The Price You Agreed Is Not the Price You Pay
One standard form tells you on its own face that the quantities behind your tender figure are estimates. The other says the Contract Sum will not be altered — and then lists eleven express provisions that alter it. Neither is dishonest. Both are routinely reported to boards as though the number were the cost of the building |
WHAT HAPPENED · ILLUSTRATIVE COMPOSITE · FIDIC RED BOOK A road contract with an accepted contract sum of ₦3.4 billion. The Bill carries 18,000 m³ of rock excavation at ₦14,500 per cubic metre. The rock proves more extensive than the ground investigation suggested, and the measured quantity finishes at 21,400 m³ — a 19 per cent increase, comfortably past the 10 per cent threshold everybody on site has heard of. The contractor prices a new rate at ₦19,800 and claims the difference across the additional quantity: roughly ₦113 million. However, it recovers none of it. The quantity test is passed, and the value test is passed; unfortunately, the third limb is not: the contractor's own build-up shows the Cost per unit quantity moving by about 0.6 per cent, because the haul distance barely changed and the plant was already on site. The 3,400 m³ is paid at ₦14,500, and the contractor is paid ₦49 million for work it believed was worth ₦113 million more. |
“Three out of four is not the test. Sub-Clause 12.3 requires all four conditions together, and the one that fails is the one nobody quotes in the site office.”
The two names FIDIC gives the money
Two terms, not one. Under FIDIC the headline figure has a defined term of its own. The Accepted Contract Amount means the amount accepted in the Letter of Acceptance for the execution of the Works. The Contract Price is a different defined term: it means the price defined in Sub-Clause 14.1, which is the value of the Works in accordance with Sub-Clause 12.3, subject to adjustments, additions and deductions in accordance with the Contract.
And the form says so. The same sub-clause then says the quiet part out loud. Sub-Clause 14.1(c) provides that any quantities set out in the Bill of Quantities or other Schedules are estimated quantities, and are not to be taken as the actual and correct quantities either of the Works the Contractor is required to execute or for the purposes of Clause 12. A developer who budgets to the Accepted Contract Amount has budgeted to a figure the contract itself calls an estimate.
JCT starts from the opposite end and arrives in the same place
The clause everybody half-remembers. Clause 4.2 provides that the Contract Sum may not be adjusted except under the express provisions of the Conditions. Read quickly that sounds like certainty. Read it slowly and the certainty is in the second half of the sentence: subject to clause 2.14, an error in computing the Contract Sum is treated as accepted by both parties.
Your mistake is yours. That second limb catches people. An arithmetical mistake in building up your own tender figure is not a ground for revisiting it. The protection runs to errors in the Bills — which are the employer's document — and not to errors in your own addition.
But the employer's mistake is the employer's. Errors in the Bills are treated very differently. Where there is an unstated departure from the method of preparation, or any error in description or in quantity, or any omission of items, the departure, error or omission does not vitiate the contract but shall be corrected — and under clause 2.14.3 the correction is treated as a Variation. That is the point at which the quantity surveyor's work becomes the employer's risk: a measurement mistake in the Bills is paid for as though it had been instructed.
“An arithmetical error in computing the Contract Sum is treated as accepted by both parties. An error in the Contract Bills is corrected and treated as a Variation. Same mistake, opposite consequence, and the difference is whose document it was in.”
What it actually takes to change a rate
Four conditions, cumulative. Under FIDIC the Engineer values each item by applying the measured quantity and the rate specified for that item in the Bill. On a quantity change, a new rate becomes appropriate only where four conditions are satisfied together: the measured quantity has changed by more than 10 per cent from the Bill quantity; that change multiplied by the Bill rate exceeds 0.01 per cent of the Accepted Contract Amount; the change directly changes the Cost per unit quantity by more than 1 per cent; and the item is not specified as a fixed rate item or fixed charge.
The one that usually fails. Fail any one of the four and the original rate stands however far the quantity has moved. The limb that usually fails is the third, because a quantity can change substantially without changing what it costs to do a unit of the work — which is precisely what the composite above turns on.
