RICS and Construction Confederation create new document for September 1 regulation change

From 1 September 2007 contractors and surveyors will have to use revised daywork definitions for dealing with the prime cost of daywork carried out under building contracts.

In a new document entitled “Definition of Prime Cost of Daywork Carried out under a Building Contract”, the RICS and the Construction Confederation have provided a definition of the new regulations. The previous document was published in 1975.

Key users of the definition will be building contractors and professional quantity surveyors.

John Bradley, partner at law firm Reynolds Colman Bradley and director of legal affairs at the Construction Confederation, said: “It brings with it substantially more clarity than previous published definitions while providing for flexibility with its new optional provisions.”

Dayworks arise frequently in building contracts since it is almost impossible to anticipate all eventualities in the construction process. Contractors and QSs will benefit from clarification of the way that contract variations, where the work cannot be properly valued by measurement, are handled.

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. The definition provides rules for calculating a standard hourly base rate for labour, for building contracts.

The definition now offers two options for dealing with the prime cost of labour:

• Option A - Percentage addition is based upon the traditional method of pricing labour in dayworks, and allows for a percentage addition to be made for incidental costs, overheads and profit, to the prime cost of labour applicable at the time the dayworks is carried out.

• Option B - All inclusive rates includes not only the prime cost of labour but also includes an allowance for incidental costs, overheads and profit. The all-inclusive rates are deemed to be fixed for the period of the contract. However, where a fluctuating price contract is used, or where the rates in the contract are to be index-linked, the all-inclusive rates shall be adjusted by a suitable index in accordance with the contract conditions.

The party responsible for compiling the contract documents should decide which of the two methods is the most appropriate in the circumstances.