Search


Article

Navigating the impact of scope adjustments on construction projects

Johanlene Venter

Senior Consultant

johanleneventer@hka.com

+27 11 731 7026

The ever-evolving landscape of construction can cause sudden and unexpected change and construction projects must be able to adapt to successfully achieve key project outcomes. To manage change, project teams can adjust project plans, drawings or specifications either by way of additions, deletions or modifications, but claims and disputes often arise because of scope changes.

According to HKA’s 6th annual CRUX Report,[1]HKA (2023) Forewarned is forearmed Sixth Annual CRUX Insight Report [online]. Available at: www.hka.com/crux-insight-sixth-annual-report-forewarned-is-forearmed/ [accessed 15 November 2023]. change in scope is the most common cause of claims and disputes globally, and second in Africa (after restricted site access).

In this article, we unravel the reasons behind scope change and explore the underlying factors that fuel disputes and legal battles. Lastly, we consider the success story from a case study that managed to deliver a project on time and within budget against all odds. By shedding light on how scope change can trigger disputes, we aim to empower stakeholders to mitigate these risks and to foster a more collaborative environment, driving project success.

There are valid reasons for scope change. To narrow down the possibilities, we can consider the basic dynamics of how construction projects work, often referred to as the triple project constraints – time, cost and quality.

For example, a constrained budget and project schedule might necessitate sensible decisions to optimise resources and financial allocations to manage change. For instance, imported building material might cause critical delay due to logistical impasses.[2]Picheta R (2021) ‘Why the Suez Canal is so important – and why its blockage could be so damaging’ [online]. Available at: … Continue reading Subsequently, project stakeholders might need to reconfigure certain elements of the scope to make better use of locally available material and to accommodate budget limitations.

To effectively manage change, it is common practice for change mechanisms to already be set out in the construction contract. By adopting an appropriate change mechanism, realistic expectations can be created, and parties can plan accordingly. Although contractual provisions are aimed at creating certainty, anyone involved in construction projects will be aware that unplanned and unexpected circumstances may arise. Therefore the ‘certainty’ that is sought, is not always found.

Most employers and contractors will be familiar with standard contract clauses dealing with scope change like Clause 13 [Variation and Adjustment] of FIDIC Red Book[3]FIDIC (2017) Standard Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer (2nd edn). and Core Clause 6 of NEC4[4]NEC4 (2023) Engineering and Construction Contract Option B: Priced Contract with Bill of Quantities (4th edn). that specify how scope change should be managed and valued.

However, despite best efforts to address uncertainty in contracts, disputes and claims still arise due to different interpretations of contractual provisions. One such instance involved the Van Streepen case,[5]Van Streepen & Germs (Pty) Ltd v Transvaal Provincial Administration (71/87) [1987] ZASCA 69 (21 August 1987) – www.saflii.org/za/cases/ZASCA/1987/69.html [accessed 22 November 2023]. where a contractor-initiated action against the employer due to scope omission. The contractor sought to recover all damages sustained, including expenses not recovered through payments made for work done, liability to its subcontractors, and loss of profit on the contract.[6]The contract was entered into on 24 August 1981 and required the contractor to build student lodging at a College in South Africa. Work had to be completed within 36 months, but five months after … Continue reading The employer contended that the costs claimed by the contractor was limited under the contract (clause 3(6)),[7]This clause stipulated an amount not exceeding 5% of the scheduled prices for the net value of work omitted beyond 20% of the contract amount. which by implication, precluded the contractor from claiming all damages suffered.

