Assessments Against a Contractor
When costs are incurred by Public Services and Procurement Canada (PSPC) on projects as a result of a lack of performance by the contractor in terms of time or quality, the Project Manager (PM) must consider possible assessments against the contractor to recover its losses and damages.
Criteria for Assessments
- each assessment must be considered on its own merit
- each assessment requires technical, contractual and legal approvals
- the Claims Prevention and Management Unit/Regional Claims Representative may be consulted when preparing an assessment
- PSPC must have the right to make assessments under the terms of the contract
- the items identified in the assessment must be fair and reasonable
- the amounts stated in the assessment must be clearly substantiated
- the PM notifies the contractor, with copy to Contract Officer (CO) of the Department's intent to make the assessment
In all assessments, PSPC must substantiate their case, and provide detailed meticulous technical and cost records to identify the specific costs incurred. Assessments may include both internal and external costs such as:
- salary costs for all PSPC on site and office project staff
- disbursements for travelling/accommodation of staff overseeing completion of the work
- additional rent incurred by PSPC as a result of delay and inability to use the facility
- costs and damages incurred or sustained by PSPC as a result of supplementary work performed by third parties, e.g. additional consultant fees for extended supervision for actual delay, other contractors, etc.
- time and cost to renegotiate lapsed approvals/funding, misc
- costs incurred by client due to facility not available (swing space, unproductive time)
Reasons for Assessments
Under GC 4.3: Damage to material, plant and equipment supplied by PSPC.
Under GC 6.2: Subsurface Conditions. Contractors have the right to claim for extra costs incurred if subsurface conditions are substantially different from those that could be reasonably expected. PSPC has the right to a reduction in contract amount if the opposite conditions result in savings. Reductions in the contract amount are not often obtained. Contractors usually claim for extra costs incurred and consequently, the PM should not overlook PSPC rights.
Under GC 6.4.1: Determination of Price. The contract provides for amending unit prices and the PM should realize that they may be negotiated 'downward' as well as 'upward'.
Under GC 5.10: Assessment and damages for late Completion. To determine if completion of construction is late:
- provide contractor a realistic completion date at the onset of the project
- during the course of construction, maintain an accurate record of potential and actual delays that occurred and identify their causes and estimated impact on the construction completion date
- insist on the requirement of the proper schedules as stipulated in the specifications
- have contractor incorporate changes into the baseline schedule to determine impacts as they occur
- ensure regular reporting of actual vs. projected progress in the master schedule
- ensure that an "as-built" schedule is produced upon completion of the project
The following may be considered if construction is not completed within the established construction completion date:
- when a request for an Extension of Time has been submitted and is being evaluated, the PM must not take the work out of the contractor's hands
- if an extension of time has been granted to the contractor, then no assessment can be levied against the contractor for the period of extension
- if an extension of time has not been granted under the terms of the contract, PSPC should assess the contractor for late completion. This assessment must be for reasonable and readily identifiable costs incurred by PSPC during the period of delay only (those project costs that would not have normally incurred had there not been a delay). PSPC is obligated to mitigate losses and damages. Where possible, PSPC staff must be reassigned to other projects during the period of delay so their salaries and mark ups are not assessed against the contractor. This is not always possible however, because PSPC resources may be totally dedicated to the project and an assignment elsewhere would require retraining, client or organizational realignment or other significant disruption
Failure to meet specified requirements. Assessments should be made against the contractor promptly in cases where PSPC must accept inferior quality material (that may result in a shorter useful life), or inferior quality equipment (perhaps higher operating costs) than called for in the contract.
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