QUESTION

I am the CA for an MMCD Contract to which the nature of the work is using trenchless technology under 33 05 24.

The Owner has requested a particular type of treatment work related to the sewer interface at service connections be deleted from the contract in its entirety as the contractor has not been able to demonstrate good workmanship, best practices and meet the specifications to rehabilitate underground infrastructure.

The CA, as well as third-party QA review and testing on work completed to date on a separate item, agrees with the Owner to not peruse this item as work not performed in it entirety.

I have reviewed the document to help determine what the contractor is entitled to, to which my understanding is Deletion of the work the contractor is entitled to 20% of 85% of Tender value of the deleted item as per (9.4.3(1). This is similar to Volume 1-Section 3-Example 6.3.2, since the item is subject to the Quantity Variance being set to zero . However, the deletion of the work is due to the right to reject work under 4.13.1 and 4.13.3, so my current determination is the deletion clause under the Quantity Variance (9.4.3 (1)) does not apply and the CA must determine the value of the deduction.

Since the entire pay item is rejected in its entirety, the amount the Contractor should be entitled to is the bare cost of materials, plus freight, plus OH&P at 20% on those materials

If I could seek your opinion on how to better understand the deletion of work vs the rejection of work, and if an item is deleted or reject example exists (what is entitled to the contractor), as these examples were mentioned in Volume 1 but later supplemented with none? Also if you have any guidance as to my determination and its value are as per contract documents intentions.

COMMENT

If [we] understand your situation correctly, the contractor has done some work on the item the Owner wishes to delete in its entirety. The Owner’s motivation is a belief that the Contractor is incapable of meeting the project specifications. You wish to know if the deletion of the item is as simple as applying GC9.4.3.1 or if the lack of quality of the work to date means some other method is appropriate.

First let [us] clarify one point. Your comment “Deletion of the work the contractor is entitled to 20% of 85% of Tender value of the deleted item as per 9.4.3(1)” is not correct. Even if one were to use 9.4.3 (1), the Contractor must prove to the CA’s satisfaction the % of the line item bid price that was for overheads and profit. It does not default to 20%. That was simply the number chosen for the example in the User Guide. Similarly your comment about 20% later in your question is also incorrect. GC 9.4.3(1) was intended to apply when some work was correctly performed but the final quantity was below the 85% threshold. It can be equally well applied when no work was done – i.e. the Owner wants to delete the entire item before work is done. I am not sure it is appropriate to use it by itself when some work has been done but some or all of that is not up to spec. [We] agree with you that GC 4.13.3 is relevant. It allows a CA to determine if defective work should be left unrectified but at a savings to the Owner. The CA is solely the one to determine the value (if any) and either the Owner or Contractor can take that “initial decision” to a Dispute. This is the way for you to determine if the Contractor is due reimbursement for any of the work to be abandoned. I suggest you will have to determine if any of the work done will be to the Owner’s eventual benefit. If so, then that portion has value to the Owner and the Contractor should be reimbursed for related costs before even considering the additional reimbursement intended under GC 9.4.3(1). If the work to date has no value to the Owner, or worse, will cost additional money to re/re, then that may generate negative values in the overall calculation.

To summarize, if [we] were to do this [we] would:

1.   Determine what value the abandoned works are to the Owner (including any labour etc. to install the     materials which have been installed and will remain- presumably only those which meet specification).    Remember, the Owner is not obligated to pay for anything that does not meet specification.  [Call this amount “X”.]
   

2.   Determine whether there are any additional costs the Owner will incur by having someone else do this work  (e.g. re-handling, storage, insurance, security, etc.)  [Call this amount “Y”.]
   

3.   Determine what percentage (if any) of the line item work was completed properly and already paid at contract prices.  Then apply GC 9.4.3(1) up to the threshold level using the overhead and profit levels proven by the Contractor, or selected by the C.A. if the Contractor’s numbers appear unreasonable.  [Call the resulting amount “Z”.]
   

4.   Simply sum X-Y+Z to get a final value.
   

Again, [we] stress that your lawyer may have a different interpretation of this situation. Nevertheless, [we] would do this calculation to get an “order of magnitude” amount for discussion with the lawyer before finalizing an Initial Decision under either GC.