Average Haul Distance - Mass Balance 1

[geomaritimer]

I am working on an issue where the developer has completed the construction of 195 kilometres of 4 lane highway. It negotiated with a contractor new unit rates based on an increased average haul, this before construction. It was later found that the as-built mass-haul indicated that the average distance had in fact not increased as much as originally thought. The developer is now looking for a credit, it paid overhaul and wants the underhaul credit back. In all fairness, the contractor was paid to haul on average 1000 metres but only actually haul 600 metres. Large savings for the contractor. Has this been done before or need it be negotiated and written into the contract??

 

[Krautso]

Geomaritimer,
Was the unit price for excavation changed to reflect the expected overhaul increase? If so, I don't think I've ever heard of an "underhaul credit" and I can't see the contractor agreeing to it.

Overhaul is generally its own bid item and is measured from the mass-haul diagrams generated following final cross-sections. This usually means that payment for overhaul is not made until finals (as builts) are performed and the true overhaul determined.

If haul was considered incidental to the excavation (regardless of whether the unit price was adjusted) then I doubt your client is entitled to any credit from the contractor unless this provision was included in the tender.

This situation could have easily gone the other way (the overhaul far exceeded the estimate) in which case the contractor would have a case to enter a claim against the developer for the extra costs. Doesn't really seem fair, its just one of the perks of being the contractor, I guess.


Krautso

 

[geomaritimer]

It is more involved, there was a primary agreement where the two parties agreed on prices based on haulage distances. When it came time to bid the work, the distances (theoretical/design) had increased from the original agreement. The parties agree to the increased unit price due to increased haul distance but at the end of the day, as-built information does not reflect such an increase, this in part due to poor design and inaccuracies in the original ground surveys (at design stage) however the As-built is accurate, new OG prior to construction, taken before grubbing. Does this help.

 

[krd]

It should have been written in the contract. The main purpose of the contract is to specify to what extent the owner or contractor will be responsible for the risk that things might not turn out as planned. A good contract would tell you what to do when this happens. A significant variance between bid and final quantity is sometimes set at + or - 25% after which the parties agree that the unit price may be renegotiated. Contractor accepts the first 25% as risk. In this case the revised unit price would only apply to the quantity in excess of the first 25%.
If your contract does not spell out what to do you are left with good faith negotiation. The current trend is to use 3rd party arbitration if necessary and avoid adversarial lawyers at all costs.

 

[Krautso]

So the unit price for excavation was adjusted after the contract was awarded, based soley upon an increase in the expected haul?

I am not familiar with a tendering structure which allows the contractor to bid items after the contract is awarded (unless its extra work). If these prices were negotiated instead of bid upon, perhaps somewhere in the agreeement the basis for the increase in the unit price for excavation (increased haul) was documented and a provision exists detailing how the unit prices was determined?

I would expect that without a provision in the agreement for using measured average haul to determine adjustments to the unit price for excavation after construction, the developer really can't hold the contractor responsible for design flaws or material variations making the work easier for him and might have to be content with having the work done at the agreed upon price.

To answer your original question - I doubt it has been done before and yes, it had to of been negotiated beforehand.

My thoughts, for what they're worth.

Krautso

 

[geomaritimer]

That is my feeling as well but it is difficult to explain that construction contracts are not always fair, sometimes that contractor gets away with one.

 

[jheidt2543]

And then again, sometimes the Owner gets away with one. You know we are all big boys. The reason we negotiate a contract is to try and "balance" each side's interests and DOCUMENT each sides intent. The whole idea of a contract is to TRY to forsee the problem areas and have a method to resolve them. So, when each side has the opportunity to review, negotiate and agree to a contract, why is it that if a provision goes against one side or the other "we got screwed". Isn't more like, "we screwed" ourselves? We have to do more than read the fine print, we have to understand it. Then, when we agree to a contract, we have only ourselves or "the gods" to blame.

 

[KRSServices]

Beased upon what you have written, if the developer and the contractor negotiated a price based upon erroneous or incorrect information, the developer may have grounds for a claim. If however, a contract was then awarded based upon the information that is a different matter altogether. The contract's measurement and payment clauses will define the method and calculation of the payment item. Regardless of previous agreements, if your client accepted the contract, and the M & P clauses have been satisfied, there may not be grounds for a claim. If the contract provides for payment based upon the as-builts or a review once as-builts are determined, or has discretionary language specific to this issue, then there may be grounds for a claim. There may also be grounds for a court challenge too, so be careful. I would solely rely on the signed contract and it's interpretation. That is the document that will preside in court.

 

[geomaritimer]

Thanks for all the advice, very helpful.