Ralph, I'm out of the office, this week, so don't have access to my files and don't have time to research the Internet. I have a full file on this subject with Case citations back in the office.

However, I will guarantee that the "Victory Principle" has been re-affirmed in Court, after 1992. The Eng BCA "Bean Dredging" Decision, circa 1989, briefly overturned the Victory Principle. The ENG Board decided that overruns beyond 115% of the estimated quantity should be re-priced , based on actual costs of the overrun quantity. This amounted to cost plus percentage of cost contracting! It was ludicrous. This decision only applied to Civil Works funded work.

Soon after, in another case, the name escapes me, The ASBCA refused to follow Bean for Military Construction. At this point, we had two diametrically opposed rulings which applied to Civil or Military funded work.

The Claims Court,circa 1994, re-affirmed the ASBCA and "Victory" Principle, deciding that the Bean Decision was WRONG. Current Corps of Engineers policy, which I was involved in formulating after Bean was finally dumped, is that price adjustments are only based on difference in unit cost to the contractor between the first 115% and the overrun beyond 115% - irrespective of the contract unit price. If you can wait until next week, I will cite you the Cases. Happy Sails!

By Ralph Broome on Tuesday, May 30, 2000 - 05:19 pm:

Joel
I believe that what your saying in your 3rd paragraph is that you don't reprice the entire work, but only the increase or decrease to the cost of the work caused by the quantity variation. Am I correct? Also, do you have a reference for the ASBCA and Claims Court case(s) that re-affirms the "Victory" decision. I have been told that Burnett Constr. Co. v. U.S. (26 Ct. Cl. 296, "1992") overturned the "Victory" case. Would you have anything on this?

By joel hoffman on Saturday, May 27, 2000 - 10:39 pm:

The VEQ clause is intended to enable a unit price adjustment for actual payable quantities of unit priced work outside a range of 85-115% of the estimated quantity, under certain circumstances.

The VEQ Clause is not intended to "control" overruns. The technical specifications, in combination with the drawings, generally describe what work is payable. The drawings should indicate a "pay line" for rock, so that the Contractor can't just pile it on and expect payment. If the contractor is performing work within the paylines established in the specs and/or drawings, you will have to pay for the extra quantity.

If the work beyond 115 % of the estimated quantity costs the contractor less per unit or costs the contractor more per unit than the cost to the contractor per unit for the first 115%, either party can request an adjustment to the unit price on the overrun work. The adjustment is only based on difference in unit cost to the contractor. The contract unit price, itself, has little bearing on the adjustment or whether to make an adjustment. In other words, we do not "reprice" the overrun work to determine what to pay for the it. This method of adjustment is called the "Victory Principle," based on an old Court case,recently re-affirmed by ASBCA and by the Claims Court.

In an overrun, assuming no difference in method required to place the overrun rock, there may be a savings per unit (ton or cubic yard?),because the contractor has recouped its mobilization costs. Absent a bid item for "mobilization and demobilization", the contract unit price is assumed to include an allowance for this. There might also be some savings per unit due to economy of scale (e.g., discounts from the quarry for more rock purchased?) caused by the overrun. The unit price should include a share of the site overhead costs, which mostly are "fixed", daily costs. If no time extension is involved, you might be able to obtain a reduction for those savings. On the other hand, the extra work may cause extra time on the job. Then the contract unit price may or may not include its proportional share of site overhead.

At any rate, don't allow the contractor to simply reprice the overrun at actual cost. Happy Sails!

By Vern Edwards on Friday, May 26, 2000 - 10:58 am:

Christine:

You are quite right that the contractor cannot charge the government for quantities in excess of what is actually needed based on the drawings and specifications.

Any request for an equitable adjustment under the variation in quantity clause must be based on:

(1) entitlement (actual quantities exceeded estimated quantities by more than +/- 15 percent);

(2) damages and causation (the contractor must have suffered an increase in the cost or time required to perform that was caused by the variation in excess of +/- 15 percent), and

(3) quantum (the amount requested must be based on the damages suffered and must be reasonable).

The dollar amount of the request must pass the test of reasonableness in accordance with FAR 31.201-3.

So you are right to say that the government is not "wide open" to unreasonable claims.

The point in response to Ralph Broome's original inquiry is that the variation in quantity clause does not impose on the contractor a duty to warn the government of an impending quantity overrun. Some other clause may impose such a duty, and a wise contractor would notify the government in advance if it could, but the government cannot cite the variation in quantity clause as ground for refusing to compensate the contractor if it fails to give the government a heads up.