The Court of Appeal found in favour of the contractor and allowed the claim for damages, including the loss of profit suffered because of the omission. The court interpreted the limitation in clause 3(6) in context of the circumstances and concluded that the early termination of the contract would probably result in extensive loss for the contractor in excess of the scale of compensation laid down in this provision.[8]The decision identified the fundamental importance of how the clause should be interpreted. The wording should be narrowly construed and if this did less justice to what the employer intended, the … Continue reading

Like Van Streepen, a case from the United Kingdom echoed the importance of clear wording in variation provisions.[9]The court held that a convenience or omissions clause required clear words to allow an employer to omit work and award it to another. In the case of Abbey Developments,[10]Abbey Developments Ltd v PP Brickwork Ltd [2003] EWHC 1987 (TCC) – http://www.adjudication.co.uk/archive/view/case/4/abbey_developments_ltd_v_pp_brickwork_ltd_%5b2003%5d_ewhc_1987_(tcc)/ … Continue reading the subcontractor claimed compensation due to omission of work. However, the contractor contested the claim by arguing it was entitled to omit work by virtue of a contractual clause that allowed the employer to change the scope.[11]This clause stipulates that the employer is allowed to “reserve the right to vary the number of units and the construction programme without vitiating the Contractor or giving rise to a claim from … Continue reading

A strict interpretation would have prevented the subcontractor from claiming compensation, but the court found that the reasons cited by the contractor for scope omission were not supported by the contractual provisions.[12]The reasons provided included amongst others poor levels of performance and inadequate labour on site.

The right to omit work from the project’s scope must be exercised under controlled and documented processes. Otherwise, there will be uncertainty about risk ownership, disruption to the project schedule and increased risk of cost overruns, which could all adversely impact the project’s financial viability and stability. For these reasons, it is commonplace for construction contracts to include limitations on the percentage of work that can be omitted to ensure expectations of the work to be conducted are reasonable and the associated compensation will be received.

In support of the above, the legal principles of fairness and reasonableness require that omissions must be genuine – as determined in the case of Hydro Holdings.[13]Hydro Holdings (Edms) Bpk v Minister of Public Works and another 1077 (2) SA 778 (T). For instance, it would not be genuine if the employer omitted work from the scope and executed the work himself, or awarded the omitted work to a third party, except if the contractor agreed thereto. If the employer omits work that is not genuine and the contractor does not agree to such omission, then the employer will be in breach of contract and the contractor will have the right to recover any loss and/or damage suffered without limitation on the amount of damages and/or loss.

A case study[14]Laryea S and Watermeyer R (2020) Managing uncertainty in fast-track construction projects: case study from South Africa, Proceedings of the Institution of Civil Engineers-Management, Procurement and … Continue reading based on a R1.5 billion (US$100 million) fast-track[15]Fast tracking allows overlapping of sequential work activities which means that construction of work sections can start without having to wait for other sections to be completed. This type of … Continue reading project in South Africa proved it is possible to successfully meet the cost constraints of the project, despite there being 74% of the project scope that the contractor could not estimate at the onset of the project due to insufficient information.

The measures followed on the project are client management techniques and included a rigorous control budget and systematic budget management, designing to budget and collaboration between designers and production teams.

These measures were successfully implemented because the client took the lead role in the delivery process and there was a shift from traditional working practices to a more collaborative approach. This allowed early engagement between the contractor, employer and design team to set and agree a realistic target price within budget at the start of the project, which in turn supported the design team to complete outstanding work in line with agreed perimeters. Should change result in cost increases or savings, trade-offs were sought elsewhere to bring the prices back within the agreed target price.

Scope change, including omissions, occurs frequently on projects for multiple reasons and is a leading cause of claims and disputes.

It is essential for contracting parties to carefully review the contract terms relating to variations, compensation and omissions. Early notification of potential scope omissions can help manage expectations and allow for timely resolution. Clear and well-documented records – together with a transparent breakdown of direct cost, overheads and profit – are essential to substantiate claims and to effectively resolve disputes.

Alternative approaches and strategies to avoid or minimize the need for omitting work should be considered, such as early collaboration between key stakeholders to enhance better decision making and to implement realistically defined scope of work. Other initiative-taking measures to mitigate risk due to uncertainty are to include agile project management to improve flexibility, continuous communication, and regular project reviews, allowing issues to be addressed promptly, before they become critical.

For further support, expert assistance could prove helpful to advise clients with selection of the right contracting framework and a thorough review of the parties’ obligations and contractual mechanisms to avoid disputes or to effectively resolve disputes.

