contracts_ advanced questions red book question_answer _fidic 87

3/28/2015 Contracts:advancedquestionsRedBookQuestion/Answer|InternationalFederationofConsultingEngineers

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RedBook(CivilEngineering4thEd.1987)

REMEASUREMENTMODIFIEDTOLUMPSUMQUESTION

ThefollowingqueryisinrelationtoasituationwhichhasoccurredinthecontextoftheexecutionofaLumpSumcontract,regulatedbyastandardFIDIC(RedBook)termsandconditions.TheSpecificationscallfor"CastIron"pipes,whiletheBOQcallsfor"UPVC"pipes.TheContractorandupontheapprovaloftheEngineer,andwithouthavinganyinstructionstodoso,executedtheWorksinUPVC.DoesthisentitletheEmployertorequestcostsavingonthisitem?Andonwhatbasis?Yourresponsetotheaboveishighlyappreciated.

ANSWER

YousaythatyouhaveaLumpSumContract.TheFIDICConstructionContractBookisaremeasurementcontractsothepaymentprovisionsmusthavebeenchangedtoprovidefortheLumpSum.TheanswertoyourquestionwilldependonthewordingoftheseLumpSumprovisions.IregretthatFIDICcanonlycommentonquestionswhichontheinterpretationoftheFIDICGeneralConditions,soweareunabletoansweryourquestion.WefearthatthisisanindicationofwhathappensifGeneralConditionsaremodifiedbySpecialProvisionswithoutduecare.

SUBCONTRCATOR'SEXPERIENCEQUESTION

Iwouldlikeyouradviceonthedefinitionofasubcontractor,andofthefollowingtendercriteria:"subcontractors'experienceandresourcesshallnotbetakenintoaccountindeterminingthebidder'scompliancewithqualifyingcriteria".Inotherwords,doesthismeanthatifabidderhasworkedasasubcontractor,heisnotpermittedtoaddthatexperienceaspartofhisqualification?Iwouldlikeyourclarification.

ANSWER

TheFIDICdefinitionofasubcontractorisgivenatSubClause1.1.2.8ofthe1999ContractforConstructionas:"Subcontractor"meansanypersonnamedintheContractasasubcontractor,oranypersonappointedasasubcontractor,forapartoftheWorksandthelegalsuccessorsintitletoeachofthesepersons.Differentclientshavedifferentcriteriawhenevaluatingtenders.FIDICwouldcertainlyexpectthatanyclientwillwanttoensurethatthetendererhasadequateexperienceasamaincontractorandhasnotjustworkedasasubcontractor.However,inFIDIC'sopinion,thiswouldnormallybewordedas"Experienceasasubcontractor....".FIDIChasalsoknownclientstobeconcernedthattenderershavereliedonaproposedsubcontractor'sexperienceandresourceswhenpreparingatenderandthenthenamedsubcontractoriswithdrawnandanother,lessexperienced,companyisproposedafterthetenderhasbeenaccepted.However,foraninternationaltender,someclientsrequirethatacertainpercentageoftheWorksmustbesubcontractedtolocalcompanies.Inthiscasetheexperienceandresourcesoftheproposedsubcontractorswillbeanimportantpartofthetender.Theclient'scriteriawhenevaluatingtendersdependonanumberofdifferentfactors,includingthepastexperienceoftheparticularclient.In



ordertoascertaintheexactintentionsforevaluatingyourparticulartenderyouwouldneedtoraisethequestionwiththeclient.

FREEISSUEMATERIALSQUESTION

IhaveaquestionregardingClause69.1forDefaultofEmployer.WeareexecutingaContractforaProjectinPakistanunderFIDICFourthEdition,1987.TheEmployerhasassignedTheEngineerandalsoanEmployer'sRepresentative.TheEmployer'sRepresentativeisformtimetotimeactinglikeTheEngineerandwouldliketophysicallychecktheworksatsite.TheyarealsoapplyingdeductionsonthecertificatesofTheEngineer,suchasretentionmoneyonescalation,andalsoQuantities,etc.Theamountoftheunauthorizeddeductionsarearound5%ofthetotalamountcertificatesissuedbyTheEngineer.WehaveservedanoticeunderClause69.1and69.4,oftheConditionsofContracttoreducetherateofworkandfurthermore,clarifythattheClause69.1explainsthedefaultoftheEmployer,regardlessofthequantumofamountincaseofEmployer'sfailuretopaytotheContractortotalamountdueunderanycertificateoftheEngineer.DoyouthinkthattheabovestatementistrueanditisacaseofdefaultoftheEmployer?

ANSWER

DependingonwhatiswrittenintheContractandtheParticularConditions,generallyspeakingyouhaveacaseagainsttheEmployer.ThedamageswhichtheContractormayclaimwouldincludeinterestand/orfinancingcharges.However,youmustchecktheprovisionsoftheSubclause2.1Engineer'sdutiesandauthority,toseewhatismentionedthere.ItisnotveryclearwhatisthisEmployer'sRepresentativeandwhatarehisdutiesundertheContract,.However,onewouldsuspectthatyouhaveacaseagainsttheEmployer.

BOGUSCLAIMSQUESTION

IrequesttogivemeclarificationaboutthecorrectinterpretationofClause60.6FinalstatementintheFIDICConditionsofContract1987revisedin1992.ThisisaboutsubmissionbytheContractoroffinalstatementcontainingthefollowing(a)'thevalueofallworkdoneinaccordancewiththecontract,and(b)anyfurthersumswhichthecontractorconsiderstobeduetohimunderthecontractorotherwise'.Iwantclarificationwithrespectto(b)above.DoesitincludetheClaimswhichtheContractorhasneverraisedduringthecurrencyofcontractaccordingtoprovisionsofthecontract?IamconfrontedwithadisputeInwhichthecontractorforavalueoftotalworkofRs70millionhassubmittedfinalaccountsofRs280millonbyincludingvarioustypeofclaimswhichheneverclaimedduringthecontractperiodandnowclaimsinthefinalstatementandsincetheEngineer/Employerfailedtorespond,theContractorclaimsthatthefinalaccounthasbecomefinal.Iwouldrequestforanearlyresponseastothetrueandintendedpurposeofthesubclause(b)ofClause60.6oftheGeneralConditionsoftheabovementionedFIDICversionforcivilworksconstruction.ShouldIincludeallbogusclaimswhatIintendtoincludeforthepurposethatifIclaimUSD100IwouldatleastgetUSD1.HowIcanrebutthis?

ANSWER



TheprovisionsofSubclause60.6havetobereadtogetherwiththeprovisionsofSubclause60.5andofcoursewiththeprovisionsoftheSubclause60.9.InorderfortheContractortomaintainanyclaim,hemustincludeitinhisStatementatCompletion,ifithasarisenbythen,andinhisFinalStatement.ThereareanumberofincidencesunderthecontractwhentheEmployergivestotheContractorindemnitiesorisotherwiseresponsibletotheContractor.ClausesinwhichthisoccursandwheretheContractor'sresultingclaimsagainsttheEmployercouldariseforthefirsttimeaftertheStatementatCompletionorFinalStatementhavebeensubmittedbytheContractorincludethefollowing:Clause19.2(Employer'sresponsibilities)inrelationtosafetyClause21.3(Responsibilityforamountsnotrecovered)Clause22.3(IndemnitybyEmployer)Clause24.1(Accidentorinjurytoworkmen)Clause25.4(Compliancewithpolicyconditions)Clause26.1(Compliancewithstatutes,regulations)Clause70.2(Subsequentlegislation)andClause71.1(Currencyrestrictions).Ineachoftheabovecases,itisconceivablethattheContractorwouldwishtomakeaclaimagainsttheEmployerafterthedateoftheFinalStatement.Further,iftheContractorwasmadeliableundertheapplicablelawtoathirdpartyinrespectofdesignwhichhadbeencarriedoutbytheEngineer,theContractorwouldwishtobringaclaimagainsttheEmployertorecoveranydamagespaidout.Subclause60.9infactbarstheclaimsnotmentionedintheStatementatCompletionandintheFinalStatement.Thepurposeofthesubclauseissensible,namelytoenabletheEmployertoachieveareasonabledegreeofcertaintyastohisultimateliability.

APPOINTINGANENGINEERQUESTION

IsitrecommendedtohaveinacontractbasedonFIDIC'sElectricalandMechanicalWorksContractanexternalexpertactingastheEngineer?OristherenoprobleminrecruitingtheEngineerfromamongsttheBeneficiary(inourcasea"public"authority)?Wearesigningacontractshortly.TheEngineerisaccordingtotheRedBook,Clause2.4PartIboundtoactimpartially.ThequestionisifthereisaninternalincompatibilityintherelationshiptohisEmployer.

ANSWER

Thebasisuponwhichthe1987YellowBookandRedBookiswrittenisthattheEngineerisappointedbytheEmployer,butthatheisindependentofbothpartiesi.e.,heisanindependentthirdparty.InmanycasesheisrequiredtogiveimpartialdecisionsinfactunderClause2.4oftheYellowBookheisrequiredtoactimpartiallyatalltimeswhenexercisinghisdiscretion.IftheEngineerisanemployeeoftheEmployere.g.,someonefromtheEmployer'sEngineeringDivisionthereisabigriskthathewillnotbeinapositiontoactimpartially.Althoughhemaybeveryexperiencedandcapablefromatechnicalpointofview,andabletohandlealltechnicalmatters,hemaynotbefreetomakedecisionswhichinvolvefinancialarrangements,etc.inafairandimpartialmanner.Itisnotimpossible,norunknown,fortheEmployertonominatehimselforoneofhisownstaffasEngineer,butitisrareandcertainlycausesproblems.ThetextofanyclausesreferringtotheimpartialityoftheEngineerwillprobablyneedrevisingatsomestage,aswilltheprovisionsforhandlingclaimsanddisputes(Clauses2and50).TheprincipleofusinganemployeeoftheEmployerasEngineerwouldbemoreacceptableifaDisputeAdjudicationBoard(DAB)wasintroducedtoreplacetheprincipalprovisionsofClauses2and50.1todealwithclaimsanddisputes.



STANDARDLETTERSQUESTION

IamaCivilEngineer,presentlyworkingasContractsManager.Foreign(nonBritishnationality)engineersusuallyhaveanunderstandingofthecontractdocumentandtheassociatedentitlements/obligations,butalwaysexpressdifficultyincomposing(orrespondingto,iftheyareon"theotherside",correctlyworded"standard"letterstotheRE,EngineerorEmployerincompliancewiththerequirementsofthevarioussubclauses.Doyouhavesuchapublication?

ANSWER

Theonlybookwhichwecanrecollectis"MusterbriefeinEnglisch"(ISBN3762526079)althoughitsstandardlettersarenotsuchaswewouldprefertoendorse.AlthoughwewillreviewthesituationwithregardtothenewFIDICContractsGuide,FIDIClackenthusiasmfortheveryconceptofstandardletters,whichseemstobetiedupwiththeconceptofavoidingthinkingaboutthesituation.However,wedorecognisethevalidityofconcernsexpressedbythosewhosefirstlanguageisnotEnglish.Thus,"MusterbriefeinEnglisch"hasbeenrepublishedasanelectronicedition(itgoeswiththe1987RedBookcivilworkscontract).AnupdatedversionforusewiththeConstructionContract1stEdition,1999,theRedBooksuccessor,willbepublishedbyFIDICin2009(FIDIChasacquiredthecopyrightofMusterbriefeinEnglisch).ItshouldbenotedthatEdwardCorbett'sbook"FIDIC4th"containssomestandardletters.Thesehavebeenincorporatedwithpermissionintheelectronicversionof"MusterbriefeinEnglisch"publishedbyFIDIC.