And it is derived, not agreed. Where a new rate is due, it is derived rather than negotiated. It must come from any relevant rates or prices in the Bill with reasonable adjustments. Only where no specified rates are relevant does it come from the reasonable Cost of executing the work plus the percentage for profit stated in the Contract Data — and if the Contract Data is silent, five per cent. A contractor carrying a thinner margin than five per cent on that item does better on the derived rate. One carrying a fatter margin does worse and will not argue it back.
JCT does the same job through Approximate Quantities
The valuation route. Where an Approximate Quantity is a reasonably accurate forecast of the quantity required, the rate for that Approximate Quantity determines the valuation. Where it is not a reasonably accurate forecast, the rate is only the basis of the valuation and a fair allowance for the difference in quantity must be added.
And two more. What is less widely noticed is that the same inaccuracy opens two further doors. The execution of work for which an Approximate Quantity is not a reasonably accurate forecast is a Relevant Event, so time is extended. It is also a Relevant Matter, so loss and expense follows. One bad forecast is therefore a valuation adjustment, an extension of time and a loss and expense claim — three routes from a single error.
THE OTHER DIRECTION· ILLUSTRATIVE COMPOSITE · JCT-BASED FORM
A hospital fit-out, Contract Sum ₦1.9 billion, with the below-ground drainage measured as an Approximate Quantity because the existing services were undocumented. The employer's board is told the contract is a lump sum and budgets accordingly, with a 4 per cent contingency.
The Approximate Quantity proves to be less than half of what is required. The rate becomes the basis of the valuation and a fair allowance is added for the difference. Time is extended, because the inaccuracy is a Relevant Event. Loss and expense follows, because it is a Relevant Matter.
The employer pays the measured work, a fair allowance on top of it, the prolongation, and the cost of a handover that slips a quarter. None of it is a claim. All of it is the contract working exactly as drafted — on a figure the board had been told was fixed
“The contingency was sized for the unknown. It was not sized for a quantity the contract itself describes as approximate".
The two switches that are off until somebody turns them on
Read the first line. This is the finding most likely to cost a Nigerian contractor real money, and it hides in the opening line of two sub-clauses. Sub-Clause 13.5 opens by disapplying itself where no Daywork Schedule forms part of the Contract. Sub-Clause 13.7 opens the same way: without Schedule(s) of cost indexation in the Contract, that sub-clause does not operate either.
Opt-in, not default. Neither is a default. Both are opted into at tender stage by whoever compiled the contract documents, which on many projects is nobody in particular. Without a Daywork Schedule there is no agreed basis for valuing minor or incidental instructed work, so every such instruction becomes a negotiation. Without a Schedule of cost indexation there is no inflation mechanism at all.
And JCT has removed the other two. JCT has closed the same door from the other side. Schedule 7 of the printed form is Fluctuations Option A alone — contribution, levy and tax fluctuations. Options B and C, which deal with labour and materials cost and with formula adjustment, are not printed in the contract documents at all and are published by JCT separately. On an unamended JCT form the only price movement for inflation is a change in tax or levy. The cost of cement is not a tax.
Why this bites hardest here. Put that together with a Nigerian fact. Nigeria has no widely published construction-specific cost index of the kind FIDIC's adjustment machinery assumes — a point this series made in Week 3 — so the Schedule of cost indexation is frequently left out because there is nothing obvious to put in it. The result is a contract with no inflation mechanism, priced in an economy whose policy rate is 23 per cent. The protection was not negotiated away. It was never switched on.
“On an unamended FIDIC contract with no Schedule of cost indexation, the largest risk on a Nigerian project — input cost inflation — sits with the contractor by default. It arrived there because a schedule was left out of the tender documents.”
The eleven ways the number moves
NEC4, and why it is not in that table
Six answers, not one. Under NEC4 the question this article asks has a different answer for each main Option, and the letter is chosen before anything else. A priced contract with an activity schedule pays against completed activities, so an item half built is worth nothing that month. A priced contract with a bill of quantities behaves more like the forms above. A target contract pays Defined Cost and settles against the target through the share mechanism at the end, so the outturn depends on a calculation nobody performs until the job is over. A cost-reimbursable contract has no agreed price in the sense this article means at all.
