Divergence between ER and CP: where the money goes

Under JCT Design and Build the works are described in two documents. The Employer's Requirements set out what the employer wants. The Contractor's Proposals set out what the contractor offers to build to meet those requirements. In principle the two agree. In practice they diverge, and the divergence is where money quietly disappears.

A divergence is any place where the ER and the CP do not say the same thing. The employer's document calls for one thing, the contractor's document shows another, and someone has to decide which governs and who bears the cost of putting the works right against whichever one wins.

The contract decides, and it decides by location

Design and Build contracts contain rules for resolving a divergence between the ER and the CP. Those rules are not a single blunt statement that one document always beats the other. They turn on where the divergence sits and on what the contract says about that situation.

A divergence within the Employer's Requirements is treated differently from a divergence between the Requirements and the Proposals, and a divergence that a competent contractor should have found and dealt with is treated differently again. The contract sets out how each is handled, and the outcome depends on reading it against the specific divergence in front of you.

Because editions differ in how they express this, it is a mistake to carry a fixed rule in your head about which document prevails. The safe practice is to read the resolution provisions in the contract you are actually administering and apply them to the divergence you actually have.

Variation, or the contractor\'s risk?

The commercial question sits on a single hinge. When a divergence is resolved and the works change to remove it, is that change a variation the contractor is paid for, or is it the contractor's own risk that the contractor absorbs?

The answer follows from the contract's treatment of the divergence. In some cases resolving the divergence is a change to the employer's requirements, and the contractor is entitled to have it valued as a variation. In other cases the divergence is something the contractor took on when it offered its Proposals, and correcting the works to remove it is the contractor's cost, with no variation and no additional payment.

This is why divergence is dangerous rather than merely untidy. The physical work to reconcile the two documents can look the same whichever way the entitlement falls. Nothing on the ground tells you whether it was paid or unpaid. Only the contractual analysis does, and if that analysis is not recorded when the instruction is issued, it is reconstructed from memory when the account is argued.

Where the money leaks

The leaks are quiet because each one preserves the appearance of a normal job.

• Work proceeds to resolve a divergence, is treated as a variation, and is paid, when the contract in fact placed it at the contractor's risk.
• Work proceeds to resolve a divergence, is absorbed as contractor risk, when the contract in fact entitled the contractor to a variation.
• The divergence is reconciled on site without anyone deciding, on paper, which document governed or on what basis the cost fell where it did.

Each of these looks fine at the time. The consequence arrives at the final account, when a cost is challenged and the basis for it cannot be shown, or when an entitlement that should have been valued was never raised because the divergence was quietly built out.

Record the basis, not just the instruction

The defence against all of this is to record why, not only what. An instruction to resolve a divergence should carry the reason it was issued and the basis on which it is treated, so that the entitlement decision is captured at the moment it is made rather than argued later from recollection.

• Note the divergence: which document says what, and where the two disagree.
• Note the contract's route: which resolution provision applies and what it means for this divergence.
• Note the treatment: variation or contractor risk, and the reasoning that puts it there.
• Flag any cost change that carries no variation, because that is the signature of a divergence being absorbed as risk, correctly or otherwise.

A cost that moves without a variation behind it is not automatically wrong. But it is the exact pattern that a divergence produces when it is treated as the contractor's risk, and it deserves a deliberate entry rather than a silent adjustment.

The check when a divergence appears

• Have you identified precisely where the ER and the CP disagree?
• Have you read the contract's own resolution provisions for that kind of divergence?
• Have you decided, on paper, whether resolving it is a variation or contractor risk, with reasons?
• Is there a record you could put in front of the other side, rather than a memory you would have to defend?

Divergence between the Employer's Requirements and the Contractor's Proposals is not an exotic problem. It is an ordinary feature of Design and Build, and it is one of the few places where the same work can be paid or unpaid depending entirely on a decision that is easy to make silently and hard to reconstruct.