What is dayworks in construction?

Dayworks apply when a payment is made to a contractor based on the

cost of materials and wages plus a percentage for overheads and
profits.

For work of that is minor or incidental, where it is a variation, the work

can be carried out on a day works schedule

Dayworks are bound to come up from time to time since it is impossible

working from a Bill of Quantities to cover all eventualities. Daywork is
work for which the contractor is paid on the basis of cost of labour,
materials, and plant plus an agreed percentage for overheads and
profit. Payment in this way is usually reserved for items that cannot be
measured and priced in the normal way

What is Day Work in Construction Contracts?

Dictionary meaning of Day work is ‘work done that is paid on a daily
basis’. In construction contracts this term is applied under different
contexts.

1. For variations in a lump sum contract, wherein work will be evaluated in accordance with the Day
Work Schedule included in the Contract. Daywork rates for material, labor, plant and contractor
profits will be mentioned in the contract. In such cases the Contractor should consider
supervision charges in his bid that will not be paid separately. Clause 13.6 of FIDIC Red Book
can be referred to for claims wherein a daywork schedule is included in the contract.

2. For variation purpose in an item rate contract; when item rates are not available within bill of
quantities for extra items to be executed, method of day works can be adopted as an option.

How is daywork measured in a lump sum contract?

As mentioned in the previous paragraph rates will be included in the contract for material, labor,
plant and contractor profits. During execution of the works contractor should submit quotations
for Engineer’s approval. Works can be executed after getting approval in writing from the
Engineer. After completion of the works the contractor should submit to the Engineer along with
IPC (interim payment certificate) all the invoices, vouchers and receipts of goods, equipments
and plant involved in the work.

What rates and prices can we use to price variations?

The “normal” way to value variations is to use bill of quantities rates. The usual rules are:

• where the varied work is of similar character to, is executed under similar conditions as, and has not

significantly changed the quantity of, works set out in the contract rates and prices for the work the

rates are to be used.

• where the varied work is not then the rates and prices for the work shall be the basis for

determining the valuation; or

• where the varied work is not of similar character, it shall be valued at fair rates and prices.

Helpful guidance on the valuation of variations under an ICE contract has been given in the case of

Weldon Plant Limited - and - Commission for New Towns.

Two questions beg to be asked:

• When is it reasonable to apply Bill Rates? Where a Contractor has a particularly good set of rates

and the work has not substantially changed he can rely on these for valuations of variations. The

corollary being that if the Contractor has under priced a rate item he is also stuck with this regardless

of whether it is advantageous the Employer. The rules are contract specific.

• What is a fair valuation?

In answering the first of these questions it has been said:

"So too is an Employer stuck with rates and prices which have been accepted by him as part of the

Contract. Unless the Contract permits, he cannot extricate himself from the bargain that has been

made."

Change valuation under the NEC Contracts is different.

How can we get our dayworks paid?

The use of dayworks to value variations is often resisted by quantity surveyors and architects as they

believe it provides the contractor with greater reimbursement than he might otherwise secure.

Dayworks are only dayworks and will only be paid when you are executing a variation and when the

variation cannot be valued under the contract by measurement, reference to the bill, tender

breakdown or similar.

Daywork sheets are often more than records of men, materials and machinery engaged in certain

activities for certain lengths of time. It is generally easy to calculate the amount each daywork sheet

represents. That does not extend to an entitlement to payment for that daywork sheet. There is a

multi-step process to be gone through to establish entitlement. This is:

• Is the work on the Daywork Sheet that for which the contractor is entitled to be paid, or is it work

which is to rectify defects?

• Is the work to be paid for on daywork, or is it work which is covered by items in the bill of

quantities? If it is covered in the bill of quantities, and the evaluation mechanisms in the contract

apply, then the contractor is not entitled to be paid on a daywork basis. Equally, if the daywork price

is less than the rate in the bill, the employer is not entitled to pay only the daywork rate.

• If the proper way for payment is on Daywork Sheet then, and only then, are the sheets themselves

of importance. The starting point is that the sheets must be accurate and honest. One of the biggest

problems in relation to dayworks is the fact that there is a general perception that daywork sheets are

neither accurate nor honest.

Many architects and engineers will resist dayworks. There must be a clear instruction and proper

records every time to prove an entitlement.

What can we do about work omitted from our package?

Omissions are worrying as they will instantly mean "loss of profit".

If a contract has a variation clause, this allows for omissions seemingly without restriction. How you

deal with omissions will depend on what is omitted, why it is omitted and how the character of your

work changes as a result.

Usually work cannot be omitted from your package and given to someone else, this is a breach of

contract and you are entitled to exercise your options. Depending on the contract, the options include

claiming payment for the work which you would have originally have undertaken under the Contract,

the right to terminate performance of the Contract and the right to prevent the party in breach from

enforcing the Contract.

Usually the valuation of omissions at bill rates means an under recovery of profit and this

consequential loss may be recoverable under the contract or may not. The exact terms of the contract

must be considered.

How do I recover money by claims?

The first step, is to claim everything that is due to you. In practice, the amount that you will recover

will depend not only on when you submit a claim, but also on your evidence. This highlights the

importance of good record keeping. Often you will have a claim for something without realising it.

Potential heads are:

• variations;

• unforeseen events;

• delay caused by design team;

• error in documentation;

• tendering process;

• sub-Contractors;

• others.

