Negotiations regarding variations

CLIENT
Rigging Contractor (“Subcontractor”)

OTHER PARTY
Head contractor (“Head Contractor”)

CONTRACT
Contract to install structural steel to a recreational facility in Melbourne

PAYMENT CLAIM
$80,434.76 including GST

PAYMENT SCHEDULE
$46,141.00

The Head contractor withheld $80,343.76 for the recreational facility and withheld $61,055.54 on another job that was already completed.

The initial payment schedule stated the payment proposed was $46,141.00.

The difference related to a combination of variations. However, the Head Contractor used the large sum of money withheld to try to force a discount on the variations.

Through facilitated negotiation and initial notices under the Security of Payment Act, LPF altered the bargaining position and gained the advantage. An amicable solution was reached and payment was made by the Head Contractor within a week.

CONCLUSION
If a Head Contractor is instructing the completion of a considerable number of variations, carefully document instructions. The Security of Payment Act can be used to get the head contractor to the negotiating table. After variations exceed 10% of the contract sum, claims under the Security of Payment Act are more challenging.