VIC: Excluded Amounts and Variation Claims

Sections 10, 10A and 10B of the Act limit what can be included in a payment claim when calculating the amount of a progress payment.

The following is an attempt to explain the provisions in plain English but, because the clauses are so convoluted and ambiguous, it is possible that an adjudicator or court may interpret them differently.

Section 10A classifies claimable variations into two classes.

The first class of claimable variation is a variation where the claimant and the respondent agree they are not in dispute over the variation. The dispute is over other matters. In calculating the amount of a progress payment, an adjudicator can take into account amounts which the parties agree are payable for variations.

The second class of claimable variation is a variation where the claimant has carried out the work (or supplied the goods or services) at the request of the respondent but the respondent still disputes the claim. For example, the respondent may dispute:

(i) that the work is a variation to the contract; (ii) that claimant is entitled to a progress payment for the work; (iii) the value of the variation; (iv) the method of valuing the variation; or (v) the time for payment for the variation.

But when the contract price exceeds $150,000 and there is a dispute resolution clause in the contract, a disputed variation is not a claimable variation if:

(i) the sum of disputed variation claims exceeds 10% of the contract price; or (ii) the contract price exceeds $5 million.

Section 10B provides that variation claims, other than for 'claimable variations', are claims for excluded amounts and must not be taken into account by an adjudicator in calculating the amount of a progress payment.

In addition claims, unless they qualify as claimable variations based on the following are also excluded amounts:

(i) latent conditions; (ii) time-related costs; (iii) changes in regulatory requirements; (iv) any amount claimed for damages for breach of the construction contract or for any other claim for damages arising under or in connection with the contract; (v) any amount in relation to a claim arising at law other than under the construction contract; (vi) any amount of a class prescribed by the regulations as an excluded amount [No class is prescribed at the moment].

The following table has been developed to assist parties understand the consequences of section 10 of the Act.

Is there any dispute about the variation or its value?

No

It is a claimable variation

Yes, go to next question:

 

 

Does the contract have a dispute resolution clause?

No

It is a claimable variation

Yes, go to next question:

 

 

Does the contract price exceed $5m.?

Yes

It is not a claimable variation

            No, go to next question:

 

 

Does the sum of the disputed variation claims exceed 10% of the contract price?

No

It is a claimable variation

           Yes, go to next question:

 

 

Does the contract price exceed $150,000?

Yes

It is not a claimable variation

           No

 

It is a claimable variation

Go to Claimant prepares and serves Payment Claim

THE ALTERNATIVE - PRIVATE ADJUDICATION

Parties drafting a contract with a contract price exceeding $150,000 should give consideration to whether they wish to have variation disputes or some of them decided in arbitration or by expert determination instead of adjudication. What is better will depend upon the circumstances of the particular contract. Having some variation claims decided in adjudication and some by arbitration or expert determination may have peculiar consequences.

Adjudicate Today has available adjudicators to conduct an expert determination. However we call expert determination a 'private adjudication' It is not an adjudication under the Act and the Act has no application. It is a private arrangement between the parties and the adjudicator. If requested, Adjudicate Today can nominate an adjudicator for a private adjudication. The private adjudication could be under an expert determination clause in the contract or pursuant to an ad hoc agreement.

Further information on Private Adjudication.

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