A well thought out and well prepared claim, can include any or all of these heads and bring in

substantial rewards. In a claim you may recover:

• straight forward monetary loss i.e. full recovery for any measured work or variations;

• retention;

• wrongfully deducted discounts;

• damages for breach of contract;

• interest;

• the costs of the claim;

• an extension of time is also a valid head of claim and will not only be the foundation for claims

where there has been a time element, but will also help to protect you against any claims against you

for ascertained or general damages.

None of the above will be recovered unless you take action, and take it promptly.

What do we need to do to submit a claim?

There are three things that you need to do in order to submit a claim.

1. Use the Contract

Many of the standard forms will expressly provide for the recovery of loss and expense.

There are two key points to remember whenever dealing with a loss and expense claim under any

contract:

• the contract itself will usually set out a number of procedural steps which need to be followed closely

in handling all such claims;

• the contract itself will state the different basis upon which a claim for loss and expense may be

brought.

For example JCT 98 at clause 26.2 states the basis upon which a claim for loss and expense may be

brought.

2. Submit it early

What happens if no claim is submitted until after the job is finished? The first result if no claim is

submitted until after the job is finished is that the Contractor is unlikely to be paid any money on the

claim until after the job is finished too i.e. Practical Completion. This does not assist the cashflow for

the contractor, but is of great benefit to the employer. Under most forms of contract, it does not mean

that the claim is barred absolutely. It may mean that the value of the claim is reduced because the
provisions of the contract have not been complied with. Thus by implication this would reduce

contractors cashflow and profitability. There may be arguments from the employer in that:

• interest is not payable on sums claimed;

• if the employer had the claim at an earlier stage, other actions would have been taken which would

have reduced the amount of the claim payable and that, the contractor is not entitled to as much

money as is being claimed. Simply stated the employer was not given the opportunity to mitigate his

losses.

One of the certain effects is that the memories of the people involved will start to fade and there will

be none of the freshness which you would get with a claim which is put in as the work progresses. At

worst the people involved may have left the company taking with them your best source of evidence

to prove your claim.

Contractors should submit claims as promptly as possible, even if the employer/contractor denies

responsibility. Immediate action may pressure the employer/contractor to resolve an ongoing problem

and stop the future consequences.

3. Have good records

The better your records are, the more likely you are to be successful in a dispute. You need to spend

time and ultimately money making sure that you have the right number of staff to produce good

records. This will invariably assist in claims. You need to make a decision as to whether it is more

commercially viable to hire more staff or to possibly lose money later, on jobs.

What will submitting a claim cost?

Obviously it is going to cost you money initially to submit a claim, both your own management costs

and those of any advisors you have retained, but the important thing to remember is that on a good

claim the costs of submitting it are small compared to what you will recover. If you have a good claim

the initial outlay is well worth it.

What is a contractual discount?

Some contractors/sub-contracts provide for the employer/contractor to be entitled to a discount upon

certain conditions being fulfilled. This provides a classic example of the importance of reading the

Contract.

To take DOM/1 As an example, Amendment 10 changed the rules regarding discounts and was issued

in 1998.

Before Amendment 10, the mechanism for payment under DOM/1 was detailed at Clause 21. Clause

21.3.2 provides expressly that the discount can only be made if the contractor complies with the

payment obligations; in that payments are made within 17 days of the date due. If the contractor

does not comply with the provisions of the sub-contract in respect of the payment dates, then

discount cannot be deducted which would entitle the discount to be claimed back together with

interest.

In not allowing the deduction of discount, a sub-contractor minimises his exposure to making a loss.

Furthermore, it reduces his break even point on the project, increasing the opportunity to make

money and become profitable.

A much more difficult question is whether the contractor has to comply with the obligation every

month before he can deduct the discount from the total. If a payment in one month is made late, is it

simply the percentage reduction in relation to that month that can not be made or does the contractor

lose his right to deduct any discount at all? In any event, it is essential to track times of payment in

discount circumstances.

The percentage of discount identified in the Articles of Agreement Part 7 is 21/2%, unless a different

percentage is inserted. A lower rate should always be negotiated because why is a discount being

given? It should not be because of habit or custom.

The edition of DOM/1 which incorporates Amendment 10, however, is totally different It does not

provide for payment terms to be met for the discount. Therefore unless this has been specifically

amended, the Contractor is always entitled to deduct discount.

It is therefore vital to not only know which standard provisions, if any, is incorporated into the sub-

contract but also which edition and which amendments are incorporated.

The right to deduct discount applies to all payments whenever made and may be lost by late payment,

but this would depend on the specific terms of the contract/sub-contract.

If the discount is related to prompt payment, then is each payment considered in isolation, or if one

payment is late is no discount allowed whatsoever? Once again, need effective procedures are needed

to monitor when payments are due, and to check whether or not the contractor/employer should be

deducting any discount at all. Also ensure you have a standard letter to send out if discounts are

deducted although payments are made late.

When discounts are taken ensure that they are not deducted before retention is deducted. If the

opposite is carried out it would equate to giving the employer/contractor a large figure for discount -

not a good idea if you are trying to improve your cashflow or profitability.

What is completion?

When a building is practically complete varies, not only between Architect and Contractor, which you

would

expect, but also varies between Architects.

The key tests to decide whether or not a building is practically complete must include:

• does everything work in the manner it is intended to, subject to minor adjustment?

• does the building serve its intended function?

• will any further work necessary not cause undue disruption to the occupants of the building?

If the answer to these questions is "Yes", then the building is probably practically complete.