SAE 84

Contract quantities

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Unit pricing can cause confusion.

Sometimes the contract stipulates a specific quantity of units and a unit price, and the government wants exactly that number of units, no more and no less. If actual quantity varies from the specified quantity, you have a breach or a constructive change and some settlement may be necessary.

When the contract stipulates an "estimated" quantity and a unit price, the parties need to decide what they are going to do if the actual quantity varies from the estimate. Again, there are two pricing issues: (1) for how many units will the contractor be paid and (2) what if any adjustment will be made to the unit price if the variance affects the contractor's costs. (There may also be schedule issues, but that is another story.)

Finally, even when the contract does not include a VEQ clause, contractors have obtained relief for variances through the differing site conditions clause. See Administration of Government Contracts, 4th ed., pp. 533-534.

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Unit pricing can cause confusion.

Sometimes the contract stipulates a specific quantity of units and a unit price, and the government wants exactly that number of units, no more and no less. If actual quantity varies from the specified quantity, you have a breach or a constructive change and some settlement may be necessary.

When the contract stipulates an "estimated" quantity and a unit price, the parties need to decide what they are going to do if the actual quantity varies from the estimate. Again, there are two pricing issues: (1) for how many units will the contractor be paid and (2) what if any adjustment will be made to the unit price if the variance affects the contractor's costs. (There may also be schedule issues, but that is another story.)

Finally, even when the contract does not include a VEQ clause, contractors have obtained relief for variances through the differing site conditions clause. See Administration of Government Contracts, 4th ed., pp. 533-534.

In addition to the situation where the nature of the work is different due to actual conditions vs. those represented or reasonably expected, the DSC might well apply when the actual and estimated quantities are grossly disparate that the nature of the actual work was totally different than the expected work. For example, equipment and tool sizes are usually matched to the expected quantity of work. Different sized or different equipment and methods are often required for bigger or smaller jobs.

Otherwise, the philosophy for the VEQ clause under the "Victory Principle" is essentially this: Both parties agreed to a unit price that was was considered fair and reasonable at the time of contract formation, so both parties should live by it. It doesn't necessarily matter whether the contractor is making a windfall or is performing at a loss. The clause does provide for an adjustment if the unit cost to the contractor to perform the work outside the 85-115% band varied from the contractor's unit cost for quantities within the band. But the adjustment is an addition or deduction from the contract unit price to account for the difference in in the Contractor's UNIT COST - not the difference in the contract UNIT PRICE.

Wouldn't you know it - I ordered the 4th edition of "Administration of Government Contracts" before lunch. Upon my return, I pulled out my third edition and it covers the topic (pp 537-542). B)

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Well, I'm sure that the authors of the 4th edition will appreciate your order. B)

Vern

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Well, I'm sure that the authors of the 4th edition will appreciate your order. B)

Vern

In hardback no less. My first soft cover edition was stolen in Saudi Arabia (by a contractor). I bought the second edition at a college bookstore s a replacement when I was home one summer. I gave that one away and bought the third edition from CCH in hardback. They ought to LOVE me...

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