When More Is More: The Blurry Line Between Additional Works And Extra Works In Project Variations
The distinction between Additional and Extra works can be a gray area, similar to other legal concepts such as contract v. agreement, liability v. accountability, warranty v. guarantee, subletting v. assignment, breach v. tort, tenancy v. lease or injunction v. restraining order. Need I continue? the list can take the entire page.
Now before we go further, It’s important to note that these concepts may be defined differently in specific contracts and it should be known that the specific definitions will reign supreme if they are made explicit during the formation of the contract. However, the legal definition of these concepts have been provided based on precedents built upon countless construction projects around the globe. The Black’s law Dictionary — 8th Edition defines these concepts for us:
Additional work. Work that results from a change or alteration in plans concerning the work required, usu. under a construction contract; added work necessary to meet the performance goals under a contract.
Extra work. In construction law, work not required under the contract; something done or furnished in addition to the contract’s requirements; work entirely outside and independent of the contract and not contemplated by it. • A contractor is usu. entitled to charge for extra work consisting of labor and materials not contemplated by or subsumed within the original contract, at least to the extent that the property owner agrees to a change order. Materials and labor not contemplated by the contract, but that are required by later changes in the plans and specifications, are considered to be extra work. (Emphasis is mine)
Now, there are a number of cited case laws from the definitions above, but we cannot delve deeper into such otherwise one page of this article will not fit. At this juncture, its important to reduce the arguments to specific issues at hand that are the very crux of the discussion that revolves around the two concepts.
The issues are:
1. Distinguishing The Duo: When Do Additional Works Become Extra Works, Which One Falls Under The Legal Concept of “Variations”?
2. Refuse Execution And Consequences: Right or Responsibility? Can A Contractor Refuse To Execute Either Additional or Extra Works And What Are The Consequences?
By addressing these pointed questions, we will shed light on this crucial legal territory, paving the way for more informed conclussion.
Distinguishing The Duo: When Do Additional Works Become Extra Works, And Which One Falls Under The Legal Concept of “Variations”?
To avoid repetition, let’s set aside the definitions we discussed earlier. However, I’m interested in examining what relevant laws in our country say about these concepts as well. While we acknowledge that the written law alone might not provide a complete understanding, it serves as a valuable starting point. Given that the government is the greatest employer, means there’s a lot at stake when it comes to rights and obligations. When a right is violated in a public project it sets a bad precedent. Therefore, it’s crucial to understand what the statutes dictate. Under “Amendiments after signature” in the Public Procurement Regulations 2013; Regulation 110(3) states:
“110(3) The proposed variations such as additions or deductions which are not incidental to or arising out of the contract, and which alter the scope, extent or intention of the contract shall, in every case, be referred to the appropriate tender board for approval before instructions are issued to the tenderer.” (Emphasis is mine).
The Public Procurement Regulations aim to clarify a common point of contention in public projects: distinguishing between Additional and Extra works. The key line from this regulation is “not incidental to or arising out of the contract.” Other keywords include “scope,” “extent,” and “intent”. By applying these criteria to variations issued, one can determine whether they constitute Additional work or Extra work. The lawmakers clearly anticipated this confusion, which is why they saw it necessary to define what constitutes as a “change in scope” under Regulation 110(5&6). I will not quote them here.
Considering the argued examples, Building a 3-story building with a variation order (V.O) to add a 4th floor, constructing a university project with a V.O to add a library building, or building a 10km, 4-lane road with a V.O to add a gravel shoulder but mantaining the same kms. These all fall in the gray area between a minor adjustment and a complete overhaul of the project’s scope, potentially exceeding the Project Administrator’s jurisdiction. To determine whether a V.O qualifies as Additional work or Extra work, it must be evaluated through the criteria of “incidentalship,” “scope,” “extent,” and “intent” without forgetting its impact to the Contract Sum, there’s a bar there too.
Both Additional works or Extra works are simply variations as both represent changes to the original plan, the key distinction lies in their legal weight. From the cited regulations and with respect to the legal definitions “Variations of works” (Additional work) are considered incidental to and arising out of the contract that are minor adjustments within the existing contract’s scope and fall under the Project Administrator’s jurisdiction. Conversely, “Variations of Contract” (Extra work) are more substantial changes requiring formal Tender Board approval and an Addendum to the original contract is sacrosanct as they impact scope, extent and intent of the project.
In STC Limited v. Water Aid Tanzania, a sole arbitrator on January 13, 2022, released an Award in favour of the claimant, inter alia, Additional works amounting to TZS 707,890,000 for Additional works and TZS 132,000,000 for additional steel pipes, finding no separate approval necessary.
This Award made it to the High Court before Hon. Judge Nangela for reinforcement. However, the parties reached Memorandum of Adjustment and Satisfaction of the Award (Deed of Settlement), with Respondent agreeing to pay the Claimant TZS 524 million, within five days of registering the settlement as a court decree. Judge Nangela duly registered the settlement. While we have not been made privy to the settlement details, the Respondent’s decision to settle suggests they may have viewed their success on such an application as unlikely. Notably, had the Additional works been deemed entirely outside the contract (Extra work), the Respondent would have had a strong case. This could potentially be an error warranting the setting aside or remittance of the Award. Furthermore, the Court would likely have examined the legality of the settlement, particularly if it were publicly available in the tendering process, to ensure its conformity with the law or at least the established policy of this international entity. Thus, “arguably”, the payment for the Additional work was legally sound and did not require separate approval, albeit a Private project.
Refuse Execution and Consequences: Right or Responsibility? Can A Contractor Refuse To Execute Either Additional or Extra Works and What Are The Consequences?
In most contracts, the issuance of instrction is done by the Project Administrator, usually an Architect, Engineer or Project Manager. If an instruction is properly issued, the Contractor is obliged to follow it, this is in line with the industry practice. However the Contractor is supposed to respond to jurisdiction in order to safeguard his rights under the contract, it just happens the Administrator has the most. But surely, the Contractor may refuse execution of an instruction that changes the whole purpose of the contract, and as we have seen, these are Extra works. However, a Contractor is not expected to refuse execution of Additional works because these are within the jurisdiction of the Administrator and are incidental to and arising within the contract, thus an addedndum is not mandatory.
Now, let us examine the contractual implications when a Contractor refuses to execute variations. The appropriate course of action hinges heavily on how the relevant variations and termination clauses were constructed during contract formation. The Contractor’s refusal to execute seemingly permissible variations — Additional works, typically within the Project Administrator’s authority, there must be a reason. Monetary concerns are often the root cause of such refusals. In such situations, engaging in discussions with the Contractor is crucial to establish a shared understanding and reach a mutually beneficial solution that minimizes project disruption. This proactive approach avoids delays associated with retendering the project after termination and minimizes/avoids potential disputes. On the other hand, the Contractor is entitled to refuse execution of Extra works. This is justified because they fall outside the originally agreed-upon scope. Additionally, in the case of public projects, execution of such variations may carry legal risks from what the law holds.
Disclaimer: This article focuses on the distinctions between Additional and Extra works in construction contracts. While it references some legal instruments, It is not a substitute for legal advice in its entirerty. Please consult with qualified experts to discuss your specific situation and ensure compliance with relevant laws and regulations.