Who pays when a cheaper substitution creates extra modelling or certification work?
A lower supply price is only one part of a substitution decision. The change may also require model updates, revised evidence, design coordination or a programme change. Establish those consequences before calling the proposal a saving.
Direct answer
The party proposing a change does not automatically pay every resulting cost. Separate three questions: is the substitute acceptable, who must perform the extra work, and who is entitled to payment under the relevant contract or appointment?
Use a contract-specific authorised change protocol:
- Contractor-proposed substitution: identify consequential modelling, evidence, cost and time before acceptance. Do not implement an unsolicited proposal before the approvals your contract requires.
- Instructed change: check the contract’s direction, notice and valuation procedures promptly. Record disputed cost and time consequences. Do not assume that unresolved pricing gives a right to disregard a valid direction.
This article provides a commercial coordination method. It does not determine legal entitlement. Refer disputed liability, notice requirements or payment rights to the project’s contract adviser.
Hidden coordination costs to price (or record) early
When a cheaper product appears, list knock-ons before anyone treats the saving as banked:
- Affected model updates, with the reviewer identifying whether a rerun is needed
- Scheme evidence updates: calculator entries, certificates and quantity surveyor cost records
- Agency re-check or endorsement where the project process requires it
- Programme (certificate lead time, re-shop drawings, dependent trades)
- Consultant work outside the agreed scope; separate it from work already included
- Site method or storage changes that travel with the new product
Illustrative calculation, all figures excluding GST: $20,000 supply reduction − $35,000 additional coordination cost = −$15,000 net capital saving. That means a $15,000 increase before other consequences. This example assumes the coordination cost is genuinely additional and not counted in another allowance. It says nothing about who must pay it.
Decision tool: authorised change protocol
For each step, record the actual contract or appointment reference. Separate the technical decision from the instruction and from the final valuation. A proposal can be technically acceptable while its commercial terms remain unresolved.
Step | Action | Record |
|---|---|---|
A. Origin | State whether this is a contractor proposal, principal/superintendent direction, or design correction | Change register row |
B. Freeze implementation of proposals | Do not order or install a contractor-proposed substitute before required approval | Hold on procurement log |
C. Describe | Old product, new product, affected commitments | One-page change request |
D. Consequential scope | Ask each appointed consultant whose deliverable is affected: rework, hours, programme | Written responses |
E. Price / notice package | Supply reduction less additional design, evidence, installation and programme costs; avoid duplicate allowances | Priced proposal or contractual notice of consequences |
F. Authorised instruction | Record the instruction/approval and its authority; follow the contract where work precedes valuation | Direction / approval reference |
G. Allocation status | Mark cost/time as agreed / disputed / not assessed | Change register |
H. Appointed scope check | Confirm who is appointed to do the modelling or certification rework | Appointment extract |
Keep the two commercial relationships visible. The client–builder contract and a consultant’s appointment may allocate different tasks and costs. A consultant’s invoice does not, by itself, establish that the builder owes that amount or can recover it from the client.
Technical acceptance is also separate from commercial acceptance. The design reviewer should state whether the substitute meets the relevant requirements, including conditions. The authorised contract representative should record the instruction and commercial status.
What can turn the saving into extra work?
Use the changed input to identify the affected deliverable. Do not commission a complete rerun simply because a product changed.
- Model impact: ask the modeller which inputs change, whether the existing conclusion remains valid and what evidence supports that view. Price only the work needed to answer the project question.
- Evidence impact: identify changed product coverage, certificates, quantities and affected submission records. Check whether an agency or scheme review is needed.
- Programme impact: identify the affected activity and its dependencies. A longer product lead time is not automatically the same as a delay to project completion.
Record operating and maintenance consequences separately from the capital-price comparison. A client may accept a higher capital cost for a defensible whole-life benefit; that does not settle contractual payment allocation.
Failure mode (illustrative - not a real project)
Illustrative example: a cheaper chiller is proposed. Its part-load performance differs from the model input, so the modeller needs to assess whether the energy target still holds. Before approval, the team records the review scope, fee, required response date and responsible appointment. The contract representative then records how the proposal is instructed and valued.
The practical rule: prove the saving and allocate the work before treating the proposal as agreed. If the contract requires action before valuation, keep the unresolved commercial position on the record.
Concrete next action
Add three fields to the change register: technical status; instruction and authority; commercial status. Attach the consequential scope, cost and time assessment. Identify the person responsible for each outstanding decision and the contractual notice deadline. This prevents “approved” from hiding several different decisions.
Keep the commercial decision separate from the technical substitution approval screen so one approval does not imply the other.
Sources
- Australian Government - Prepare a contract, section 13: documenting variations and checking state or territory rules. This general guidance does not establish entitlement under a particular construction contract.
- Calculated example: 20,000 − 35,000 = −15,000 Australian dollars, excluding GST. Inputs are hypothetical.
- The change-register procedure and consequential-cost checks are Makao’s commercial coordination recommendations. No standard-form clause, universal allocation rule or payment-withholding right is asserted.
Questions or corrections: contact Makao.
