there been logistic delays in the completion of the project and why?
11. Have logistic issues arisen during the project that has jeopardized the goodwill and reputation of constituents?
12. Does there need to be an enhancement in the safe working conditions of the project site? How?
13. Have poor professional relationships among responsible officials been a bane in this project?
14. Has the additional payment been sanctioned to the contractor for extra work?
15. Quantum for extra work?
17. Has lack of clear instructions been a cause for professional frictions between the parties?
18. What has been the fundamental reason for the completion scheduled to be delayed?

Of the 50 respondents, 3 respondents submitted incomplete answers and were nullified. The data provided by the balance 47 formed the basis of this study, combined with the responses received from face-to-face interviews conducted with them.

Works Cited

Helps and Dominick. The New JCT80: Article Abstract. 1998.

Lagos Metropolitan Development Project-Final ESIA Introduction: Background. Lagos State Government. 2005. Web.

Ndihokubwayo R., and Haupt T. C. Uncovering the Origins of Variation Orders: Introduction. 2008. Web.

Peil. M. Infrastructure Services and Housing: Conclusions. 1991.

Section IV Conditions Of Contract: Notes On Conditions Of Contract. The World Bank: Procurement. 2008. Web.