Plant Hired by the Day, Revenue Earned by the Cubic Metre

Plant terms and output

Marine work often connects contracts with different payment units. A contractor earns against recognised quantities while hiring equipment and people by time. If production falls, hire charges continue and quantity-based revenue may fail to cover them.

The party organising the operation has to manage that gap. Passing work downstream requires an agreement about the conditions needed to produce it.

Two quotations, different undertakings

In the Tuas marine works dispute between Backho and KSE, the records included time-based equipment and manpower quotations and a separate SGD 1.90-per-cubic-metre quotation with an estimated guaranteed quantity of one million cubic metres. KSE alleged a later oral agreement at SGD 1.50; Backho denied it. The Singapore High Court found that agreement unproved and rejected the application to set aside the adjudication and enforcement order.^[1]

Changing a price from time to volume also changes the exposure to low output, interrupted access and waiting. The downstream scope, unit and risk allocation require their own valid agreement.

Who can make the plant productive?

A plant supplier can control equipment condition, operators and agreed maintenance. The organising contractor may control workfronts, dispatch, transport and access to discharge areas. Harbour or regulatory restrictions introduce further interfaces.

The excavator may be ready while the barge is unavailable. Trucks may wait for an unopened discharge area. A full crew may arrive before access permission has been secured. Each situation needs an operational response and an agreed commercial allocation.

For a quantity-based subcontract, examine whether the subcontractor can control the conditions necessary to deliver the quantity. A guaranteed volume should identify location, material, available working periods, measurement and the consequences of reduction. Otherwise the supplier has little basis for committing equipment and staff.

Time-based hire needs equally precise terms: the beginning and end of chargeable time, breakdown, weather, waiting for instructions, traffic interference, fuel and mobilisation. The supplier remains responsible for the availability and performance it has undertaken to provide.

A site signature needs a defined purpose

A signature should have a defined purpose. The authority schedule needs to state whether the signatory can confirm attendance or quantities, instruct a change, alter a rate or settle an account.

Both parties should issue an authority schedule to site, commercial and finance personnel. Urgent oral instructions should be recorded and confirmed through the contract's procedure, identifying the person, time, work and pricing status.

Differences in daily records should be raised while the people and equipment remain on site. Preserve the original record and the correction. Replacing a disputed timesheet with a clean final version removes the history needed to understand the account.

Allocate receipts to the account

The Backho judgment also considered payment-chasing correspondence and several lump-sum payments. Those payments alone did not establish the alleged oral agreement.^[1]

A project account should show which application, invoice, equipment and period each receipt settles. Principal, tax, interest and other adjustments need separate allocation. An unidentified payment can remain unallocated pending reconciliation, while the original balances stay visible.

A substantial payment during the month gives limited information about amounts still due to individual suppliers. Due dates, disputed items and outstanding balances need to survive the aggregate report.

Price the package actually offered

Commercial pressure can encourage an organising contractor to seek a lower downstream price after its own bid has been accepted. The supplier needs the full scope and conditions to assess that request.

An enquiry should include the quantity basis, access, interfaces, waiting provisions and payment arrangement. The main contractor's approval should show the differences between upstream and downstream terms and the risks it retains.

Specialist firms should price independently against their own resources, state the assumptions and obtain valid agreement to material changes. Confirm access and quantity commitments before mobilising plant against them.

IMWO recommends a short interface schedule alongside every plant-intensive subcontract. It should identify who makes each resource productive, who records interruption and how the related time or quantity reaches the account.

Source

^[1] Singapore High Court, Backho (S) Pte Ltd v KSE Marine Works Pte Ltd, [2022] SGHC 11,17 January 2022, paragraphs 5–12 and 126–131; application to set aside adjudication and enforcement. Original judgment.