Setting yourself up for success: getting the scope right

Co-author: Amy Dunphy, Associate, Corrs Chambers Westgarth

Co-author: Amy Dunphy, Associate, Corrs Chambers Westgarth

The Scope of Work is the key document in any major infrastructure contract. Many disputes often involve disagreements about the requirements of the scope document. Yet, the importance of preparing a clearly defined Scope of Work is often overlooked. This article considers the key issues in the preparation of a good Scope of Work document.

WHY IS THE SCOPE OF WORK SO IMPORTANT?

The Scope of Work should give certainty to both parties about the nature and extent of the Contractor’s obligations (and associated assumption of risk).

The Contractor is both obliged, and entitled, to perform the work in accordance with the Scope of Work, unless and until the Principal agrees to or directs a change.

Deficiencies in the Scope of Work can have serious consequences for both the Contractor and the Principal. This can result in delays and an increased risk of variation and extension of time claims (and, as a consequence, additional project costs).

WHAT TO INCLUDE IN THE SCOPE OF WORK

The Scope of Work describes the work that is to be performed including (amongst other things) the required specifications, standards, materials, quality, tolerances, and testing procedures for the work. It should provide a benchmark against which the Contractor’s performance can be measured and claims for ‘variations entitlements’ can be assessed.

APPROACH TO DRAFTING

There is no ‘one size fits all’ approach to drafting a good scope document. Each project will have its own specific requirements.

However, there are some simple rules which, if followed, should minimise the risk of the Scope of Work not satisfying parties’ requirements.

A scope document may include work that is to be built to ‘specification’ and also work that is to be built for a stated ‘purpose’. The Scope of Work should clearly identify which requirement applies to each component of work.

In general, the Scope of Work should:

  • Use terminology that is consistent with the Contract Conditions and/or other contract documents;
  • Identify the Principal’s requirements and the standards and objectives that the Contractor must meet in performing the work;
  • Describe how the Contractor will meet the Principal’s requirements (i.e. what, where and how the work will be performed);
  • If appropriate, detail how the Scope of Work relates to (and interfaces with) other components of a larger project;
  • Identify any other contractors (of the Principal) who will also be performing work in the same area; and
  • Identify what facilities and/or materials the Principal is to supply or make available for use in performing the work.

CONSEQUENCES OF A POORLY DRAFTED SCOPE OF WORK

If the Scope of Work is poorly drafted, there is a heightened risk that disputes may arise. This could be due to:

  • Lack of clarity about the work to be undertaken;
  • Failure to incorporate matters agreed in pre-contractual communications; and/or
  • Inconsistencies between the various contract documents.

Risk 1: ambiguous drafting

With a Scope of Work document ‘you get what you ask for’. If it is incomplete or ambiguous then this will likely create difficulties when it comes to enforcing performance of what one party thinks the document requires.

For instance, if the scope description is incomplete there is a risk that the Contractor will be required to undertake work it did not anticipate in order to deliver the outcome it has promised. Disputes are likely to ensue as to whether this work is at the Contractor’s own cost or constitutes a variation.

Risk 2: failure to reflect the parties’ agreement

Drafting of the scope document should be as complete and clear as possible at the issue of the tender package. This will ensure that the Contractor understands the performance and build requirements when bidding.

Tender clarifications will often detail agreements between the parties about the application of the contract or work, or even amend what the tender documents require. All agreed changes should be incorporated into the final version of the scope document that is included in the signed contract.

Risk 3: inconsistencies between the various contract documents

A construction contract will often comprise a number of different documents including the Scope of Work, the ‘legal documents’ (general conditions and special conditions) as well as the detailed specifications and technical standards.

Best practice is to include a clause setting out an order of priority between these documents. Where a conflict arises between documents, the contract should be clear as to which obligation is to prevail.

PRACTICAL TIPS

The risk of difficulties arising in relation to the scope document can be minimised by the following:

  • Ensuring there is consistent use of terminology and clear definitions;
  • Undertaking a final ‘sanity check’ to ensure that the scope and other contractual documents work together;
  • When recycling or reusing scope documents (or parts thereof) from previous projects, carry out a detailed review and tailor the document to suit the particular project; and
  • Considering (and specifying) the order of priority between the various contract documents.

Want to know more on this topic? Corrs Chambers Westgarth will be providing a follow-up article on ‘Management of Change During Contract Delivery’ in Gas Today’s Spring edition, available from early September.

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