DTMR Article 3

The New Normal: Part 3 – Annexure E (Increase Supply Cost)

October 31, 2022

The Queensland Department of Transport and Main Roads (‘DTMR’) Annexure E provides contractors with an entitlement to claim for material increases in the market cost of specific materials. These materials are:

  1. prefabricated steel;
  2. steel reinforcement (bar and mesh);
  3. ready-mix concrete; and
  4. fuel,

(‘Affected Materials’).

Materials required to carry out and complete work under the contract, which are made up of a combination of these Affected Materials are also permitted to be claimed under Annexure E.

Supply Cost Relief Events

Entitlement arises where a contractor:

  1. encounters a material increase in the market cost of the Affected Materials, causing it to incur more cost; and
  2. the increase in cost occurred between the tender date (for fuel, the baseline rate) and the date of procurement of the Affected Material,

(‘Supply Cost Relief Event’).

Importantly, DTMR has indicated that contractors are only entitled to claim for increased fuel costs from 1 February 2022 onwards, however, this does not impact contractors’ entitlement to claim the other Affected Materials across the duration of the project.

Annexure E restricts this entitlement to claim by giving the administrator discretion in the assessment of claims and requiring strict compliance with the process set out within it, including the timeframes for notice.

To the extent contractors encounter a delay in relation to the procurement of the Affected Materials before the Date for Practical Completion, relief must be sought pursuant to the extension of time mechanism provided under the contract.

Submitting Annexure E Claims

If a contractor encounters a Supply Cost Relief Event, they must notify the administrator in accordance with the Statutory Declaration attached to Annexure E, setting out the additional costs incurred as a direct result of the Supply Cost Relief Event.

Contractors must also:

  1. provide the contract administrator with an updated Contract Plan and Construction Program which reflects proposed relief plan;
  2. implement mitigation measures, such as:
    1. liaising with suppliers to achieve a value-for-money outcome; and
    2. negotiate with existing suppliers who have requested price increases;
  3. provide costing and programming impacts on an open book basis; and
  4. ensure all obligations and relief are passed down to its subcontractors and suppliers.

When assessing an Annexure E claim, the administrator has the discretion to take the general rise and fall provisions into account when assessing the claim. We recommend contractors discuss this with the Administrator to determine which approach is best for the given project.

Additional Considerations

Annexure E requires any claim submitted to be done so on an open book basis. This means contractors should be prepared to provide a breakdown of any calculations related to its claim, and the reasonably available source documents to verify such calculations.

The compilation of source documents and undertaking calculations to support claims submitted under Annexure E can be very time consuming and lead to additional incurred costs. To minimise this, we recommend contractors consider the best method of file management as it relates to possible claims arising under Annexure E.

For example, contractors may wish to:

  1. identify which subcontractors / suppliers are most likely to fall within the scope of an Annexure E claim at the earliest time possible on a project;
  2. keep all invoices / credits / proposed price increase correspondence from said subcontractors / suppliers easily accessible; and
  3. consider methods of identifying potential claims under Annexure E to ensure compliance with contractual timeframes and avoid missing out on entitlements relating to increased supply costs.

Contractors may also be able to recover the cost of external resources engaged to assist with the compilation of its claim.

Lamont Project & Construction Lawyers

We have the industry knowledge and experience to assist contractors in preparing Annexure E claims. If you have any questions about any matters raised in the above article as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.

The content of this article is for information purposes only; it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.

Contact: Peter Lamont or Quinn Hironaka

Email: peter@lpclawyers.com or quinn@lpclawyers.com

Phone: (07) 3248 8500

Address: Suite 1, Level 1, 349 Coronation Drive, Milton Qld 4064

Postal Address: PO Box 1133, Milton Qld 4064