APPENDIXTOTENDERDATAMISSION(CONTINUED)QUESTION

Ibelievethiscasedoesnotconstituteaquestionofmistakeincontracttobedecidedundertheapplicablelaw.Thescheduleofpricesoflabourandmaterialsisaprovisionforthetenderertoindicatehisprice(costplusprofit)onwhichhehadbasedhisContractPrice,inorderfortheEngineertoascertainthevalueofanitemofworkthathadbeenexecuted(possiblyunderavariationorder)andforwhich,orforasimilaritemofworkofwhich,nopricecouldbefoundintheBillofQuantities(BOQ).ThusthescheduleofpricesofmaterialsandlabouronlyassiststheEngineertodeterminetheoverheadsandprofitsoftheContractor,underthetermsofthecontract,thathastobeaddedtothebasiccostofexecutinganitemofwork,whichtheEngineercanalwaysreadilydetermine.Ifprovisonhadbeenmadeinthecontractforpaymentforpriceescalations,thensuchpaymentshadtobedeterminedbyreferencetopriceescalationindices,publishedbyanacceptedauthority.Astowhichsourceorpublicationistobeusedforthispurpose,dependsonwhatwouldhavebeenreasonablyexpectedtobeinthemindsofthetwopartiesatthetimeofenteringintocontract.

ANSWER

WeassumethatthisinquiryisaboutFIDIC1999ConditionsofContractwhereinthe199RedBookSubClause13.8itsays:"13.8(AdjustmentsforChangesinCost)InthisSubClause,"tableofadjustmentdata"meansthecompletedtableofadjustmentdataincludedintheAppendixtoTender.Ifthereisnosuchtableofadjustmentdata,thisSubClauseshallnotapply.IfthisSubClauseapplies,theamountspayable



totheContractorshallbeadjustedforrisesorfallsinthecostoflabour.GoodsandotherinputstotheWorks,bytheadditionordeductionoftheamountsdeterminedbytheformulaeprescribedinthisSubClause.TotheextentthatfullcompensationforanyriseorfallinCostsisnotcoveredbytheprovisionsofthisorotherClauses,theAcceptedContractAmountshallbedeemedtohaveincludedamountstocoverthecontingencyofotherrisesandfallsincosts.TheadjustmenttobeappliedtotheamountotherwisepayabletotheContractor,asvaluedinaccordancewiththeappropriateScheduleandcertifiedinPaymentCertificates,shallbedeterminedfromformulaeforeachofthecurrenciesinwhichtheContractPriceispayable.NoadjustmentistobeappliedtoworkvaluedonthebasisofCostorcurrentprices.Theformulaeshallbeofthefollowinggeneraltype:Pn=a+bxLn/Lo+cxEn/Eo+dxMn/Mowhere:"Pn"istheadjustmentmultipliertobeappliedtotheestimatedcontractvalueintherelevantcurrencyoftheworkcarriedoutinperiod"n",thisperiodbeingamonthunlessotherwisestatedintheAppendixtoTender"a"isafixedcoefficient,statedintherelevanttableofadjustmentdata,representingthenonadjustableportionincontractualpayments"b","c","d",...arecoefficientsrepresentingtheestimatedproportionofeachcostelementrelatedtotheexecutionoftheWorks,asstatedintherelevanttableofadjustmentdatasuchtabulatedcostelementsmaybeindicativeofresourcessuchaslabour,equipmentandmaterials"Ln","En","Mn",...arethecurrentcostindicesorreferencepricesforperiod"n",expressedintherelevantcurrencyofpayment,eachofwhichisapplicabletotherelevanttabulatedcostelementonthedate49dayspriortothelastdayoftheperiod(towhichtheparticularPaymentCertificaterelates)and"Lo","Eo","Mo",...arethebasecostindicesorreferenceprices,expressedintherelevantcurrencyofpayment,eachofwhichisapplicabletotherelevanttabulatedcostelementontheBaseDate.Thecostindicesorreferencepricesstatedinthetableofadjustmentdatashallbeused.Iftheirsourceisindoubt,itshallbedeterminedbytheEngineer.Forthispurpose,referenceshallbemadetothevaluesoftheindicesatstateddates(quotedinthefourthandfifthcolumnsrespectivelyofthetable)forthepurposesofclarificationofthesourcealthoughthesedates(andthusthesevalues)maynotcorrespondtothebasecostindices.Incaseswherethe"currencyofindex"(statedinthetable)isnottherelevantcurrencyofpayment,eachindexshallbeconvertedintotherelevantcurrencyofpaymentatthesellingrate,establishedbythecentralbankoftheCountry,ofthisrelevantcurrencyontheabovedateforwhichtheindexisrequiredtobeapplicable.Untilsuchtimeaseachcurrentcostindexisavailable,theEngineershalldetermineaprovisionalindexfortheissueofInterimPaymentCertificates.Whenacurrentcostindexisavailable,theadjustmentshallberecalculatedaccordingly.IftheContractorfailstocompletetheWorkswithintheTimeforCompletion,adjustmentofpricesthereaftershallbemadeusingeither(i)eachindexorpriceapplicableonthedate49dayspriortotheexpiryoftheTimeforCompletionoftheWorks,or(ii)thecurrentindexorprice:whicheverismorefavourabletotheEmployer.Theweightings(coefficients)foreachofthefactorsofcoststatedinthetable(s)ofadjustmentdatashallonlybeadjustediftheyhavebeenrenderedunreasonable,unbalancedorinapplicable,asaresultofVariations."TheclauseisveryclearandunfortunatelythequestionraisedisnotrelatedtoaninterpretationofaSubSlause.

FAIRNESSOFDEDUCTIONSQUESTION

Asourprojectisalumpsumcontract,theclienthasreducedsomeoftheitemsandisdeductingsuomeofourpaymentamountsfromthemonthlycertificate.Isitfairtodeductanamount?



ANSWER

AlthoughitisnotforFIDICtocommentonthe"fairness"ofaparticularcircumstance,itistheFIDICphilosophytopublishConditionsofContractthatadoptanapproachoffairnessandbalancedriskallocationbetweenthepartiesasaprimaryfocus.Further,FIDICcanonlycommentingeneraltermsontheinterpretationofaFIDICclauses,anditshouldbenotedthatfortheapplicationofaclausetoaparticularproblemsituation,oneshouldalwaysconsultaspecialist.Withthatbeingsaid,ingeneral,theSubClauseentitledVariations(SubClause52.1inthe4thEditionor13.1inthe1999EditionoftheConstructionContract)doesprovidetherightfortheEngineertovarytheworkdownwardspecificallytheEngineermaydecreasequantitiesoromitwork,providedofcoursethatthisworkisnotcarriedouttheEmployeroranothercontract.Further,SubClause51.1providesthatsuchvariationswillbevaluedinaccordancewiththeClause52,inthecaseofthe4theditionorClause12inthecaseofthe1999editions.Bothoftheseclausesprovidetherulesforthevaluationofthesevariations,whichincludethepossibilityofreductioninprice.Pleasenotethattheaboverepresentsageneralansweronly,andspecificadvicetotheparticularfactssurroundingyoursituation,werecommendyouconsultaspecialist.

LIQUIDATEDDAMAGESQUESTION

IamworkingasaResidentEngineerforHighwayswithconsultants.Abriefdetailofourprojectisasasfollows:Theprojectisarepairprojectandisdividedin3sections.Thesectionsareofvaryinglengthswith150mfortheshortestoneand1.5Kmforthelongestone.Completiondatefortheprojecthasalreadyelapsedearlythisyearandnotimeextensionhasbeengrantedtothecontractorowingtodelayonhisownbehalf.Twosectionshavealreadybeencompleted(openedtotraffic)andthe3rdsectionisnearcompletion.Noseparatetimesforcompletionhavebeenprovidedinthecontractforeithersection.Clause47.2ofFIDICConditionsofContract(4thedition)recommendsthereductioninpenaltysubjecttotakingoverofdifferentsections.Assatedabove,noneofthesectionshavebeenacquiredbytheclientcontractually.Thereferredclausealsostatesthattheprovisionsofthesubclauseshallonlyapplytotherateofliquidateddamagesandshallnotaffectthelimitthereof.WhatIinferfromthispartisthatevenafterthereductionofpenalty,itshallbeapplicablefromtheoriginaldateofexpiryofthecontract.Isthistherightinterpretation?Mysecondqueryisregardingthereductioninliquidateddamages.Undertheabovecircumstanceswherethesectionshavenotbeenacquired,butopenedtotrafficandgeneralpublic,canthepenaltiesbereducedcontractuallysubjecttomutualagreementwiththeclient?Thirdly,duringthecurrencyoftheproject,somesavingshavebeenthere(whichcouldn'tbeestimatedatdesignstageduetorepairingnature).Thesavingsarelessthan15%(consideringClause52.3).Ifpenaltiesareappliedandreducedthereof,aretheytobecalculatedontheoriginalcontractpriceortherevisedone?

ANSWER

Ifunderstoodcorrectly,yourfirstquestionrelatestosubclause47.2,specificallythelastsentence,whichreads"TheprovisionsofthisSubClauseshallonlyapplytotherateofliquidateddamagesandshallnotaffectthelimitthereof."Themeaningofthissentenceisthatalthoughthisclauseallowsfortheamountofliquidateddamagestobereducedproportionatelytotheworkbeinghandedover,iftheworkishandedoverinparts,themaximumlimitofliquidateddamages(asspecifiedintheappendixtotender(seeSub



Clause47.1))isnotaffected.Inregardtoyoursecondquestion,Clause47shouldbereadinconjunctionwithClause48.Inthebackgroundtoyourquestion,youstatedthatnoneofthesectionshavebeen'acquiredbytheClientcontractually',yetearlieryoustatethat'2sectionshavealreadybeencompleted(openedtotraffic)'.Inthislight,wewouldsuggestthatyoumayreviewbothsubclause48.2and48.3,which,dependingontheparticularfactpatternsurroundingyourcontract,maybeapplicable.Inanswertoyourthirdquestion,liquateddamagesarenotpenalties.YouarekindlyreferredtotheverbiagecontainedinSubClause47.1,whichreads,inpart"...andnotasapenalty...".AsexplainedintheGuidetotheRedBook,LiquidateddamagesareanamountdeterminedbytheEmployer,beforetendersareinvited,asareasonableassessmentoftheactualdamageswhichhewouldsufferintheeventofdelayincompletionoftheWorks.Hence,ingeneral,LiquadatedDamagesshouldbecalculatedfromthevantagepointthatwillresultinareasonableassessmentoftheactualdamages.

