Legal Report: AS4000 Contract Analysis and Variations in Construction

This report provides a comprehensive legal analysis of a construction project governed by an AS4000 contract. The report examines the roles and responsibilities of the builder and the superintendent, particularly focusing on contract variations. The analysis addresses specific scenarios, including the builder's response to design issues and the process for handling variations under the contract. It delves into clauses related to variations, the superintendent's authority, and the implications of design changes on the work under contract (WUC). The report also explores the builder's entitlements to additional costs and extensions of time (EOT) due to changes in the project scope. Furthermore, it highlights the importance of communication channels and the liability considerations for all parties involved, including the architect and independent experts. The report emphasizes the importance of adherence to contract clauses and the proper execution of the variation process. The report is based on a commercial building project with specific details about the building's structure, fit-out, and potential moisture ingress, using the provided facts to address legal issues related to variations and responsibilities under the AS4000 contract.

Name of the Student
Name of the University
Author Note

Table of Contents
QUESTION 1.......................................................................................................................1
Question 1(a)...............................................................................................................................1
Question 1(b)...............................................................................................................................2
QUESTION 2.......................................................................................................................3
QUESTION 3.......................................................................................................................5
REFERENCES.......................................................................................................................8
QUESTION 1
Question 1(a)
A variation arises when there is change, addition or omission of the work under the contract,
a change in its character and property, additional work is required or the past work may be
unnecessary and may be required by the Principal to be demolished now. A variation is
common especially in construction contracts and almost all projects have a tendency to
deviate a little bit from the original specifications. A variation normally always requires the
adjustment of the contract terms such as time of completion and price, even though it may not
always mandatorily be such a case. It is important to note however, that even though a
variation may require the change of project specifications, however, the variation cannot lead
to a total change of the overall nature of the contract. For e.g. where the contract was for
originally secant pile shoring, if the result variation changes the contract to the nature of a
diaphragm wall shoring, that variation shall not be valid. Thus it is clear that variations in
contract are a substantial source of conflict between the parties and it helps to have clear and
concise terms for variation in the contract detailing out the specifics, of such, its limits and
the scope of the ramifications to avoid conflict and the resultant cost and time overruns.
Under AS4000, variations in the contract can be dealt with under clause 36. Usually under
clause 36, variations to the particulars of the contract and its requirements and deliverables

are made suo moto by the principal who directs the builder to make such variation
accordingly.
However, clause 36.3 discusses “Variations for convenience of Contractor” – the Contractor
being a Builder here. It authorizes the builder to request a superintendent to make variations
for the convenience of the Builder and enables the Superintendent to do so. However, the use
of the word “may” makes it clear that the Superintendent has the disclosure to refuse to
accommodate such variation if in his opinion, it prejudices the competition of the contract.
The specifics of 36.3 further direct that variations must be requested mandatorily in a written
format. Also, while writing out the query or request for verification, it is very important that
the builder must include an estimate for the extra time and cost that will be incurred for the
variation because, sub-clause 36.3 specifically mentions that the builder is not mandatorily
entitled to neither extra time not extra money for the variation.
The query for the variation for convenience of the Builder must be addressed to the
Superintendent only. It is made clear by the words of sub-clause 36.3 that the Builder
requests the Superintendent to direct variations to the contract.
Question 1(b)
It has been mentioned in the facts of the case that the builder has not been engaged to provide
the interior fit out of the offices. Further, it has been mentioned that the builder, during
construction, was shown some of the fit-out plans and was specifically told that the plans do
not address the lower offices. The builder was also made aware that the architect was himself
aware that the fit-out of the lower offices would require some special modifications as the
area was prone to the ingress of moisture. Thus, as a builder, it would be unwise to offer a
solution to the design as the architect is himself aware of the area being prone to moisture.
Also, the very important factor of liability has to be kept in mind here by the Builder. He is
not technically qualified to suggest variations to the project specifications, even though he
may have gained practical expertise from his years of practice. Normally under the contract
the Builder is only liable for execution of the work according to the specifications mentioned
in the WUC and that is where the extent of his responsibilities end. However, if the Builder
himself offers advice on the altering technical specifications and then later those
specifications turn out to be directly co-related with the loss suffered by the Principal, then

