Cost versus market: how are price variations measured in construction contracts?

By Michael Sergeant 2019-07-02T05:00:00

A recent case highlights the two contrasting ways of pricing variations

Construction contracts will often say that variations should be valued at a “fair and reasonable” price. In practice, there are two ways of making such an assessment. A price can be built up using the costs the contractor incurs doing the work. Or, alternatively, it can be done by determining the price of getting the work undertaken in the open market. The two methodologies will often provide similar answers, but not always. And when the difference is significant, the parties will understandably ask what guidance the courts have given on this point.

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