VALUEENGINEERINGSUBCLAUSEQUESTION

IntermsoftheFIDIC1987RedBook,istheContractorentitledtoaportionofthesavingasprovidedforinthetermsofSubClause13.2(ValueEngineering)inthe1999RedBook?

ANSWER

TheFIDIC1987eRedBookdoesnothaveasimilarprovisionastheonementionedintheFIDIC1999editionValueEngineering,SubClause13.2Howeveryoumayfindinthe1987RedBookasocalledbonusforearlycompletion.

ADDITIONALWORKSQUESTION

Beingaprojectmanagerfromtheclientside,IwouldliketoknowasperFIDICcanIforceacontractortocarryoutadditionalworkspriortoapprovalofhisfinancialclaim?

ANSWER

ThebasicanswerisYES,providedyoufollowthecorrectcontractprocedures.ThereareanumberofSubClauseswhicharerelevantincluding,fromthe1999ConstructionContract:a)S/Cl3.1:TheEmployermayhaveimposedconstraintsontheEngineer'sauthorityintheParticularConditions.b)S/Cl3.3:TheContractorshallcomplywithinstructionsgivenbytheEngineer.c)S/Cl13.1:TheContractorshallexecuteandbeboundbyeachVariationinitiatedbytheEngineer.SubjecttoexceptionsasstatedintheSubClause.d)S/Cl13.3:ProceduresfortheEngineertovaluetheVariation.TheEngineermayhaveaskedforandacceptedaproposal,orheproceedsasClause12.

NEWRATESQUESTION

InacivilmarineworkcontractofFIDICconditions,disputesquiteoftenoccursonfixingofrevisionofrates.



thoughclauses51and52ofFourthEditionRedBookclearlyprovidecausesforvariationandvaluationofrates,ambiguitystillpersistswithrespecttoadoptionofrevisedratesforvariedquantitiesonlyorforfullquantityexecutedaslongastherearenomajorchangesindeploymentofworkmen,equipmentandmaterials.LeavingthedecisiontoengineermaynotgiveanappropriatesolutionaspersonsholdingthepostofengineermayhavedifferentviewsandtheirdecisionsmaynotexactlymatchwiththeviewsofFIDICauthors.Pleaseclarifythesituationswhenrevisedratesareapplicablefortheentirequantityorforincreasedquantitiesonly.

ANSWER

Thedecisionwhetheranewrateappliestothetotalquantityofanitem,orjusttotheVariationquantity,willdependonthereasonwhyanewrateisnecessary.ThismaydependonthereasonanddetailsofthechangetotheContractor'scost.SometimestheoriginalquantitywillalreadyhavebeenexecutedandpaidattheBQrate,beforetheVariationisordered.However,sometimesthefactofthequantitybeingchangedbytheVariationwillchangethecircumstancesandcostsandmakesitreasonabletopaythetotalquantityatthenewrate.ThenewratemaydifferifitisbeingappliedtothetotalquantityorjusttotheVariationquantity.TheEngineerwill,ofcourse,takeallthesefactorsintoaccountwhencalculatinganewrate.YoushouldalsorefertothecommentaryonClauses51and52intheFIDICGuidetotheFourthEdition.Thecommentaryemphasisestheimportanceofconsultationwithboththeparties.

APPENDIXTOTENDERDATAMISSINGQUESTION

AcontractwassignedundertheFIDICConditionsofContractwhichrequirethatindicesfortheskilledandunskilledlabourshouldbefilledbytheContractorintherelevantAppendixwhilesubmittingthetender.ThisrequirementincludingthesourceoftheindiceswashowevernotfulfilledbytheContractor.Thisfactwasnotedbutemployerfailedtogetthisrequirementmetandthecontractwassignedwithoutthisinformation.Thedisputearosewhenthecontractorsubmittedescalationclaimduechangeinpricesofthelabourcomponentaccordingtorelevantprovision.Thecontractorinsiststheusesourceindicesissuedbythelocalgovernmentforcalculationofadjustmentwhichisneartheplaceoftheconstructionandbecausethisconditionismoreprofitabletocontractor.TheClientinsiststhathewillusetheindicesissuesbyagevernmentofficewhicharenormallyusedingovernmentcontracts.IamtheArbitratorinonesuchcaseandneedadviceofFIDICwhatwillbethejudiciouscoarseofactioninthisscenario.IhoweverfeelthatentireresponsibilityofnotprovidingthisinformationcannotbeplacedontheContractorandtheEmployershouldhaveinsuredthatContractorprovidethisinformationbeforesigningofthecontract.omissionwasmadeandthecontractwassignedwithoutthisinformation(sourceofindices).IwillbeanxiouslywaitingforadvicefromyourexpertwhatreasonablecoarseofactionshouldbeadaptedinthisdisputeresolutionastheContractorhasgoneindisputeonthisissue.

ANSWER

ItseemsthattheContractormadeamistakebynotaddingtheinformationtotheAppendixtoTender.TheEmployerthenacceptedtheTenderandthePartiessignedaContractwhichincludedthemistake.UnfortunatelyyousaythattheycannotagreeontheinformationwhichshouldbeaddedtotheAppendixto



Tender.TocorrectthemistakerequiresachangetothesignedContracttoaddthisinformation.CorrectingamistakeinaContractisalegalquestionwhichmustbestudiedundertheapplicablelaw.FIDICcannotcommentonsuchlegalquestions.

ENGINEER'SDECISIONQUESTION

OurfirmhasacontractforconsultingserviceswiththeGovernmentofElSalvadorfortheconstructionofmajortransportationinfrastructureinthecountry.TheprojectisdividedintothreepackagesthataregovernedbyFIDICConditionsofContractforWorksofCivilEngineering(Redbook,4thEd.1987).Theconstructionofthefirstpackageofproject,whichincludedtwo400meterbridgesoverthemostimportantriverinElSalvador,wascompletedlastApril.TheContractorisaJointVentureoffirmsthatisnowclaimingadditionalpaymentsbasedonthecontractdocuments.Inordertohaveaclearinterpretationofthedocuments,wewouldliketoclarifythefollowing:Clause67.1Engineer'sDecisionwewouldliketoconfirmifunderthisClausetheContractorcanclaimformattersthathappenedduringtheconstructionperiod,evenaftertheTakeOverCertificatehasbeenissuedandtheStatementatCompletionhasbeencertifiedandpaid.

ANSWER

RegardingClause67.1:iftheContractorisdissatisfiedwithanEngineer'sevaluationofaclaimunderClause53,hemayreferthematteratanytime(beforeoraftercompletion)totheEngineerunderClause67.1foran"Engineer'sDecision".HecandothisanytimeuptohisFinalStatementandthereisnotimelimit.TheEngineerthenhas84daystorespond.TheContractorcannotsubmita"new'"claimfornormaldeterminationunderthisclause.TheclaimmustfirstbeprocessedunderClause53,andonlywhenaClause53determinationhasbeengivenwhichtheContractorfindstobeunacceptabledowehavea"dispute"situationwhichcanbehandledunderClause67.1.

CALCULATIONOFCLAIMSQUESTION

Iwouldliketoknowifyoucanhelpmefindinformationregardingtheprocedureandcalculationofclaims(ofanykind)arisingoutofaCivilEngineeringConstructioncontract.

ANSWER

FIDICpublishesguidestoeachofitsformsofconstructioncontract,whichmayprovidetheguidanceyourequireontheproceduresforclaims.YouwouldneedtoordertheGuidefortheuseofwhateverConditionsyouareusing.IfyourenquiryrelatestoOctober2000.FIDIC'sguidesdonotelaborateonthecalculationofclaims,soyoumightneedtoconsultotherpublications.Personally,Iamonlyawareof"BuildingandCivilEngineeringClaimsinPerspective"byGeoffreyArthurHughes,whichwasfirstpublishedbyLongmanin1983.Itmayhavebeenrepublishedandfulfilyourneeds.


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NOTINPREHANDOVERLISTQUESTION

IhavethefollowingproblemandIcannotfindasolutionintheFIDICRedBookFourthEdition1887.Theproblemisasfollows:wehavemadeacontractwithaprehandoverlistmade,withtheEngineer,inApril2000.Anewcontract,giventoanothercompanyinthesamebuildingwasgiveninMay2000,itwasanobligationformetogivethekeysofthebuilding.AstheEngineerisinZimbabweandtheBuildingisinBurundi,noengineerwasthereforthehandoveroftheinsideofthebuilding.Now,theEngineerasksustorepairsomethingswhichwerenotontheprehandoverlist.CanyoupleasetellmewhatIhavetodo.

ANSWER

FIDICdoesnotundertaketoprofferadvicerelatingtoeverysituationwhichmayariseunderaFIDICbasedcontract.However,itappearsthattheanswertoyourquestiondependsuponwhetheraTakingOverCertificatehasbeenissued.Ifso,theprehandoverlistpresumablyadvisedyouoftheworkdescribedinSubClause49.2(a),andtheEngineerhasaskedyoutorepairsomethingsasdescribedinSubClause49.2(b).Ifnot,theEngineermaybe"specifyingalltheworkwhich...isrequiredtobedone...beforetheissueofsuchCertificate"underSubClause48.1.Ineithercase,youhavenotindicatedanyreasonfornotcomplyingwiththeEngineer'sinstructions.

ADDITIONALPAYMENTSQUESTION

OurfirmhasacontractforconsultingserviceswiththeGovernmentofElSalvadorfortheconstructionofmajortransportationinfrastructureinthecountry.TheprojectisdividedintothreepackagesthataregovernedbyFIDICConditionsofContractforWorksofCivilEngineering(Redbook,4thEd.1987).Theconstructionofthefirstpackageofproject,whichincludedtwo400meterbridgesoverthemostimportantriverinElSalvador,wascompletedlastApril.TheContractorisaJointVentureoffirmsthatisnowclaimingadditionalpaymentsbasedonthecontractdocuments.Inordertohaveaclearinterpretationofthedocuments,wewouldliketoclarifythefollowing:Clause53.1NoticeofClaimsitisimportanttoconfirmiftheContractorcaninvokethisClausetoclaimforadditionalpaymentowingtoconstructionworksthatwereperformedbeforetheTakeOverCertificate,oncethisCertificatehasbeenissued.Inotherwords,iftheContractorcanclaimformattersthathappenedduringtheconstructionperiodevenaftertheTakeOverCertificatehasbeenissued.

ANSWER

RegardingtheapplicationofClause53.1.ThisclauserequirestheContractortogiveNoticeofapotentialclaimwithin28daysoftheeventoccurring.ThisestablisheshisrighttoclaimandheshouldthenproceedtosubstantiatetheclaimaccordingtoClause53.3.HecanclaimatanytimebeforeorafterTakingoverifeventsoccur(beforeoraftertakingover)whichheconsidersentitlehimtoclaim.TheintentionofClause53.1istotrytomakesureclaimsaredealtwithasandwhentheyoccursothateveryoneisfamiliarwiththecircumstances(thusthe28dayprovision)andnottoleavethemtotheendwhenpeoplehaveprobablyforgottenallthedetails.Ifhedidthiswithinthetimelimits,thentheclaimshouldbeevaluatedaccordingtotheContractor'ssubmissions.Ifhedidnotaswouldappeartobethecaseandhascome



inwithaclaimaconsiderabletimeaftertheevent,thenwewouldsuggestthatyouhavetwocoursesofaction.Firstlyyoushouldperhapstrytoestablishwhyhedidnotgivenoticewithinthe28days.Eitheryoucanrejecthisclaimonthegroundthathedidnotsubmititwithin28daysasrequiredbyClause53.1,or,underClause53.4youcanmakeanassessmentbasedonrecordswhichwerekeptatthetime.NormallyIwouldsuggestitdependsonthecircumstances.Iftheclaimappearstobefrivolousandconfusedwithnosubstantiation(possiblyaneventyouknewnothingabout)youmaywelldecidetorejectit.ButifitconcernsaneventofwhichyouwereawarewhichyouknewhaddisruptedtheContractor,thenmaybeyoucouldconsideritunderClause53.4.

