Superintendent’s direction: variation, suspension or methodology change?

A recent case Civil Mining & Construction v Wiggins Island Coal Export Terminal¹ serves as a useful illustration of how claims made under an AS 2124 form of contract will be assessed.

Wiggins Island Coal Export Terminal (WICET) was developing a new coal export facility.  In doing so it let some 20 packages for contract works, this package being for bulk earthworks under a contract to Civil Mining & Construction (CMC).  The contract incorporated lightly modified AS 2124 conditions.

CMC made some $14.5M worth of claims in the court proceedings, largely based on alleged variations and directions and for delay costs for delays brought about by WICET.  As is usually the case in disputes such as this, WICET counterclaimed for overpayments and liquidated damages for late completion.

The dispute was heard over 36 hearing days with conflicting expert evidence being given both by programmers and quantity surveyors.

There is useful discussion in the judgement, particularly as to the following issues:

When a series of “directions” is given by the superintendent, are they to be classed as being under:

• clause 33.1 – a direction for a change in methodology;
• clause 34.1 – a direction for a suspension of part of the works; or
• clause 40.1 – a direction for a variation?

In this case there were numerous directions from the principal’s representative to the contractor which were claimed to constitute a variation (e.g. to mobilise prematurely notwithstanding the principal’s failure to obtain clearance permits, notification that work was not to proceed in a particular area due to historical artefacts being found and delays in providing approvals).  The Judge thought otherwise.  In his view they did not change the “character of any work”.  However they did fall under either clause 33.1 or 34.1.

This then gave rise to the important question as to whether claims under clauses 33.1 or 34.1 were to be assessed differently to variations directed under clause 40.1?  According to the Judge they were. 

Relevantly:

• Clauses 33.1 and 34.1 only allow recovery of the additional cost the contractor otherwise would have incurred.  This is notwithstanding that they are required to be valued under clause 40.5; and
• In contrast to that, variations directed under clause 40.1 could be assessed by reference to the schedule of rates incorporated for the purposes of valuing variations.  That schedule would not apply to directions under clauses 33.1 and 34.1.

There was an interesting analysis by the Judge as to how to properly assess extension of time claims having regard to the differing conclusions of the two programming experts.  The Judge accepted that it is not always practicable to assess delay claims on a prospective basis and in an appropriate circumstance (in this case for part of the overall delay claim), clause 35.5 allowed assessment on a retrospective basis (using an "as planned" versus "as built" analysis).

As is inevitably the case in contracts of this nature, the contractor had not in all cases sought extensions of time within the times required by clause 35.5.  However, the Judge found that, due to the principal’s representative’s habitual failure to comply with the timing requirements on it, there had been a waiver of the notification timing provisions.

There was also discussion as to the application of clause 36 in claiming delay costs and the ability to use rates referred to in clause 40.5 (for variation valuations) in assessing “extra costs incurred” under clause 36.  The contract had a very attractive rate of $38,000 per day for “Overall Composite Daily Rate (includes Staff and Facilities)” in the Schedule for Dayworks.  The Judge found that this was not referable to clause 36 and would not allow recovery on that basis.