Re-Measurement, a Quantity Overrun and an Omitted Alternative Design
A QS is administering a re-measurement contract for the core of a six-storey office building. The bill of quantities contains 850 tonnes of reinforcement at $1,150 per tonne. The rate build-up is material $620, labour $260, plant $90, overhead $100 and profit $80 per tonne. The contract states that if the measured quantity of an item differs from the bill quantity by more than 10%, the rate for the quantity beyond the 110% threshold may be adjusted to reflect actual cost plus 8% overhead and 5% profit. Site measurement now shows 1,020 tonnes. The contractor has submitted a claim to re-rate the entire 1,020 tonnes at a new rate of $1,185 per tonne, based on current material costs of $680, labour $270 and plant $95. The contractor also says that, because the increase was caused by a client-requested layout change, it is entitled to loss of profit on the omitted alternative design. The client's project manager wants to reject everything and pay the original rate for all 1,020 tonnes.
1. Calculate the correct amount payable for reinforcement under the contract. Show how you treat the original rate, the threshold and the re-rated quantity.
Read the worked answer
The 10% clause does not re-rate the whole quantity. It allows adjustment only for the quantity above 110% of the bill quantity.
110% of 850 tonnes = 935 tonnes. Quantity above the threshold = 1,020 - 935 = 85 tonnes.
Original-rate quantity: 935 tonnes x $1,150 = $1,075,250.
Revised rate for the 85 tonnes:
- Actual prime cost: $680 + $270 + $95 = $1,045 per tonne
- Add 8% overhead: $1,045 x 1.08 = $1,128.60
- Add 5% profit: $1,128.60 x 1.05 = $1,185.03 per tonne
- Value of excess: 85 x $1,185.03 = $100,728
Total payable: $1,075,250 + $100,728 = $1,175,978, subject to rounding.
This is close to the client's blanket original-rate figure of $1,173,000 and well below the contractor's claim of $1,208,700. The QS should issue a reasoned assessment showing the threshold calculation and the rate build-up. The contractor's use of $1,185 per tonne is broadly consistent with the revised rate, but its application to all 1,020 tonnes is not supported by the clause. The project manager's blanket rejection is also wrong because it ignores the entitlement above the threshold.
2. Advise on the contractor's claim for loss of profit on the omitted alternative design and on how the QS should respond to the project manager's instruction to reject everything.
Read the worked answer
The layout change may be a variation, and the contractor is entitled to have the instructed work valued under the contract. That does not automatically entitle it to the profit it would have made on a different design that was not built. A claim for loss of profit on omitted work normally requires either an express contractual right or proof that the omission breached a minimum-quantity or exclusivity obligation. If the omission is a normal variation, the contractor can recover direct loss and expense caused by the change, such as abortive design, demobilisation or unused procurement, but not the margin on work it never performed. The QS should ask for evidence separating direct costs from lost margin and should not allow a windfall.
The project manager's instruction to reject everything is also not acceptable. The QS must value the measured work under the contract, including the threshold adjustment, and then assess any separate loss-and-expense claim on its merits. The response should be a written interim assessment that sets out: the measured quantity, the 110% calculation, the revised rate, the amount certified and the reasons for rejecting the global re-rate and any unproven profit claim. The QS should avoid adopting either party's position as a negotiating stance. If the project manager insists on rejecting a valid entitlement, the QS should record the advice and escalate the matter rather than certify a figure that is not supported by the contract and measurement records.