NEWRATESFORREMEASUREMENTQUESTION

IhaveaquestionregardingadoptionofFIDICRedBookFourthEditionreprinted1992.TheparticularContractcontainsClause51/52"Variations"andalsocontainsClause56"WorkstobeMeasured"andhasBOQ.DesignandConstructServicesforElectricalandMechanicalweretenderedasdiagramaticdesignsandaretobedevelopedtotheApprovalofEngineeraspartofobligationsundertheContractandhavevariousBOQitems.ThisDesignDevelopmentforMechanical/ElectricalservicesishisobligationundertheContract,andinthiswaywouldnotseemtoqualifyasaVariationtotheContract.HowevernewitemstotheoriginalBOQhavebeennecessitatedbyDD.UnderwhichClausecannewratesbeestablishedfortheremeasureoftheseWorks?

ANSWER

TheConditionsofContractforWorksofCivilEngineeringConstruction(1992)donotcontainexpressprovisionfornewratesbeingestablishedfortheremeasurementofnonvariedContractordesignworks,wherenewitemstotheoriginalBoQhavebeennecessitatedbyDesignDevelopment.Typically,Contractordesignworksarepricedonalumpsumbasis,andarenotsubjecttoremeasurementafterDesignDevelopment,sosuchexpressprovisionwouldbeinappropriateintheConditionsofContractwhichFIDICintendedtobesuitableforEmployerdesignworks.

TERMINATIONBEFORECOMPLETIONQUESTION

HasEmployergotanauthorityaccordingtoFIDICtoterminatethecontractofEngineerbeforecompletionofprojectandappointanotherengineeringcompanyorcontinuewithitsownresources?IknowthatthatEmployercannotdothisaccordingtoRedBookFIDICClause1.1DefinitionsbyreferringtoPartIIofthecontract.Whatshouldwedoasacontractoratthisstage?

ANSWER

YouappeartounderstandFIDIC'sprovisions,assummarisedatthetopofpage41oftheRedBookGuide:"Itshouldbenotedthat...theeffectof...[1.1(a)(iv)]istopreventtheEmployerfromchangingtheEngineerwithouttheconsentoftheContractor."Ineffect,providedthelegalpersondefinedas"Engineer"continuestoexist,suchlegalpersoncontinuestobetheEngineerforthepurposesoftheContract,and



theEmployerhasnopowertonamesomeoneelseasEngineer.By"continuestoexist",wemeandoesnot(asanaturalperson)die,orisnot(asacompany)dissolved.FIDICcannotgivespecificadviceinrespecttotheactionsapartyshouldtake,andonlyundertakestoclarifyaspectsofitsownprovisions.Youdonotseemtoneedsuchclarification,butmayneedtoobtainadvicefromalawyerwithexpertknowledgeofconstructionlaw.

Thereisalwaysapossibilitythatsomeaspectofthesituation(whichyouhavenotmentioned)wouldentitletheEmployertoreplacetheEngineerunderthelawgoverningtheContract.ForFIDIC,itseemsthatyoushouldfirstdecidewhetherthereplacement"Engineer"isacceptableassuchbecause,ifnot,youcouldinformtheEmployeraccordinglyandseektoresolvethematterbeforeitescalatesintoamajordispute.

EMPLOYERREPLACESTHECONTRACTORQUESTION

RegardingthecorrectapplicationoftheRedBookContract,theEmployerincompliancewithsubclause63.1,aftergivingwrittennoticetotheContractoruponhiscontraventionofprovisioninsubclause4.1,enetereduponthesiteandtheworks,andterminatedtheemploymentoftheContractor.TheEmployerwantstoemployanotherContractor,whichtooksecondplaceintheinitial,publictender,tocompletetheworks.Thefurtherprocedurewillbeincompliancewithsubclauses63.2,63.3,63.4and64.1.Thequestionsis:isthisprocedureincompliancewiththeGeneralConditionsoftheRedBook4thEdition?

ANSWER

WerefertoyourquerywhetheraproposedprocedurecomplieswiththefourtheditionoftheGeneralConditionsofContractforWorksofCivilEngineeringConstruction.FIDICcannotundertaketoprovideadviceonactualcircumstances,andisonlypreparedtoclarifyandexplainthemeaningandpurposeoftheprovisionsitpublishesinitsConditionsofContract.Inthecaseofseriousmatterssuchastermination,legaladviceshouldbesought.However,wewouldmakethefollowingobservations,withoutconcludingwhethertheEmployerisentitledtoproceedasyouhavedescribed.Forthesepurposes,westartbyassumingthattheEmployer'sterminationwasvalidbyreasonoftheContractor'sbreachofsubclause4.1.Suchvaliditymay,ofcourse,bechallengedbytheContractor.Followingavalidtermination,theEmployer'soptionsonemployinganothercontractorwouldnotappeartobeconstrainedbytheGeneralConditions,otherthanunderClause63(withwhichyoustatethefurtherprocedurewillcomply),althoughtheymaybeconstrainedbytheapplicablelaw.Youmentioncompliancewithsubclause63.4,whichrelatestoassignmentofsubcontracts.ApplicablelawmayconstraintheEmployer'srightsinrespectofsubcontractswhichwereassociatedwiththeContractor'sbreachofsubclause4.1.Youmentioncompliancewithsubclause64.1,whichrelatestourgentremedialworkwhichtheContractorisunwillingorunabletodo,priortotermination.Aftertermination,hispreviousunwillingnessorinability



wouldnotseemtoentitletheEmployertoinvokesubclause64.1.Asregardsemployingacontractorwhichtook"secondplace...intheinitialpublictender",thisisnotamattertobedecidedbytheGeneralConditionsoftheContractunderwhichtheterminationwaseffected.Thechoiceofreplacementcontractorisamattertobedecidedbythelawrelevanttotheprocurementproceduresandanyconstraintsimposedbythoseprovidingfundsfortheproject.

DELAYEDPAYMENTQUESTION

IamanArchitectregisteredwiththeRIBAintheUKsince1978andtheUAEAuthoritiesinAbuDhabi,UAEsince1981.IhaverecentlybeenEngineerunderaFIDICRedBook4thEditionBuildingContractbetweenaUAEGovernmentAgencyandalocalContractor,andEmployer'sRepresentative/AdviserunderaFIDICDesignandBuildContract,sameEmployerbutdifferentContractor.ClausesofParticularApplicationhavebeenpreparedbyathirdpartyadvisingtheEmployerdirectinbothcases,butlargelyignored,theEmployerpayinglatethroughout,notpayingthefinalInterimCertificatesonTakingOvertheWorksineithercase,threateningtheimpositionofPenaltiesbyignoringand/orrejectingthecasesforExtensionsofTimeinbothcases,andnotpayingatalluntilforcedagreementtoreducedamountshasbeenacceptedbytheContractorsthroughbarter.Asyoumayknow,thereisverylimitedrecoursetothelawhere,especiallyforforeigners.BothContractorsarelikelytoweighthecostsofCourtsandfurtherDelayagainstthebenefitofanypaymentatallonehasalreadygivenin,buttheotherisstillfighting,orperhapsmorerealistically,negotiating.WhatshouldIdo,please:indeed,isthereanythingthatcanbedone?ThisistheworstcaseofabuseofContractIhavecomeacrossinmorethan20yearshere,thoughtheamountsarerelativelysmall.

ANSWER

Whilstwecansympathisewiththesituationdescribedinthequestion,thereisnotalotFIDICcanrecommendorthathecandoasEngineerinthiscase.Thesituationdescribedis,unfortunately,notallthatuncommoninsomeMiddleEastcountriesandtheultimatedecisionofwhattodolieswiththeContractor.Ifhefeelsthesituationwarrantsextrememeasures,thenhecanterminateunderClause69.1(unlessofcourse69.1hasbeenchangedasitveryoftenisinthesecountries).Otherwisethereisnotalotyoucando.BeingfairandimpartialtheEngineercould(andperhapsshould)writetotheEmployerremindinghimofthetermsoftheContractbuthewillprobablybringdownthewrathoftheEmployeronhisshoulders,andthatmaynothelpanybody.YoushouldperhapsalsobearinmindthatContractorswhochoosetoworkinthesecountriesareusually



(orshouldbe)ratherfamiliarwiththissituationandmaywellhaveallowedsomethingintheirpricetocoverthissortofthingespecially,asthepersonaskingthequestionsays,theamountisnotverylarge.

EXPIRYOFDEFECTSLIABILITYPERIODQUESTION

FortheRedBook,cantheEngineerissueinstructionsunderClause13.1aftertheexpiryoftheDefectsLiabilityPeriod?

ANSWER

AftertheDefectsLiabilityPeriodexpires,theEngineermayissueinstructionsunderClause49,andcannotrelyuponClause13asauthoritytoissueotherinstructions.

PERFORMANCESECURITYQUESTION

Pleaseinformusaboutthevalidityoftheperformancesecurityifthedurationofthecontractis90days.

ANSWER

TheseprincipleswouldprobablyapplywhicheverFIDICdocumentisbeingused.

PRIORITYOFTENDERDOCUMENTSQUESTION

ThequestionreferstoFIDICConditionsofContractforWorksofCivilEngineeringConstruction(4thEdition1987,reprinted1988witheditorialamendments,reprinted1992withfurtheramendments).Iamanemployerwhoisnegotiatingwiththecontractornow.IhaveatroubleinusingtheFIDICconditions,andaskforyourhelpurgently.SubClause1.1(b)(v)"Tender"meanstheContractor'spricedoffertotheEmployerfortheexecutionandcompletionoftheWorksandtheremedyingofanydefectsthereininaccordancewiththeprovisionoftheContract,asacceptedbytheLetterofAcceptance."AndSubClause5.2specifiesthepriorityofthecontractdocument,ofwhichtheTenderislistedasthird.Arethosetwo"Tender"havethesamemeaning?CanweexplainthattheTenderonlyrefertothedocumententitledletteroftender(maybe1or2pages,veryshortandsimpleanyway),orallthedocumentssubmittedbytheContractoralongwiththeletteroftenderasresponseupontheBiddingDocument(alotofdocuments,suchasappendixtotender,pricedBOQ,technicalproposal,evidenceforconstructionexperienceandfinancialcapacity)?