What to ask first. The consequence for a Nigerian employer or funder is worth stating plainly. On NEC4 the Option letter is a more important commercial decision than any rate in the document. Ask which letter was selected, and ask it before asking what the price is.
If the employer is a public body
What the Act provides. Three provisions of the Public Procurement Act bear on the cash profile. A mobilisation fee of not more than 15 per cent may be paid, it must itself be backed by a guarantee or bond, and once it has been paid no further payment may be made without an interim performance certificate issued under the contract. Where a mobilisation fee is to be paid, a performance guarantee is a precondition of the award. And no procurement proceedings may be formalised until the procuring entity has ensured funds are available.
And the limb everybody misses. The size of that guarantee is where most tenders go wrong, because section 36 does not stop at ten per cent. It requires the guarantee to be not less than 10 per cent of the contract value, or an amount equivalent to the mobilisation fee requested, whichever is higher. On a ₦3 billion contract: ask for 5 per cent and you take ₦150 million against a ₦300 million guarantee; ask for 10 per cent and you take ₦300 million against the same ₦300 million; ask for 15 per cent and you take ₦450 million against a ₦450 million guarantee.
What that means in practice. Two consequences follow, and neither is obvious from the ten per cent figure alone. Below ten per cent there is no guarantee saving in asking for less — a contractor who modestly requests five per cent posts exactly the same instrument as one who requests ten and takes twice the cash. And above ten per cent the advance stops being free money: each additional point of mobilisation is matched by a point of guarantee, so the top five points are borrowed against your own facility rather than received from the employer.
And what it does not. The silence matters more than any of them. The Act caps what a contractor may be paid before starting and says nothing about how far the price may move afterwards. There is no statutory percentage ceiling on post-award variation in the Act itself. Whatever discipline applies to the outturn comes from the contract, from the procuring entity's own approval thresholds and from the Bureau of Public Procurement's processes — not from a section anyone can point to. A contractor relying on a statutory limit to protect it, or an officer assuming one constrains the employer, is relying on something that is not there.
What to do before the next tender report
Report a range, not a figure — the board is entitled to the Accepted Contract Amount and to the realistic outturn band around it, with the drivers named. A single number presented as the price is the error this whole article describes.
List the Approximate Quantities and size them — each one is a forecast somebody made. Ask who made it, on what information, and what happens on the valuation, time and loss-and-expense routes if it is wrong.
Add up the provisional sums and state them separately — they are a budget, spent only as instructed. A tender total that buries them reads as a price and is not one.
Check whether a Daywork Schedule exists — on FIDIC, SC 13.5 simply does not apply without one, so every minor instructed work becomes a negotiation.
Check whether a Schedule of cost indexation exists — on FIDIC, SC 13.7 does not apply without one. On JCT, confirm whether anything beyond Fluctuations Option A was incorporated. If neither, the contract carries no inflation mechanism and somebody is absorbing it.
Read the Contract Data entry for profit percentage — it governs derived rates and provisional sum mark-up, and defaults to five per cent on FIDIC if left blank.
On NEC4, establish the main Option before anything else — A, B, C, D, E or F determines what the agreed price even means, and no rate in the document tells you.
On a public contract, treat the 15% as a ceiling and the 10% as a cost — the mobilisation fee is capped, the performance guarantee is a precondition, and the guarantee ties up facility that has to be priced somewhere.
Which side of the table you are on changes what you do about it
If you are the employer or developer — stop asking for the price and start asking for the band. Require the tender report to carry the Accepted Contract Amount or Contract Sum, the total of provisional sums shown separately, the Approximate Quantities listed with the basis of each forecast, and a statement of whether any inflation mechanism exists at all. A report that cannot answer those four is not yet a tender report.
If you are the contractor — price the switches, not just the work. A contract with no Schedule of cost indexation has handed you the inflation risk; a contract with no Daywork Schedule has handed you a negotiation on every minor instruction. Both are visible at tender, both are priceable at tender, and neither can be recovered afterwards by argument.