the Builder shall be held liable for his wrong advice. Thus the Builder ought to proceed with
caution here and limit his exposure to risk.
As mentioned above, clause 36.3, does not give the Builder an automatic right over extra time
or funds because of the proposed variation. Thus, it is very important that the time-frame
required by the Builder be addressed to the Superintendent in the written form of the
variation requirement.
The query has to be addressed to the Superintendent under Sub-Clause 36.3. who must
escalate the concern to the relevant specialist, i.e. the architect or the interior decorator as the
case may be. The final answer has to be given by the architect or a technically qualified
person.
The facts also mention that during the planning stage it has been that the Superintendent has
repeatedly been sidelined from the discussions. This is unacceptable, as according to
AS4000, the Superintendent must be made aware to all discussions between the relevant
parties and stakeholders in the construction. The Superintendent has already tried to enforce
this obligation on the Builder and Architect and thus due care should be taken to escalate the
concern through the proper channels. As a builder also, since AS4000 gives the
Superintendent the right to impose penalties on the Builder, due care must be taken to
maintain cordial professional relationships with the Superintendent.
The instruction as regards to how to progress should be channeled through the Superintendent
only, even if the query is ultimately answered by the architect or the interior designer as the
case may be, as they are the specialists of fit out. Clause 36.1 specifically gives the power to
the Superintendent to direct the Builder/Builder to any variation in the contract affecting the
Work under Completion, and this change can include the increase or decrease in any part of
the work, change of character or quality, any additional work, change of dimensions or the
demolition of any part of the work.

QUESTION 2
Under the AS4000 form of contract, the role of the Superintendent is not to supervise the
construction of the project. In fact, the Superintendent does not need to even visit the site
often and regularly supervise that the construction is proceeding according to design
specifications. The contract must largely act in an independent manner to ensure the proper
proceeding of the work according to specifications. If the same is not found to be true, then
the builder is liable for penalties when the final inspection of the work is carried out.
Here, the architecture has offered an unfavorable solution which according to the builder will
not solve the problem. The Supervisor’s job is to liaison and as an intermediary between the
parties to a contract. Here is in effect, the contract manager not a technical expert. Wherever,
conflicts, ambiguities and variations arise in contract, the Supervisor’s job is to confirm such
variations however only with regard to verifying that it is in line with the time limits and
budgets as required by the Principal. Thus, the Supervisor is entitled for engaging with a
third-party architect or an independent expert to get an unbiased and fresh opinion in the
matter.
If an extension of time has been claimed by the Builder, the Superintendent shall revert back
to the Builder within 28 days of receiving the query as per Clause 34.5 of the Contract.
When instructing the builder to proceed, the Supervisor needs to give the due consideration to
the to the variation specifications, the time and cost provisions, and the change in pricing of
the variations. According to clause 36.1 of the contract, the Superintendent may require the
Builder to change, increase, decrease or omit any part of the construction, may ask the
Builder to alter the quality of the construction, change the dimensions, levels and lines,
instruct the Builder to carry out any additional work, or demolish any unwanted part of the
project. According to clause 36.2, the Supervisor must give a notice to the Builder to verify
the proposed variations in the project and the Builder must after perusing through the
variations must inform the Superintendent about the feasibility of the proposed varitions of
the project. In his acknowledgment, the Builder must give an estimate about the effect of the
variation of the project on the timelines of the Completion of the Contract i.e. time of final
completion, and also what the additional costs of that the variations would require. The
Superintendent must assess and acknowledge all the variation requirements in regards to time

and cost as proposed by the Builder. If it is ambiguous, the Superintendent may ask the
Builder to send more detailed specifications. However, without the acknowledgment and
final instructions by confirmation by the Builder, the Superintendent would not be entitled to
start the work on the project. The pricing for the variations must be considered by the
Superintendent according to Clause 36.4 which requires keeping in mind, the prior agreement
and applicable pricing rates in the prior contract, or in a bill of quantities and schedule of
rates already decided in the contract documents, or if such is absent then a reasonable rate at
which such prices may be decided. Finally, the Supervisor become giving final
acknowledgment to the builder to start working on the verifications, must add or deduct such
sum from the contract sum already decided and modify it accordingly.
Under AS4000, a Superintendent is the final authority to take decisions on the contract and
the Builder is bound to work according to the directors of the Builder. Any directions given
by the Superintendent as regards to the variation of the works required shall be included in
the amendment of the work under contract (WUC). It is the Builder’s duty to ensure that the
construction is completed according to the directions issued to him by the Superintendent.
This is evidenced by the fact that under Clause 30.1 – Tests, that after the completion of the
contract, and any time before the commencement of the Defects Liability Period, the
Supervisor shall direct the work to be test. However, the work to be tested shall only be
limited to the WUC. Clause 36.1 – Variations, also specifically provides that the Builder will
not vary the WUC except according to the instructions of the Superintendent. The facts of the
case study specifically mention that the Builder has communicated to the Superintendent, that
according to his opinion, the proposed specifications of the Architect is not sufficient to
rectify the defect. As illustrated under the above-mentioned clauses, and upon the holistic
reading of AS4000, it can be clearly concluded that the Builder does not have an independent
opinion regards to the WUC.
Thus, if the Builder diligently completes his work according to the WUC, he cannot be held
liable for the loss attributed to the Principal due to adherence to the proposal of the Architect.
However, since the Superintendent is bested with all the powers to take decisions to propose
variations under Clause 36 and approve the work under WUC, he shall be held liable for
faulty work if the Architect’s proposal was followed because the Superintendent had the
power to commission the opinion of the independent expert, which he chose not to do.