ANSWER

TheTenderatSubClauses1.1(b)(v)and5.2(3)meanstheformofTenderwhichisgivenattheendofPart1oftheRedBook.TheformofTender,atparagraph2,confirmsthattheAppendixtoTenderformspartoftheTenderandSubClause1.1(b)(iv)confirmsthatthepricedbillofquantitiesformspartofthe



Tender.IftheEmployerrequiresotherdocumentstobeincludedintheContractaspartoftheTenderthenhemuststatethisclearlyintheInstructionstoTenderersandintheformofTender.

OBTAININGCONTRACTDATAQUESTION

SubClause11.1tellusthatthehiredcontractingpartyisresponsibleforthedatacontainedinhisproposalbasedonthedatasuppliedbytheContractor.CouldyoupleasetellmehowIcanobtainthedata?

ANSWER

TheContractormusthavebasedhistenderoninformation:1)whichwasprovidedtoalltenderersbytheEmployerfromtheinvestigationswhichhadbeencarriedoutbytheEmployer2)whichtheContractorobtainedfromhisowninspectionandexaminationoftheSiteanditssurroundings.WheretheContractorobtainedthisinformationwilldependonthecircumstancesbuthemusthavesatisfiedhimselfthathistenderwascorrectandsufficienttomeethisobligationsundertheContract.

INTERIMCERTIFICATESQUESTION

SubClause60.4stipulatesthattheEngineermaycorrectanyerrorinaninterimcertificateinsubsequentcertificates.Arethereanylimitationsintheapplicationofthisprovision?

ANSWER

YouarereferringtoSubClause60.4ofthe1987ContractforCivilEngineeringWorks.ThereisasimilarprovisionatSubClause14.6ofthe1999Contracts.TheContractdoesnotputanylimitationonthisprovision.However,underSubClause60.2theEngineerhaspreviouslycertifiedtheamountwhichheconsideredtobedueandpayable.Ifhehasnowfoundanerrorandchangedhismindheshouldexplainthereasonsforthechange.

REFIXINGOFRATEQUESTION

IaminterestedinapplicationofClause52.2(PoweroftheEngineertofixRate).Ifcircumstancesallowarefixingofrate,woulditapplytothevariedquantity(increased/decreased)ortotheentirequantity,i.e.,quantitiesinthebidplusincrease/decrease?

ANSWER

Youarereferringtothe4thEdition1987oftheContractforWorksofCivilEngineering,SubClause51.1(a)allowstheEngineertoissueaninstructiontoincreaseordecreasethequantityofanyworkincludedintheContract.TheratewhichtheEngineeragreesorfixesunderSubClause52.2wouldonlyapplytothevariedquantity(increasedordecreased).TheoriginalquantityisnotpartoftheVariationandwouldbe



paidattheoriginalrate.

RECOVERYOFCOSTSQUESTION

Workingwith1987,4thEdition,reprintedin1992FIDICformofcontractonaprojectwhereClause70,whistbeingmodifieddoespermittherecoveryofchangesinthepricesoflabourandmaterials.Arethereanylegalprecidentswhichreflecttheprovisionreflectedinthe1999formofcontracttoallowtherecoveryofcosts,postthestatedcontractcompletionwherethecontractorhasfailedtocompletetheworksinthespecifiedtime?Orarethereanyprecidentstoreflecttherecoveryofcostspersec,postthecontractcompletiondate?Ifthereareanyprecidents,ifthereareinelectronic,format,couldyouforwardthemor,advisewheretheycouldbeobtained.

ANSWER

FIDICisunabletoprovidelegalguidanceorinformationonlegalprecedents.However,tobehelpful,thefederationhasaskedanexperttocommentsothatyourfutureresearchcanguidedintheapproriatedirection.Youarecorrectthatthe19874thEditiondoesnotincludespecificprovisionfortherecoveryofpricechangesafterthecontractcompletiondatewhentheContractorhasfailedtocompletetheworkinthespecifiedtime.AlternativeclausescanbefoundintheFIDICGuidetothe4thEditionandinthe1999Contracts.Theproblemwithlegalprecedentsisthatnotwodisputesituationsareeverexactlythesameandsoneedlegaladvice.Guidanceandsummariesofsomearbitrationawardscanbefoundintheinternationallegaljournals,newslettersfromlawfirmsandthepublicationsoftheinternationalarbitrationcentressuchastheICCParis,theLondonCourtofInternationalArbitrationandothercentresindifferentpartsoftheworld.

ENGINEER'SINSTRUCTIONSQUESTION

AFIDICstandardContractforcivilengineering(RedBook4thEdition1987)isbasisofaContractforaWharfandApproachBridgeConstructionandCausewayReclamationproject(TheContrac).TheContractisaLumpsumAgreementandtheBOQrefersasfollows:AllworksinthissectionexceptProvisionalQuantitieswillbepaidforasLumpSums.Quantitiesareestimatesonly.IftheContractorwishes,additionalitemsmaybeaddedtotheBillorquantitiesamended.Ratesnominatedwillbeusedonlytoassessvariations(ifany)totheContractandtoassessprogressclaimsandpayments.ProvisionalQuantitiesandItemswillbepaidforasdescribedintheConditionsofContract.OneoftheBoQitemwaspertainingtoCraneRailstobeprovidedbytheContractor.LatertheCompanyorganizedtheRailsontheirownandtheContractorisnotrequiredtoprovidetheCraneRailsaspertheBoQ.InviewofthistheCraneRailrelatedAmountasstatedintheBoQisproposedtobedeductedoutoftheBoQ.PleaseconfirmthatthisisproperapproachunderArticle51and52oranyotherconditionsofFIDICstandardcontract.

ANSWER

UnderaFIDICContract,anychangetoaddoromitworkmustbemadebyaninstructionfromthe



Engineerundertheappropriatesubclause.YoumentionSubClauses51and52,whicharefromthe19874thEditionoftheContractforCivilEngineeringWorks.SubClause51.1,item(b)allowstheEngineertoissueinstructionstoomitwork,butthisisqualifiedbythestatementinbrackets"(butnotiftheomittedworkistobecarriedoutbytheEmployerorbyanothercontractor)".Yourproposalforthecranerailswouldappeartocontravenethisrequirement.HencethechangeandpriceadjustmentmayneedtobenegotiatedbetweenthePartiesandwouldprobablyinvolvelegaladvice.

VARIATIONSEXCEEDING15PERCENTOFTHEEFFECTIVECONTRACTSUM(CLAUSE52.3)QUESTION

WeareintheprocessofpreparingaclaimunderClause52.3oftheFIDICConditionsofContractforWorksofCivilEngineeringConstructionandareseekingclarificationontheapplicationoftheclauseespeciallyasregardstowhichamountdoweapplythepercentagewhichisinexcessofthe15%.Doweapplyitto:Theeffectivecontractsumor,Thedifferencebetweentheamountscalculatedusingtheactualpercentagebywhichtheeffectivecontractsumshallhavebeenexceedbyandthe15%.PleasenotethatInthisparticularcontract,themajorityofPreliminaryandGeneralItemswerestatedasprovisionalsums(asstatedintheBillofQuantitiesbytheEngineer)itisnoteasyforustoaccuratelydeterminethecontractor'soncosts.Wehavesinceacquiredacopyofthe"GuidetotheUseofFidlicConditionsofContractforWorksofCivilEngineeringConstruction"andtheexplanationgivendoesnotadequatelycoverus,referpage117oftheguide.Pleaseadviseusonhowthisclauseistobeapplied.

ANSWER

ThepreciseproblemisnotclearandwecanonlycommentingeneraltermsontheinterpretationofSubClause52.3.TheSubClauseallowstheContractorandEngineertodiscussandagreealumpsumadditionordeductiontotheContractPricewhentheadditions/deductionsasdescribedat(a)and(b)aremorethan15%ofthe"EffectiveContractPrice".ItwillbeuptotheContractortoprovethechangestohisSiteandgeneraloverheadcosts.ThedetailsandcalculationofthelumpsumwilldependantonthereasonsfortheincreaseordecreasetotheContractPrice.

UNITRATESQUESTION

1.ThefollowingadditionhasbeenmadeinClause52.2(FIDIC1987,ContractforWorksofCivilEngineering)inourcontractbytheEmployer:"..ProvidedfurtherthatnochangeintheUnitRatesorpricesquotedshallbeconsideredforanyitemintheSchedulestotheBillofQuantities,unlesssuchitemindividuallyaccountsforanamountofmorethan2percentofthesumnamedintheLetterofAcceptance,andtheoriginalbilledquantitybymorethan30percent.Notwithstandingabove,forvariationexceeding10%inquantityofanyitemofBOQwithrespecttooriginalBOQquantities,thefollowingshallapplytotheunitrateofthatitem:a)ForratesquotedbelowCSR2000rates,nochangeinquotedunitrateshallbeallowed.b)ForratesquotedaboveCSR2000rates,thequantityexceeding10%fromoriginalBOQquantityoftheitemsshallbepaidtothecontractorasperNHACSR2000ratesapplicableintherelevant



district.ProvidedfurtherthatfornonBOQitemsappearinginNHAsCSR2000,CSR2000ratesshallapplywhereastheratesofnonCSR&nonBOQitemsshallbedeterminedbytheEngineerasstipulatedinGeneralConditionsofContract."2.TheSituationBOQItemNo.108b(i)FormationofembankmentfromroadwayexcavationinRockmaterial(HardRock)andBOQItemNo.106d(i)ExcavateSurplusRockmaterial(HardRock)hasincreasedupto453%and77.8%respectivelyfromtheOriginalBilledQuantityandtheseItemsareindividuallyaccountingformorethan2.55%and4.99%respectivelyofthesumnamedintheLetterofAcceptance.Therefore,wedesiretorequesttheEmployer/TheEngineerthattheUnitRatesforthesaiditemsasquotedintheBOQfortheentirequantitybechangedandtillthetimenewratesarefixed,theprovisionalratesorpricesbedeterminedinaccordancewithCSR2005with25%Premiumtoenableonaccountpayment.3.Questionsa)Willtherevisionofratesbebasedoncompositescheduleofrates2005(CSR2005)with25%premiumasrequestedbyus?b)Aresubparagraphsaandboftheadditionmadeinthesaidclause(refertopara1above)applicabletousasweconsiderthatthesaidsubparagraphsarenotrelevanttousbecauseourvariationisover30%.c)WillRevisedRatesbeapplicabletotheentirequantityoronlyonvariedquantity?d)Withsomuchvariation,isitalrighttoaskfordeterminationofProvisionalrates?

