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Fixed Cost Contract without escalation delayed by Client in addition VO instructed without increase in time. Contractually how to reason with Client?

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Question added by Muhammad Saud Barakzai , Engineer's Representative , National Engineering Services Pakistan (NESPAK)
Date Posted: 2013/11/21
Sam Lund
by Sam Lund , Management consultant , Stella Polaris

It all depends how the contract and its requirements are setup. After signing the contract, requirements stand as they are, and along with the agreed processes, pretty much dictate how the whole project is going to pan out. And in minimum, these should create the conditions for negotiation, when things do go against the plan.

Even in fixed costs contracts, but with clear requirements in place, any deviation to those requirements may translate to an associated bill going straight to the customer. And vice versa! This is a very effective way to create an atmosphere of reasoning...

Additional work orders: if you have just gone ahead and really accepted them, without reconsidering existing commitments and agreements (amending them accordingly) - then in principle you have mandated that change and costs without much or any right to further compensation. However, if you do have a proper process in place for such changes, then this surely is a topic to negotiate about. You deliver the contract, the requirements, and anything changing that needs to be regulated with amended contracts and requirements! Remember: even additional work orders need to be specified, so that they in turn do not create opportunities for the project to implode.

 

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