QUESTION 3
An independent expert was brought in who changed the design specifications of the project
and made it more comprehensive and thus significantly increased the Work under Contract
(WUC) requirements for the builder which also took a considerably longer time to resolve.
Thus, under the contract the Builder may be entitled for to the following costs.
The alterations of the design specifications and the (WUC) by the independent expert would
lead to an extension of time (EOT) being granted to the Builder by the Superintendent under
Clause 34.5 of the Contract. The Builder may himself request the Superintendent for such
Extension of Time, or the Superintendent may by himself grant such Extension of time to the
Builder by his own discretion. Under Clause 34.9 – delay damages, the Builder is entitled to
claim compensation for delay per day payable to him for extension of time not attributable to
him under the Contract.
To claim such money payable to the Builder for delay due to Extension of Time, a claim must
be submitted by the Builder as per Clause 41.1. whereby he must submit the claim as soon as
he reasonably becomes aware of the claim after perusal of the new design specifications and
claim of EOT.
During the period of the time extended, the Builder is entitled to claim successive payments
by way of Progress claims under Clause 38 of the Contract. Under Clause 38.1 of the
Contract, the Progress Claims shall include evidence of the moneys payable by the Builder to
the workers of the Builder or sub-builders employed by him. As due to an extension of the
time, The Builder has to employ these people for a longer period of time, their wages can also
now be claimed by the Builder.
As the new design specifications from the independent expert is quite a lot more
comprehensive in nature, it can be assumed that there has been a lot of variation in the Work
under Contract which will increase the costs of the Builder. The Builder would thus be
entitled to send a variation request to the Superintendent under Clause 36.3 of the Contract.
And while granting the request for such variation, the Superintendent has to alter the Time of

Completion and the grant extra costs to the builder as per the prior agreement and reasonable
pricing under Clause 36.4 of the Contract.
The contract specifies the following maximum variations in price.
• Variations 8% for overheads and 5% for Margin
• Liquidated Damages $4,500 per day
• Delay Costs $3,300 per day
It is to be remembered that this are the maximum amounts available and the Builder is not
entitled to automatically get the maximum amount. The actual amount shall be adjudged by
the Superintendent after taking into consideration, reasonability and costs incurred the
Builder with proof.
Also, a Builder has to be aware of the Security of payment legislation which was introduced
in each Australian State to ensure payments are made to contractors and sub-contractors and
their rights are protected even in the case of an ongoing dispute under the Agreement such as
disputes under Clause 42 of the AS 4000 contract. Different states have different security of
payment legislation. The relevant one for new South Wales is the Building and Construction
Industry Security of Payment Act, 1999 under which most commercial construction contracts
are covered as a rule. Some of the general protections afforded to Builders (contractors) are
invalidity of unilaterally unfair “paid when paid” clauses in the contract which acknowledges
a debt but does not provide a timeline or guidance for payment, a minimum rate of interest
payable to the Builder regardless of there being provision for such in the contract, maximum
payment terms of 15 days for head contract and 30 days for sub-contracts, and a statutory
right given to the contract entitling him to suspend work due to non-payment of dues. A
recent development has seen some states including in their state versions of Security of
Payment Legislations, clauses to include a separate project account, which is not under the
unilateral control of either party so, as to guarantee payment to contractors with minimum
hassle. However, it is very relevant to note that, the security of payment legislation does not
allow for provisional allocation of costs or defrayed payment of costs for litigation. In other
words, to bring a claim under the act, the legal costs of both parties must be borne by
themselves. The adjudicator may also refuse to release the final judgment or award in favour
of the claimant if it is found that moneys payable to the adjudicator is due. If however, after

the adjudication, it is found that the claim of the Builder is successful and fault is attributed to
the other party, the legal costs of the Builder can be imposed by the adjudicator on the other
party. It must also be noted that the legislation provides very limited scope of appeal and
appeal on merits are almost quite impossible. Even the fact that the adjudicator has
committed an error and incorrectly interpreted and applied the terms of the contract does not
give rise to a cause of action for appeal. To make an appeal a “jurisdictional” error must be
alleged by the aggrieved party such as making a case that the adjudicator did not abide by
rules of procedural fairness and afford a fair hearing, did not have jurisdiction in matter such
due to not being referred by the party – irregular appointment and failure to consider (not
interpret) the terms of the contract. Even, in case of successful appeals to a statutory court,
the party against whom the award has been declared must deposit the said amount in the
custody for the Court as security.
REFERENCES
Australian Standard AS 4000-1997 General Conditions of Contract
Building and Construction Industry Security of Payment Act, 1999