ANSWER

Asageneralprinciple,FIDICexpresslyprohibitsusersofitscontractstoaddandadjustClausesintheGeneralConditions.AnyadjustmentsandchangesshouldbemadeintheParticularConditions.However,sinceyourOrganizationmaynotberesponsibleformisuseandbreachofcopyrightweshallattempttohelpyou.Buthereagain,FIDICisabletoofferadviceoninterpreationofclauses,butofcourseonlyontheclauseofthecontractsGeneralConditions,notonsomeoneelse'sclauses.Thissaid,onceagain,weshalltrytobehelpfulontheunderstandingthatinfutureyoutrytoimpressonclientsthattheyshouldusetheGCscorrectly,andnotrisklegalactionandcontractinvalidityowingtobreachofcopyright.ThechangestotheGCmeanthattheinterpretationoftheFIDICSubclause52.2maynotberelevanttotheamendedcontract.Howeverthefollowingmaybehelpful.a)ImpossibletoanswerbecauseofthechangestotheGC.b)ImpossibletoanswerbecauseofthechangestotheGC.c)Revisedratesarenormallyonlyapplicabletotheadditionalquantitybutthisdependsonthecircumstancesandthemakeupoftherevisedrates.IndeterminingrevisedratestheEngineershouldtakeallfactorsintoconsideration.d)TheContractorisentitledtobepaidforworkdoneinaccordancewithSubClause60.2.IftherevisedratescannotbeagreedintimeforthenextInterimPaymentCertificatethentheEngineershoulddetermineprovisionalratesasthelastsentenceofthefirstparagraphofSubClause52.2.IfthefinalrateisdifferenttothisprovisionalratethenInterimPaymentCertificatescanbecorrectedasSubClause60.4.

ADDITIONALSUMFORREPLACEMENTCOSTQUESTION

WearerequestingaclarificationoftheintentionofClause21.1(b)InsuranceofWorksandContractor'sEquipmentoftheFIDICCivilEngineeringConstruction1987(4thEdition)Part1.ThereappearstobeamixedInsurancemarketviewastowhethertheadditionalsumof"15%ofsuchreplacementcost"forProfessionalFees,DemolitionandRemovalofDebrisappliesto:(1)eachofthesecostsindividually,or(2)asacombinedamount,and(3)whetherthisamountshouldbeappliedasapercentageoflossorapercentageofthesuminsured(contractvalue).OurContractorsarekeentohaveclarification.



ANSWER

ThewordingofSubClause21.1(b)shouldbeclear.Theinsuranceshallcoverthefullreplacementcostas(a),plusanadditional15%ofthatfigure.Thisadditional15%istocoveranyadditionalandincidentalcosts,INCLUDINGprofessionalfeesetc.ThisfiguremaybechangedintheParticularConditionsandyoushouldalsorefertotheFIDICGuidetothe4thEdition,atpage72.

EXCESSQUANTITIESOFWORK(SUBCLAUSE52.3)QUESTION

Iam"TheEngineer"ofProjectandhaverecommendedreratingofcertainitemsofworkundertheprovisionsofClauses52.2oftheContract.Ihavehoweverfailedtounderstandfromthegivenprovisionisthat:a)TheEngineershallevaluateatthetimeofTakingOver,iftheContractCosthasincreasedordecreased()15%oftheoriginalcostofcontract,asaresultof:i)allworkexecuted&measuredisinexcessofBOQqualities.b)ThentheEngineershalldeterminesuchfurther"Sum"thatmaybeaddedordeductedfromthecontractprice,takingintoregardtheContractor'ssiteandgeneraloverheadcostsoftheContractbasedupononlytheamountbywhichsuchadditions/deductionswillbeinexcessof15%oftheEffectiveContractprice.InmyopiniontheExcessquantitiesofworkhavebeentakencareofbyreratingunderClause52.2andnofurtherSummaybeaddedtotheContract.DoestheClause52.3intendtoapplythereratingonquantitiesthataremorethan15%oftheBOQquantitiesthusrerated.Iquoteanexample:letusassumethecostofContractasUSD100000.ABOQitemcostingUSD20000isincreasedtovalueUSD50000atcontractrates.HencereratingunderClause52.2becomesapplicable.Onreratingthevalueof(original+increased)qtyofworkbecomesUSD55000.Nowthetotalvalueofcontract,i.e.,USD55000.Thevalueofworkbeyond15%ofcontractpriceis$40,000.IstheContractorentitledtoadditionalpremiumunderClause52.3forExecutingworkbeyond15%ofContractprice.IsthiswhatismeantbytheprovisionoftheClause52.3?

ANSWER

Clause52.2referstothereratingofanindividualvariation.Clause52.3referstothesituationwhenthetotaleffectofallvariations,plustheremeasurementoftheapproximatequantitiesintheBoQresultsinanincreaseordecreaseofmorethan15%.ItispossiblethateachindividualvariationdidnothaveasignificanteffectontheContractor'soverheadsbutthetotaleffectofallvariationsandtheremeasurementwassignificant.ItisnecessarytoconsidertheactualeffectoftheadditionalquantitiesontheContractor'soverheads.Forexample,partoftheallowanceforoverheadsmaybeafixed,orlumpsum,figurewhichisnotrelatedtothequantityofworkwhichhasbeencarriedout.Asubstantialincreaseinthetotalquantityofworkmaynotincreasethispartoftheoverheads.Hence,theoverheadsperunitquantitywoulddecrease.Theallowanceforoverheadsintherateswouldneedtobereconsidered.AnyreratingunderClause52.2wouldbetakenintoaccountwhenconsideringClause52.3.TheGuidetotheFourthEditionpublishedbyFIDICgivesusefulguidanceandexamplesatpages115and117.

FREEHAULAGEQUESTION



Myinquiryis:aretheiranyguidlinesformaximumFREEHAULAGEdistance...fortheTERMBORROWmaterialstobeengagedinEMBANKMENTCONSTRUCTION....sinilarly....whatfreedistancelimitsareset/providedinFIDICforanytransportationofmaterial....fromBORROW,fromthesiteofe.g.,asphaltmixingorconcretemixingplanttothesiteofaccomodatingthefinishedproductintheroadconstructionprojects.

ANSWER

TheFIDICConditionsofContractgivethelegalrightsandobligationsofthePartiestotheContract.Matterssuchasthemaximumfreehaulagedistancewilldependontherequirementsanddetailsoftheproject.Theywillvaryfordifferentprojectsandshouldbegiveninthetechnicalspecificationsand/orbillsofquantities.

ENFORCINGACLAIMQUESTION

IamrequestinganinterpretationofClause63.2and63.3oftheFIDICRedBook,4thEdition.a)WhenaContractorhassumsduetoitarisingoutofavaluationunderClause63.2atthetimeoftermination,andtheEmployer/EngineerdelayscertificationofpossibleclaimsunderClause63.3,howdoesFIDICenvisagethattheterminatedContractormayenforceitsclaim/obtainthosesumscertifiedbytheEngineerasbeingduetoit?b)Onceanewcontractorhasbeenengaged,isthedatescheduledforcompletionunderthenewcontractrelevant,andwhenisthenewcontractorliableforfurtherdelaystothecompletiondate?c)IsthereadutyontheEmployerorEngineertoinformthefirstContractorthattheprojecthasbeencompleted?Whenthedefectsliabilityperiodisover?d)IsthereadutyontheEmployer/EngineertoissueacertificateinaccordancewithClause63.3withinareasonabletime?Whatmaybeconsideredareasonableperiodforissuingsuchacertificate?e)WhatarethepossibilitiesforaContractortoobtainthemoniesdueunderClause63.2iftheEngineerfailstoissueacertificateunderClause63.3.?

ANSWER

Thisisreallyalegalquestion,butthekeyseemstobethatthefirstsentenceofClause67.1saysthatitcontinuesaftertermination.Afewadditionalcommentsmaybehelpful.OneassumestheenquiryisreferringtotheFourthEdition,amended1992,withoutanysignificantamendments.MattersarisingfromterminationunderClause63.1willdependontheprovisionsoftheapplicablelawaswellasFIDICContractClauses.Mostlegalsystemsincluderequirementsfortheterminationofacontractandalsocontainprovisionsbasedontheconceptof"goodfaith"whichmaybeapplicable.AnycommentsbasedontheFIDICContractmustbereviewedinrelationtotheapplicablelaw,butsomegeneralcommentsmaybehelpful.a)Clause67.1,firstsentence,saysthatitcontinuesaftertermination.b)Clause63.1enablestheEmployerto"terminatetheemploymentoftheContractor".TheClauseisclearthatthisdoesnotreleasetheContractorfromanyofhisobligationsorliabilities.SodoesthelawrequirethattheEmployeralsoisnotreleasedfromhisobligations?IfsothenotherClauseswillalsoberelevant.c)Thenewcontractorispresumablyliablefordelayswhichhecausesandwhicharenotattributabletothepreviouscontractor.d)Clause1.5,finalsentence,requiresthatanyconsent,approval,certificateordeterminationshallnotunreasonablybewithheldordelayed.e)Clauses60.6and60.8givetimeperiodsfortheContractor'sFinal



StatementandtheEngineer'sFinalPaymentCertificate.Clause63.3requirestheEngineertoissueacertificate,withoutstatingatimeperiod.ByreferencetoClause1.5,thismustbeissuedinareasonabletime.ReasonablemightbebasedontheClause60.6and60.8timeperiodsunlesstherearespecialcircumstances.f)ItcertainlyseemsnecessaryfortheContractortobeinformed,orhisquestionstobeanswered,inorderthatheknowswhentheconstructionandDefectsLiabilityPeriodsarecompleted.g)TheContractor'srightsandproceduresforobtainingpaymentarecoveredbyClause67andtheapplicablelaw.

NEWRATEORPRICEQUESTION

WeareaconsultingfirmprovidingContractAdministrationServicestoContractorsinPakistan.WhileseekingassistancefromtheFIDICwebsiteFAQSection,wehavecomeacrosstheadviceuponSubClause52.2ofRedBook4thEdtionConditionsofContractPartIIstatingthereinthat:theratewhichtheEngineeragreesorfixesunderSubClause52.2wouldonlyapplytothevariedquantity(increasedordecreased).TheoriginalquantityisnotpartoftheVariationandwouldbepaidattheoriginalrate.TherationalebeingusedinconstruingtheSubClause52.2intermsthattheRevisedRatesunderSubClause52.2willbeappliedtothevariedquantityonlyhascreatedmuchconfusioninsomeoftheongoingprojectswiththeNationalHighwayAuthority,Pakistan.AspertheadviceofFIDICSecretariatFAQSection,ifforinstance,aContractor'soriginalBOQworkincreasesfrom100m3to140m3,thenheshallbepaidfor100m3asperoriginalratesandfortheremaining40m3,revisedratesshallbeapplicable.IfweapplythesamelogicinacasewheretheContractor'soriginalBOQworkdecreasesfrom100m3to60m3,thenheshallbepaidfor100m3asperoriginalquantityofwork.Whereas,forthedecreasedquantity,heshouldbepaidattherevisedrates(althoughheshallbeactuallyexecuting60m3work.).Thesameistrueforthecasewhentotalexecutedquantityexceedsbymorethan30%andthenewrateshallbeapplicabletothetotalexecutedquantity.ThesameClausecannotbeconstrueddifferently.Ifthisdoesnothappen,thenitshallcauseprejudicetotheinterestoftheContractor.

ANSWER

UnderSubClause52.2,theEngineeronlyfixesanewrateorpricewhentheBOQrateorpricehasbecomeinappropriateorinapplicableforaparticularVariation.Infixingthenewrateorpricehewillconsiderthereasonswhytheoriginalrateorpriceshouldbechanged.Hewillnotfixanewrateorpriceuntilheknowswhetheritinvolvesanincreaseordecreaseinquantity.Thenewrateorpricewillprobablybedifferentforadecreasetothatforanincrease.Itmaybedifferentforalargeincreasetoasmallincrease.TheanomalieswhichyoumentionshouldnotoccurbecausetheEngineerwillhaveconsideredthesesituationsbeforehefixesthenewrateorprice.

