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alexreb

"...due solely to the variation"

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Have a question concerning quantity variations under the VEQ clause (construction clause 52.211-18) and its "...due soley to the variation" language. Mainly, would the language apply and would an adjustment be warranted if a contractor loses a material supplier after exceeding the estimated quantity of a line item and obtains another supplier who charges more for the same material?

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Alexreb, I have some experience in the area of VEQ and helped write the USACE policy guidance on pricing adjustments back in the early 90's. As you may know, we don't simply reprice the units beyond 115% of the estimated quantity based upon the actual unit cost (known as the "Bean Dredging Decision" method). For overruns, we look at differences in unit cost to perform.the work within the range of the first 115% of estimated quantity and those units exceeding 115% of estimated quantity (otherwise known as the "Victory Construction" method, reaffirmed in "Foley Construction", circa 1993 or so. I am on Blackberry today without access to my notes and cases).

At first glance it would appear that the contractor would be entitled to a price adjustment based upon the increase in supplier cost for the work outside the range. However, you didn't say at what point it lost its lower cost supplier. Was it during performance of work bwtween 100 and 115 % of the estimated quantity or during performance of quantities exceeding 115% of the estimated quantity? Do you know at what point the material price changed?

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Approximately 110% of the quantity had been placed when the contractor found out the original contract quantities were in error.

Does it make a difference if the overrun was within the VEQ range? My question was geared at the remaining quantity above the 115% value. Your answer seems to indicate that an adjustment would probably be allowable. Would your answer be different if you found that the contractor lost his supplier due to not living up to their agreement (supplier dumped the contractor)? Or does that make a difference?

Thanks Joel.

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Approximately 110% of the quantity had been placed when the contractor found out the original contract quantities were in error.

Does it make a difference if the overrun was within the VEQ range? My question was geared at the remaining quantity above the 115% value. Your answer seems to indicate that an adjustment would probably be allowable. Would your answer be different if you found that the contractor lost his supplier due to not living up to their agreement (supplier dumped the contractor)? Or does that make a difference?

Thanks Joel.

Alexreb, you will probably have to consult with counsel. There weren't many cases to fall back on when we were trying to define general VEQ policies. In my experience, there are many scenarios and reasons for price increases. I think that the spirit and intent was to hold the bargain for the contracted scope of work (original scope), except where an increase in actual quantities over the estimate caused either an increase or a decrease in the unit cost to perform the work.

in the hypothetical case, the contractor apparently lost its supplier because it didn't hold its end of the bargain with the supplier. You aren't really clear about when the supplier changed and at what point in placement did the price increase actually affect the unit cost to complete the contracted scope of work. You said the contractor discovered the estimated quantities were "in error" at the time of placement of about 110% of estimated quantity. Estimates are estimates, not set in stone and variations are often encountered. Now, if there was a gross error in the estimating methodology or if a differing site condition exists, there have been cases when the courts or boards held that the changes clause or some other clause should apply to the work beyond the range within the clause.

The VEQ clause says that there is no adjustment for overruns or underruns within the range of 85-115% of the estimated quantity. Any adjustment would apply to quantities outside the range, if the contractor's unit cost increased or decreased due solely to the overrun or underrun (absent a change in the work or scope or absent a grossly negligent estimate). Well, technically, the unit cost apparently didn't change due to the overrun nor did it appear to change from the unit cost at the point that the contractor lost its original supplier, although you haven't clearly described when that was. That's why I asked when the higher material prices affected the unit cost.

There are all sorts of things to consider here...

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