New guidance on contract variations
Government has worked with the Construction Sector Accord to release new advice to the sector as clients work with contractors to agree a fair value for contract variations due the COVID-19 lockdown.
Last month the Accord developed guidelines on a consistent government position for contractors facing additional costs created by the lockdown. These guidelines stated that in most cases contractors would be entitled to claim costs as a variation to the contract. Today the Accord is sharing additional guidance on the complex process of establishing the fair value of these variations.
The new guidance includes a set of principles for parties to follow when negotiating the cost of the variation, and outlines the factors that need to be taken into account. It lists the types of costs contractors can claim and notes that they need to be able to demonstrate they have incurred these costs and have tried to mitigate them where possible. There is also guidance on a fair approach to 'idle labour' costs, which has been an emerging contentious issue in the sector.
These principles and guidance will apply to all government contracts but are equally valid in the private sector and the Accord encourages anyone dealing with this issue to engage with the guidelines.
The guidance was developed based on Construction Sector Accord principles, and will work to support the COVID-19 Response Plan aim of keeping cash flowing in the sector.
As an Accord partner, the Ministry of Education has already provided its guidelines for valuing COVID-19 project variation claims on school property projects. These have been based on the Accord guidelines, and you can read them on the Ministry of Education website(external link).