NEWBOQRATESQUESTION

Acontractwasdrawnupforaspecificlengthofhighway.Realignmentwasrequiredwhichincreasedthelengthbyafewkilometers.ShouldthisadditionalworkbeincludedinavariationorderasperClause51or



shouldaseperatecontractbefloated.Thecontractorisaskingforsinglevariationorderwithtwodifferentrefixedrates(forthesameitemofBoQ),oneforthevariationintheoriginalworkandsecondfortheadditionalwork.Idifferwithhisviews.Ifeelthatifonevariationorderisconsideredforthewholeworkthenonlyonlyonerefixedrateforvariedquantitycanbegiven.Irequireyouradviceonthisissue.

ANSWER

Ifboththechangetotheoriginalworkandtheadditionalworkcamefromthesamechangeofrequirementandinstructionthenitwouldbeusualtoissueasinglevariationorder.However,itisalsoquitenormalforthepricecalculationsforavariationordertoincludedifferentratesforthesameBoQitem.Thecontractor'scostsandthereasonswhytheBoQratesareinappropriatemaybedifferentforthevariedworkandfortheadditionalwork.Itisthenfairerandmoretransparent,tothebenefitofbothparties,tonegotiatedifferentnewrates.

NEWVARIATIONORDERQUESTION

Acontractwasdrawnforaspecificlengthofhighway.Realignmentwasrequiredwhichincreasedthelengthbyfewkilometers.shouldthisadditionalworkbeincludedinavariationorderasperClause51orshouldaseperatecontractbefloated.Thecontractorisaskingforsinglevariationorderwithtwodifferentrefixedrates(forsameitemofBoQ),oneforthevariationintheoriginalworkandsecondfortheadditionalwork.Idifferwithhisviews.Ifeelthatifonevariationorderisconsideredforthewholeworkthenonlyonlyonerefixedrateforvariedquantitycanbegiven.irequireyouradviceonthisissue.

ANSWER

Ifboththechangetotheoriginalworkandtheadditionalworkcamefromthesamechangeofrequirementandinstructionthenitwouldbeusualtoissueasinglevariationorder.However,itisalsoquitenormalforthepricecalculationsforavariationordertoincludedifferentratesforthesameBoQitem.Thecontractor'scostsandthereasonswhytheBoQratesareinappropriatemaybedifferentforthevariedworkandfortheadditionalwork.Itisthenfairerandmoretransparent,tothebenefitofbothparties,tonegotiatedifferentnewrates.

INSTRUCTIONSTOVARYTHEWORKSQUESTION

Weareexecutingaconstructionworksproject(18floortower),nowthereisanadditionoftwomorefloors.Iwouldliketoknow...thisadditionwouldbedealtasavariationorseparatecontractrequired,wherewewillhavethelibertytorevisetheprice,sincethistwofloor'sadditionislessthanthe25percentofthecontractvalue,hencewedonthaverighttoincreasetheprice,inceaseifwedealitbyvariation.pleaseclarify.

ANSWER

Clause51.1allowstheEngineertoissueinstructionstovarytheWorks.Yourquestioniswhetherthe



additionaltwofloorsarejustachangetothequantityoftheworkwhichisincludedintheContract,asClause51.1(a),orareoutsidethescopeoftheWorks,whichshouldbedefinedintheContract.TheanswertoyourquestionthereforedependsontheexactwordingoftheContractAgreement,theothercontractdocumentsandperhapsalsotheTenderDocuments.Itwillalsodependontheinterpretationofthiswordinginaccordancewiththeapplicablelaw.ThisisnotsomethingwhichFIDICcananswerandyoushouldobtainspecialistadvice.

FIXINGOFANEWRATE(RED4:52.2)QUESTION

WerequestedfortheclarificationregardingrepliestoacoupleofquestionswhichappearattheFAQSectionofFIDICwebsite.ReplytothefirstquestionillustratesthatunderSubClause52.2,EngineermayfixanewrateorapriceiftheBOQratebecomesinappropriateorinapplicableforaparticularvariation,keepinginviewthereasonsforthechange.Inreplytothesecondquestion,FIDICsaysthattheoriginalquantityisnotapartofthevariationandcannotbepaidattherevisedrate.Repliestothequestionsasnotedabovearecontradictorytoeachotherandwethinkthatthemattershouldfurtherbeclarified.Ourelaboratenote,whichwassubmittedtothiseffectconstitutesofourunderstandingoftheClause52.2oftheRedBook4thEdition.ThedefinitionofthevariedworktricklestotheClause52.2fromtheClause51.1,whichgivesthedefinition/scopeofthevariedworkasfollowing:(a)increaseordecreasethequantityofanyworkincludedintheContract,(b)omitanysuchwork(butnotiftheomittedworksistobecarriedoutbytheEmployerorbyanothercontractor),(c)changethecharacterorqualityorkindofanysuchwork,(d)changethelevels,lines,positionanddimensionsofaypartoftheWorks,(e)executeadditionalworkofanykindnecessaryforthecompletionoftheWorks,(f)changeanyspecifiedsequenceortimingofconstructionofanypartoftheWorks.Thegivendefinitionthusholdsthatthevariedworkmaynotessentiallycompriseofonlythechangeinthequantityofcertainitemincludedinthecontract.Variedworkmayalsoariseoutofthevirtueofotherreasonsasnotedabove.Hence,restrictingthedefinitionofvariationonlytothechangeinquantitymaynotbeappropriate.ThereplygivenattheFIDICwebsitetothefirstquestion,ashasbeenreferredabove,seemstoholdthesameviewbythevirtueofwhichthedecisiontothiseffecthasbeenlefttotheEngineer.However,thereplytothesecondquestionforwardsratherarestrictiveinterpretationoftheClause52.2bysayingthatanewratewouldapplyonlytotheincreased/decreasedquantity.SuchaninterpretationfallsincontradictiontothedefinitionofthevariedworkaswellastheopenendedspiritoftheFIDICDocumentingeneralandthatoftheClause52.2,readinconjunctionwiththeClauses51.1,51.2and52.1therebefore,aswellasthatoftheClauses52.3and52.4thereafter......FIDIC'sinitialreply:FIDICcanonlycommentingeneraltermsontheinterpretationofaFIDICclause.Ifyourequireamoredetailedopinionontheapplicationofaclausetoaparticularproblemsituationthenyoushouldconsultaspecialist.TheexamplesinyourletterillustratethewiderangeofsituationswhichmayariseonaprojectandresultintheapplicationofClause52.2.Forthisreason,theclausecannotrestricttheEngineerinthewayhecalculatesanewrate.TheEngineerisawareoftheexactsituationandsocanmaketheappropriatedecisiontosuitthewordingandapplicationoftheVariation.AVariationnormally,butnotalways,onlyappliestoworkwhichhasnotyetbeenexecuted.Ifsomeworkhasalreadybeencarriedoutonthesamebasisaswasenvisagedfortheoriginalbillratethenthatworkwouldnormallybevaluedatthebillrate.HoweveraparticularVariation,suchasadecreaseinquantity,maybewordedinsuchawayastorequireadifferentapproach.........Yourreplyalsonarratesthatour



understandingoftheissuefallscloselytoacertainprojectspecificlegalopinion.Webelievethatsuchaconcurrenceonthematterhasbecomeevidentonlybecauseoftheproperunderstandingoftherationale.Thisparticularlyholdswhenwealsoconsiderthepossibilityofvariationbecauseofthedecreaseinthequantityofcertainitemsofwork.NologicwouldallowthatthedecreasedquantitywhichisnotexecutedmaybepaidatsomerevisedratefixedbytheEngineer.Therevisedratewouldcertainlyapplytothequantityexecuted.TherationalethusdemandsthesametreatmentforfixingoftheratebytheEngineerincaseofvariationinthequantityofcertainitemsoftheworkbecauseofanincrease,givinganobviousreasonofourunderstandingofthematterinlinewiththelegalopinioninthesimilarcontext.Yourreplydated7thJune2007furtherseemstoacknowledgethattheexactsituationundersuchacasemayonlybedeterminedbytheEngineerthroughanappropriatedecision,ashasbeenprovidedunderthespiritoftheFIDICDocument.However,thecommentsthereafter,onceagainseemtorestrictthedefinitionofvariation.So,tocontinue:regardingfixingofanewrate(Red4:52.2)Regardingourqueryregardingreratingofthevariedquantity.WeseektheclarificationregardingtheopinionofFIDIConreratingofthevariedquantity,asshownintheFAQSectionoftheFIDICwebsite.Ourdebate/discussionasappendedwithourqueryisonlymeanttoexpressourunderstandingthattheSubClause52.2onlytalksofthe"variedwork"andnotthe"variedquantity",which,however,remainssubservienttothedefinitionof"variedwork".TheactualintentionofourquerythusremainstoseektheclarificationinlightoftheSubClause52.2ofCivilWorkscontract4thEdition,1987.Tothiseffect,itmaybedeemedappropriatethatthewritersofthisparticularclauseortherelatedbackupmaterialmaybeconsultedsothattheambiguityortheconfusion,ashasarisenregardingthevariedworkthroughtheopinionofFIDICintheFAQsection,mayberemovedandtheprestigeoftheorganizationlikeFIDIC,whichisconsideredasanapexbodyincontractadministration,wouldbemaintained.

ANSWER

Thankyouforyourmoredetailedexplanationofyourquery.Ourrepliestopreviousquestionswereinresponsetoparticularquestions,whereasyourquestionisratherdifferent.Youare,ofcourse,correctthatVariationsunderSubClause52.1cancoverawiderangeofsituations,includingchangestothenatureaswellastothequantityofanitemofwork.Forthisreason,SubClause52.2mustbegeneraltocoverthewiderangeofpotentialsituations.ItisthenfortheEngineertoassesstheparticularsituationandtoagreeorfixanappropriaterate.Indecidingthequantum,andalsotheapplication,ofthisratetheEngineerwouldtakeintoaccounttheconsequencesofachangeinnatureaswellasachangeinquantity.YoushouldalsonotetheexplanatoryremarksintheFIDICGuidetotheuseoftheFIDICConditionsofContractforWorksofCivilEngineeringConstruction.SubClauses52.1and52.2arereviewedatpages114and115oftheGuideandincludethestatement:IfthenatureoramountoftheworkinvolveddifferssomuchfromthatincludedintheoriginalContractthattheratesandpricesarerenderedinapplicable,itistheEngineer'stasktoagreeappropriateratesandpriceswiththeContractor,or,ifagreementcannotbereached,tofixtheratesandprices.Wetrustthisfurtherexplanationwillansweryourquery.Anyfurthercommentswouldrequiredetailsofthespecificcontractandproblem,whichFIDICcouldnotconsider.

UNDUEDELAYFORCLAIMSQUESTION

Canyoupleaseidentifywhatismeantby"withoutunduedelay"underRedBook4thEditionclause44.3



consideringthattheContractorandtheEngineerhavemutuallyagreed,undercl.44.2(b),tosubmitdetailedparticularseveryfirstweekofthemonthandnotingthateverymonththecontractorissubmittingthesame.Whatisthedurationneededbyengineertoprovidehisinterim/finaldeterminationofextensionoftimeclaimsunderthisclause?