Learn more about HKA’s expert and contract administration service lines.

​​Johanlene Venter is a qualified and non-practicing Attorney, Conveyancer and Notary and will soon be a qualified Quantity Surveyor.  

Johanlene has extensive work experience in construction and engineering projects. She has worked for contractors, employers and dispute resolution consultancy firms on many prestigious projects in South Africa ranging from buildings, power and utilities, oil and gas and infrastructure. She has sound practical experience in the use of FIDIC and NEC, as well as other locally, and widely used contracts, such as the JBCC and GCC.  


References

References
1 HKA (2023) Forewarned is forearmed Sixth Annual CRUX Insight Report [online]. Available at: www.hka.com/crux-insight-sixth-annual-report-forewarned-is-forearmed/ [accessed 15 November 2023].
2 Picheta R (2021) ‘Why the Suez Canal is so important – and why its blockage could be so damaging’ [online]. Available at: https://edition.cnn.com/2021/03/26/africa/suez-canal-importance-explainer-scli-intl/index.html [accessed 20 June 2024].
3 FIDIC (2017) Standard Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer (2nd edn).
4 NEC4 (2023) Engineering and Construction Contract Option B: Priced Contract with Bill of Quantities (4th edn).
5 Van Streepen & Germs (Pty) Ltd v Transvaal Provincial Administration (71/87) [1987] ZASCA 69 (21 August 1987) – www.saflii.org/za/cases/ZASCA/1987/69.html [accessed 22 November 2023].
6 The contract was entered into on 24 August 1981 and required the contractor to build student lodging at a College in South Africa. Work had to be completed within 36 months, but five months after contract conclusion, the employer notified it had to cancel the agreement due to insufficient funds. The contractor raised a dispute based on the employer’s breach of contract and claimed compensation for the costs incurred in relation to the project (such as appointing additional staff, entered contracts with subcontractors, hired plant and equipment, provided a performance guarantee, etc.
7 This clause stipulated an amount not exceeding 5% of the scheduled prices for the net value of work omitted beyond 20% of the contract amount.
8 The decision identified the fundamental importance of how the clause should be interpreted. The wording should be narrowly construed and if this did less justice to what the employer intended, the employer had only itself to blame for not making its intention clear.
9 The court held that a convenience or omissions clause required clear words to allow an employer to omit work and award it to another.
10 Abbey Developments Ltd v PP Brickwork Ltd [2003] EWHC 1987 (TCC) – http://www.adjudication.co.uk/archive/view/case/4/abbey_developments_ltd_v_pp_brickwork_ltd_%5b2003%5d_ewhc_1987_(tcc)/ [accessed 23 November 2023].
11 This clause stipulates that the employer is allowed to “reserve the right to vary the number of units and the construction programme without vitiating the Contractor or giving rise to a claim from the Sub-Contractor.”
12 The reasons provided included amongst others poor levels of performance and inadequate labour on site.
13 Hydro Holdings (Edms) Bpk v Minister of Public Works and another 1077 (2) SA 778 (T).
14 Laryea S and Watermeyer R (2020) Managing uncertainty in fast-track construction projects: case study from South Africa, Proceedings of the Institution of Civil Engineers-Management, Procurement and Law, 173 (2), 49-63. Available at: www.icevirtuallibrary.com/doi/abs/10.1680/jmapl.19.00039?journalCode=jmapl [accessed 20 June 2024].
15 Fast tracking allows overlapping of sequential work activities which means that construction of work sections can start without having to wait for other sections to be completed. This type of construction enables a faster completion of the work and was necessary on this project because time was of the essence to have the facilities completed before the start of the new academic year.

This publication presents the views, thoughts or opinions of the author and not necessarily those of HKA. Whilst we take every care to ensure the accuracy of this information at the time of publication, the content is not intended to deal with all aspects of the subject referred to, should not be relied upon and does not constitute advice of any kind. This publication is protected by copyright © 2025 HKA Global Ltd.

X

Follow HKA on WeChat

关注我们的官方微信公众号

HKA WeChat