MF/1 Changes in Cost in a post Covid-19 world

This blog looks at clause 6 of MF/1 which deals with Changes in Cost.

Cost Is defined under MF/1 as “all expenses and costs incurred including overhead and financing charges properly allocable to such expenses and costs with no allowance for profit”. This gives a clear definition for all concerned.

Clause 6.1, which may attract more attention in a post Covid-19 world, deals with a change to the Contract Price where the Contractor’s performance of its obligations affects the Cost as a result of any law, order, regulation or bylaw having the force of law which occurs after the date of the Tender. Contractors will probably consider this clause to see whether they can claim additional costs under it both for costs incurred during the period of strict lockdown and for complying with social distancing requirements now that lockdown has been eased.

Clause 6.2 deals with changes in the Cost of labour, material or transport above the Cost ruling at the date of Tender. This is effectively a fluctuations clause. If this clause is used, the formula for calculating the increase or decrease is required to be specified in the Appendix. There have been reports, especially during the height of lockdown, of shortage of certain materials. If this increases the Cost a Contractor might try to claim under this clause.