No. | Subject | Traditional contract | Alliance contract | Material difference and trade-off between traditional contract and alliance contract |
7 | The Superintendent may direct the Contractor to vary the work under the Contract. The Contractor will be entitled to an extension of time for any variation (but not delay damages). The Contractor will be entitled to its additional costs of executing any variation (either agreed between the parties or valued in accordance with the provisions of the contract). | The Owner may direct the Participants to change the Works. In some instances, the ALT may also make such directions to the Participants. Government agencies need to carefully consider the appropriateness (or otherwise) of entitling the ALT to direct the Participants to change the Works (particularly in the context of the effect such directions may have on the Owner's VfM Statement). If the ALT determines that the Participants will be delayed in reaching Practical Completion as a result of a direction by the Owner, the ALT must decide on an appropriate extension of time and seek the approval of the Owner accordingly. Unless the ALT determines that a Scope Variation has occurred (i.e. a significant change to the Works), the Participants will not be entitled to any adjustment to the TOC. Allowance for the cost of directions which are not Scope Variations must be made by the Participants in the Risk & Contingency Provisions and then incorporated into the TOC. If the ALT determines that a direction is a Scope Variation, it must determine the adjustment required to be made to the TOC and make a recommendation to the Owner. If the Owner approves, then the TOC will be adjusted accordingly. (It is important that the Owner undertakes an independent evaluation of the ALT's recommendation.) However, please note that, in some instances, the alliance contract will not include an extension of time regime. Rather, there will be an 'adjustment event' regime under which the occurrence of any 'adjustment event' (which events will be workshopped and agreed between the Participants prior to entry into the alliance contract) will entitle the ALT to recommend an adjustment to any part of the Commercial Framework (including the Date for Practical Completion) for the Owner's approval. | Ability to give directions Unlike under a traditional contract, in some instances, the Owner will not have the sole right to give directions to change the Works under an alliance contract. Rather, in some instances, the ALT may also give directions. However, the Owner will be represented (albeit by representatives of the Owner Participant) on the ALT and all decisions of the ALT must be unanimous. In addition, the ALT must act in good faith* and in accordance with the Alliance Charter. Time allowance for Changes Unlike under a traditional contract, the Owner will not have the sole right to determine whether or not the Participants are entitled to a time allowance for directions under an alliance contract. Rather, it will be determined by the ALT. However, the Owner will be represented (albeit by representatives of the Owner Participant) on the ALT and all decisions of the ALT must be unanimous. In addition, the ALT must act in good faith* and in accordance with the Alliance Charter. Cost allowance for Changes Unlike under a traditional contract, the Participants will not be entitled to a cost allowance (i.e. adjustment to the TOC) for all directions to change the Works under an alliance contract. Rather, the Participants will only be entitled to a cost allowance for Scope Variations (i.e. significant changes to the Works). However, allowance for all directions (which are not Scope Variations) will be made by the Participants when agreeing the Risk & Contingency Provisions component of the TOC (which is ultimately approved by the Owner). Given that the allowance will be made as Risk & Contingency Provisions, the Participants will make a gain or loss in the Risk or Reward* regime depending on whether or not the Reimbursable Costs incurred for directions (which are not Scope Variations) are less than or exceed those Risk & Contingency Provisions. These gains or losses will be shared equally between the Owner and the NOPs under the Risk or Reward* regime. |