By Christine on Friday, May 26, 2000 - 10:25 am:

Vern,
I apologize, I was kind of thinking out loud. In supplies I consider this a cap on liabilities where there is considerable less oversight than construction. In my own experience we always knew when a construction contractor was close to exceeded estimated quantities no matter what we were buying. Construction Contracts are paid by progress payments all of which are accepted by the Government as service or item received, usually every two weeks. To say the Government is wide open I do not believe. The contractor cannot use any quantities they want and the Government has paths to establish need.

By Vern Edwards on Friday, May 26, 2000 - 10:05 am:

The variation in quantity clause for construction contracts, FAR 52.211-18, cannot be interpreted as a cap on the government's liability for variations in quantity, except to the extent that it limits the government's liability to variations that exceed 15 percent. The main effect of the clause is to prevent either party from seeking a price or time adjustment for variations of less than +/- 15 percent of the estimates.

The clause says that:

(a) if the quantities in the contract are estimated quantities, and

(b) any actual quantity varies from the estimate by more than +/- 15 percent, and

(c) if the variation in excess of +/- 15 percent is the cause of an increase or decrease in the cost of the contract, then

(d) the affected party is entitled to an adjustment equal to the increase or decrease in cost that is caused by the variation in excess of +/- 15 percent.

In addition, if the variation increases the time required for performance, then the contractor may request a time extension.

The variation in quantity clause does not say anything about the contractor having to notify the government in advance if actual quantities are going to exceed estimated quantities.

The only notice requirement imposed by the clause is related to requests for a time extension. The contractor must request a time extension in writing and within 10 days of the beginning of the delay or within such longer time as granted by the contracting officer. The contractor does not have to notify the government in advance of the beginning of the delay.

This is not to say that a competent, responsible contractor should not notify the government when it becomes aware of a problem. I am merely pointing out that the variation in quantity clause does not impose such an obligation as a condition precedent to entitlement and does not relieve the government of any obligation to compensate a contractor in the absence of advance notification.

Agencies should have on-site construction managers or inspectors and require them to prepare daily progress or inspection reports. Those managers or inspectors should make observations and report trends that indicate that there will be significant variations in quantities. If an agency does not have enough staff of its own for this purpose, then it should hire a construction management contractor.

Agencies can also write clauses for their contracts that require contractors to notify the agency if they anticipate significant variations in quantities. But such clauses will work only to the extent that a contractor knows or has reason to know of such variations in advance. Also, see FAR 52.243-5, Changes and Changed Conditions, which requires the contractor to notify the government of "subsurface or latent physical conditions differing materially from those indicated in this contract or unknown unusual physical condidions at the site... ."

By Chrsitine on Friday, May 26, 2000 - 08:43 am:

The way I have always interpreted the variation in quantity clause as a cap of the Government’s liability. This enabled the Government to tell the contractor - you exceeded the estimated quantity we are not responsible for payment above the 15% (or other specified). Of course this would open up for a claim and whether or not the Government received a benefit. Both the contractor and the Government have a responsibility to know what quantities are available for their respective protection. In order to protect themselves the contract should be modified if it goes beyond the specifed estimates.

By Charles Phillips on Friday, May 26, 2000 - 08:27 am:

I think it depends upon the quantity. If twice as much rock is going to be required to build the project this should immediately send up a red flag. The contractor has the responsibility to notify the CO of possibly faulty specifications.
I believe the order of predence is the schedule, specifications and drawings. If the contract is going to require twice as much rock as estimated on the bid schedule then there is a conflict between schedule and drawings and/or specs.

By Vern Edwards on Thursday, May 25, 2000 - 03:07 pm:

I assume that you are talking about fixed-price construction contracts. If so, agencies usually require the contractor to report actual quantities when requesting payment. See paragraph (b)(1) of the clause at FAR 52.232-5, Payments Under Fixed-Price Construction Contracts. Agencies often supplement the FAR clause with a clause of their own which requires the contractor to report specific quantity information.

I know of no standard clause for fixed-price contracts that requires a contractor to notify the government before doing work in excess of an estimated quantities. However, FAR does not preclude an agency from including such a clause in its contracts.

An agency that is administering a construction contract properly should be aware of prospective quantity overruns before they occur.

By Ralph Broome on Thursday, May 25, 2000 - 10:34 am:

At what point would a contractor have a duty to inform the Government of a quantity overrun occurring on construction contract that includes the Variation in Estimated Quantity Clause? In my current case, the CLIN's estimated quantity for rock is approximately half of what is needed to complete the project IAW the contract specs and drawings. Unless I am misreading my Government Contract Law Student Manual (GSA-April 1993), it looks like the Government is unprotected when such a clause is used and the estimated quantities of the contract are faulty. The plus or minus 15% variation included in the clause seems to be the indicator of when either party may request a modification, not an idicator of when the contractor should notify the Government of a quantity overrun.