Base date in construction contracts

A 'base date' is a reference date from which changes in conditions can be assessed.

The base date in construction contracts is generally used as a mechanism for the allocation of risk between the client and contractor for changes that might occur in the period between the contractor pricing the tender and the signing of the contract. This period can be very long and changes that occur may have a significant impact on the costs of the works.

The base date sets the reference date from which the conditions under which the tender was prepared are considered to have been known by the contractor and so are properly reflected in their price. If specified conditions change before the contract is implemented, then the contract may be adjusted to reflect this.

On very small projects, where the time frame is short, this may not be considered necessary. On larger projects, the base date can be used to allow changes to the contract sum, or sometimes extensions of time, or even to determine which rules will apply to the contract (for example which edition of arbitration rules).

The exact provisions will depend on the specific form of contract that is adopted. For example, in the Joint Contracts Tribunal (JCT) Design and Build Contract, the base date determines the allocation of risk in relation to changes in statutory regulations, changes to VAT exemptions and changes to definitions of dayworks.

Traditionally the base date was set as the date of tender, however this was sometimes found to give rise to uncertainty because of the complexity and duration of tendering procedures. The usual practice now is to insert a date in the contract linked to the date of the return of tenders.

The FIDIC suite of standard conditions of contract (the Red Book and Yellow Book), set the base date at 28 days before the latest date for the submission of tender. The JCT Design and Build Contract suggests a date that is 10 days prior to the date of the return of tenders.

NB: According to NRM1: Order of cost estimating and cost planning for capital building work, the term ‘base date of cost data’ means; ‘...the date on which rates and prices contained within cost analyses or benchmark analyses are taken as a basis for calculations.’

And the term 'estimate base date' means '...the date on which the cost limit (excluding inflation – i.e. the sum of the works cost estimate, project/design team fees estimate, other development/project costs estimate and risk allowance estimate) is established as a basis for calculating inflation, changes or other related variances.'

NB: Fluctuation clauses are a way of dealing with inflation on large projects that may last for several years. The contractor may be asked to tender based on current prices and then the contract makes provisions for them to be reimbursed for price changes over the duration of the project (a fluctuating price). This may be done by setting a base date for specified items and defining the price indices by which fluctuations will be assessed.

Fluctuation may allow for; changes in taxation; changes in the cost of labour, transport and materials; and even changes in head office or administrative costs.

NB: NRM3 Order of cost estimating and cost planning for building maintenance works, defines the 'estimate base date' as '...the date on which the cost limit (i.e. the sum of the works cost estimate, project/design team fees estimate, other related costs estimate and risk allowance estimate, excluding inflation) is established as the basis for calculating inflation, changes or other related variances.'