ANSWER

YourquestionreferstoSubClause44.3intheRedBook,FourthEdition1987.SubClause44.2hasimposedtimelimitsforthesubmissionofinformationbytheContractor,whichyousayhavebeenagreed.FIDICdoesnotimposeatimelimitontheEngineerbecausetheactualtimeneededforhimtomakehisdeterminationwilldependonthecircumstancesandthedetailsintheinformationprovidedbytheContractor.Howeverthe"withoutunduedelay"emphasisestheneedforthedeterminationtobemadeassoonaspossible.SubClause1.5alsorequiresthatanydetermination"shallnotunreasonablybewithheldordelayed".ThisgivestheContractortheopportunitytoraiseaqueryifheneedsthedeterminationinordertoplanhiswork.

PAYMENTONACLAUSE63.2VALUATIONQUESTION

ConcerningClause63.2and63.3oftheFIDICRedBook4thEdition.TheContractwasterminatedbytheEmployerpursuanttoClause63.1(thisisundisputed).ItwasagreedthattheadditionalcoststotheEmployerofexecutingtheworksbyanalternativecontractorhastobedeductedfromthevalueoftheworksexecutedbythefirstContractor.ThewordingofClauses63.2and63.3wasnotchangedoramended.ContractornowrequestsapaymentfromtheEmployercalculatedpursuanttoaClause63.2valuation.InadditionContractorstatesthatthewholeoftheWorkshasnotcompletedand,therefore,theDefectsLiabilityPeriodhasnotexpired,whichisaprecedenttoanycertificationofEmployer'scostsunderClause63.3.Therefore,anEmployer'sapplicationforClause63.3costsispremature,cannotbeconsideredandContractorisentitledtorequestapaymentbasedonthecalculatedClause63.2valuationwithoutanydeductionpursuanttoClause63.3.a)IsacontractorentitledtoaskforapaymentbasedonaClause63.2valuation,sinceanemployerisnotobligedtomakeanyfurtherpaymentuntiltheexpirationoftheDefectsLiabilityPeriod?b)IsitcorrecttointerpretthatContractor'srequestforpaymentbasedonClause63.2isnot(currently)justifiedalsoincases,whereacompletionoftheprojectwasdelayedduetocircumstancescausedbyanalternativecontractorortheemployer,iftheterminatedandrequestingContractoritselfhasformallyandexplicitpleadedthatthewholeprojectisnotcompletedwithoutcomplainingthedelayofcompletingtheprojectcausedbythealternativecontractorortheemployer?c)CantheContractorsimultaneouslyrefertoandrequestaClause63.2calculatedclaimandreject(alleged)unmaturedEmployer'sClause63.3costs,ifbothclauseswereagreed?

ANSWER

Thisisacomplextechnical/legalquestionarisingfromaspecificrequestbytheContractoronyourproject.FIDICcanonlyanswergeneralquestionsofinterpretationandcannotcommentonspecificrequestsorclaims.TheFIDICGuidetotheFourthEditionstatesatpage146forSubClause63.3:"IftheEmployerterminatestheContractor'semployment,heisnotliabletopaytheContractoranyfurtheramounts



(includingdamages)untiltheexpirationoftheDefectsLiabilityPeriodandthecertificationbytheEngineerofthecostofexecutionandremedyingofanydefects,damagesfordelayincompletion(ifany)andotherexpensesincurredbytheEmployerasaresultoftheContractor'sdefault."

WHENISPAYMENTMADEQUESTION

Weareseekingadefintionastowhenpaymentisactuallymadebytheemployertothecontractor.Isitwhentheemployerissueshispaymentinstructiontohisbank,orispaymentdeemedtobemadeoncethemoniesarereceivedinthecontractor'sbankaccount.ArethereFIDICguidelinesonthismatter?

ANSWER

yourqueryisreallyagenerallegalquestionaboutwhenapaymentis"made",ratherthanaquestionofinterpretationofaFIDICcontract.Theanswermaybedifferentunderdifferentjurisdictions.Youshouldconsultalawyerwithexperienceoftheapplicablelaw.

STATUTORYDECLARATIONQUESTION

MyfirmisexecutingaContractwithFIDICtermsandconditionsandIrequireaStatutoryDeclarationdocumentforinternationaluse(ProjectlocationisMadagascar).CanyoupleaseadvisewhereIcanfindthisinyourdocumentation,orbetteryetcanyouemailmetheappropriatedocument.

ANSWER

YourStatutoryDeclarationwouldseemtoconflictwiththeprinciplesoftheFIDICContracts.Progresspaymentsarereferredtoas'interim',whichsuggeststhattheyareprovisionalandnotfinal.EPCTSubClause14.6allowstheEmployertomakecorrectionsormodificationstopreviousamountsconsidereddue,whichsuggeststhattheContractorcanrequestmodificationstoapreviousvaluation.ItisonlytherequirementfortheApplicationfortheFinalPayment,asSubClause14.11,whichuseswordsindicatingfinality.TheContractorthenconfirmsthefinalitybyhisDischarge,asSubClause14.12.Theequivalentprovisioninthe1987RedBookwasSubClause60.7.TheStandardLetterforthatSubClausemerelyrepeatedthewordingoftheSubClause.However,thiswasacontractualletterandnotaStatutoryDeclaration.AStatutoryDeclarationwillpresumablybeissuedbytheGovernmentandwilldependontherequirementsoftheapplicablelaw,whichwillvaryfordifferentcountries.

FINALANDBINDINGDABDECISIONQUESTION

Inthe1992reprintedversionofthe1987FIDICConditionsaswellasinthe1999FIDICConditionsitis,intherelevantDABClauses,statedthattheContractor,EmployerandEngineershallgiveeffectforewithtoeverydecisionoftheBoardunlessanduntilthedecisionisrevisedinanamicablesettlementoranarbitrationalaward.OntheotherhanditisstatedthataBoarddecisionbecomesFINALandBINDING



unlesseitherpartygivesanoticeofdissatisfactionwithin28daysafterreceivingtheBoarddecision.Averybasiclegalprincipleisthatonlyfinalandbindingdecisionsareenforceable.AretheFIDICconditionsreallybasedontheveryunusualprinciplethattheEmployerhas,onbasisofununbindingBoarddecision,topaytotheContractoracompensationwiththeconsequenceofrunningtheriskofneverbeingabletorecoverthepaidamountfromaforeigncontractorwhentherevisedarbitrationawardisissued(long)afterthecompletionoftheworks.PleaseclarifywhethertheEmployerhastopayamonetarycompensationonbasisofaBoarddecision,whichisNOTFINALANDBINDING.

ANSWER

SubClause20.4ofthe1999ContractsisclearthatbothpartiesshallpromptlygiveeffecttotheDABDecision.TheEmployermustpayanysumawardedtotheContractoralthoughthesumtobepaidmaybechangedbyalateramicablesettlementorarbitration.IfaNoticeofDissatisfactionhasbeenissuedthenthedispute,nottheDABdecision,maybereopenedandfinallydeterminedbytheArbitralTribunal.Thesumtobepaidmaythenbeincreased,ordecreased,andadditionalmoneymayneedtobepaid,ormoneymayneedtoberepaid.AnArbitralAward,includingsuchfurtherpaymentorrepayment,wouldbeFinalandBindingandwouldbecoveredbyarbitrationlawandtheNewYorkConvention.ItisnormalpracticethataDABorAdjudicator'sDecisionisBindingandsomustbepaid,butisnotFinalandsomaybechangedinthisway.IfnoNoticeofDissatisfactionhasbeenissuedthentheDABDecisionbecomesFinalaswellasBindingandthedisputecannotbereopened.

LUMPSUMCALCULATIONQUESTION

Canyoupleaseadvisehowtocalculatethelumpsumtobeaddedordedcutedtothecontractpricewhentheeffectivecontractpriceexecceds15%.Inaddition,pleaseadviseonwhendowededuct,andwhendoweaddsuchamount.

ANSWER

Commentaryatpage117oftheFIDICGuidetothe4thEditionisrecommended.TheGuideexplainsthatsomeoftheContractor'soverheadcostsareincludedintheratesforitemsofworkandothersareincludedinseparateitemsintheBillofQuantities.ChangestotheactualquantitiesmaymeanthattheoverheadcontentofitemswhichhavepaidisnotappropriatetotheactualoverheadcostsincurredbytheContractor.InordertocalculateanyadjustmenttheEngineerwillneedtoobtaininformationfromtheContractor,orwouldhavetomakehisownassessment.AnycalculationmusttakeintoaccountanyadjustmentwhichhasalreadybeenmadeunderanotherSubClauseandonlyappliestoanyincreaseordecreaseinexcessof15%oftheEffectiveContractprice.TheSubClausestartswithareferencetothesituation"ontheissueoftheTakingOverCertificateforthewholeoftheWorks".ItisalsonecessaryforthevalueofvariationsandotheradjustmentstohavebeenagreedinordertomaketheSubClause52.3calculations.Anyadditionalpaymentordeductionwouldthenbemadeinthenextpaymentcertificateafterthefigureshavebeenagreedordetermined.

NEWRATEFORANINCREASEDQUANTITY



QUESTION

Iam"TheEngineer"foraroadconstructionproject.AdifferenceofopinionhasarisenontheapplicabilityofnewratesfixedbytheEngineeronthequantities,i.ewhetherthenewratewillbeapplicableonlyontheenhancedquantitybeyondtheoriginalBoQquantity,Ooritshallapplyontheentirequantity.Toexplainthisfurther,theBoQquantityforpileswas2000cum.Thedesignerincreasedthenumberofpilessothatthequantitybecame3000cum.TheEngineerfixedanewrateforpileworkfromXtoY.WillYratebeapplicabletoenhancedquantityof1000cum,orshoulditapplyto3000cum?

ANSWER

FIDICcanonlycommentingeneraltermsontheinterpretationofaFIDICclauses,anditshouldbenotedthatfortheapplicationofaclausetoaparticularproblemsituation,oneshouldalwaysconsultaspecialist.Withthatbeingsaid,ingeneral,SubClause52.2givesthepowertotheEngineertofixnewratesandstatestheconditionswhensuchnewratesmaybefixed,butSubClause52.2doesnotindicateacalculationmethodortheapplicabilityfornewrates.ThereasonforthisisbecauseSubClause52.2mustallowforcoveringawiderangeofpotentialsituations.So,althoughitistruethatrevisedratesarenormallyonlyapplicabletotheadditionalquantity,itisfortheEngineertoassesstheparticularsituationandcircumstancessurrounding,andtotakeallfactorsintoconsiderationinmakinghisdeterminationregardingthequantumandapplicabilityofthenewratesfixedunderSubClause52.2.Forreference,seepage127128oftheFIDICRedBookGuidetotheuseoftheFIDICConditionsofContractforWorksofCivilEngineeringConstruction,andpleasenotethattheaboverepresentsageneralansweronly,andspecificadvicetotheparticularfactssurroundingyoursituation,werecommendthatyouconsultaspecialist.