If you are the consultant — say which number you are giving them. A quantity surveyor who reports a single figure without naming its mechanism has given the board a number it will treat as fixed, and will be asked at the final account why it moved. The defensible position is the one taken at tender, in writing, with the drivers listed.
The objection, and what actually answers it
The fair question. The objection is reasonable and it is usually put by the employer: if the price is this movable, what was the point of tendering it competitively? Three answers are given and the first two are weaker than they look.
The two weak answers. Competition still does its work — true, and the rates are competitively set and still govern. But that is an argument about rates, not about the total, and it was the total the board was given. Contingency covers it — sometimes, and a 4 per cent contingency does not cover an Approximate Quantity that was out by half, because it was never sized to.
The answer that holds. The answer that holds is that the movement is knowable in advance, item by item. Every mechanism in this article is visible at tender: which items are Approximate Quantities, which are provisional sums, whether a Daywork Schedule exists, whether a Schedule of cost indexation exists, and what the Contract Data says about profit percentage. None of that requires a dispute to discover. It requires somebody to read the contract documents before the tender is reported to the board, and to report a range rather than a figure.
In conclusion
Two honest forms. FIDIC is the more honest of the two forms about this, and honest in a way most readers never notice: it gives the tender figure a name of its own, tells you on the face of Sub-Clause 14.1 that the quantities behind it are estimates, and sets out precisely what has to be true before a rate may change. JCT opens by saying the Contract Sum will not be altered, adds that an error in computing it is accepted by the parties, and then adjusts it through Variations, Approximate Quantities, corrections to the Bills, provisional sums and dayworks.
One common error. Neither approach is wrong. What is wrong is reporting either number to a board as though it were the cost of the building. The tender figure is an estimate with a mechanism attached, and the mechanism is printed in documents everybody has already been sent.
The price you agreed is the start of the calculation. The price you pay is the end of it, and the distance between them was visible on the day you signed.
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CLAUSE REFERENCES Sources and sourcing tiers. FIDIC Conditions of Contract for Construction, 2nd edition 2017 — the definitions of “Accepted Contract Amount” and “Contract Price” in Sub-Clause 1.1, and Sub-Clauses 12.1, 12.3, 12.4, 13.1 to 13.7 and 14.1 including sub-paragraph (c). All verified against a reference copy of the form; the effect of SC 14.1(c), SC 13.5 and SC 13.7 is stated in paraphrase and their wording is not reproduced. · JCT Standard Building Contract with Quantities 2016 — clauses 2.14.1, 2.14.3, 2.29.5, 3.14, 3.16, 4.1, 4.2, 4.3, 5.2, 5.6.1.2, 5.6.1.4, 5.6.1.5, 5.7 and 4.22.4, and Schedule 7 with its note recording that Fluctuations Options B and C are not printed in the contract documents and are published separately by JCT. All verified against a reference copy of the form; clause 4.2 is likewise paraphrased rather than quoted. · Public Procurement Act 2007, ss. 15(1) and (2), 16(1)(b), 31(3)(a), 35(1), 35(2) and 36 — Act text read from the hosting published by a Federal Government agency. The absence of any statutory ceiling on post-award price variation is stated as a negative finding on the sections dealing with price, which concern the bid stage rather than the outturn. · NEC4 ECC is discussed at the level of its main Option structure only. No clause of it is cited and no copy of it was consulted. FIDIC and JCT clause numbers were verified against reference copies of those forms; readers should check every citation against their own licensed copy before relying on it. · Central Bank of Nigeria Monetary Policy Rate 23 per cent, reset at the 307th meeting of the Monetary Policy Committee on 21–22 September 2026; liable to change, and readers should verify it at the date of reading. · Both illustrations are constructed composites, labelled as such, and are not accounts of real projects. · This article is for general information and is not legal advice. Projects Associates is a firm of quantity surveyors and cost consultants, not of legal practitioners. Transforming Projects with Strategic Advisory and Practical Solutions. |
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