Construction Law

Construction Law/Daywork Rates
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Expert: Peter M. Elliott - 6/7/2012
Question Hello Peter, We have a dispute with the RE for works performed on the basis of Daywork rates. We have filled detailed Daywork Sheets with the used equipment and labour and marked the time to nearest hour. This means that sometime an activity, that if timed with a stopwatch, has taken 1 hour 47 minutes is marked with 2 hours. The RE has catually timed the activities with a stopwatch and video and will only pay for the minutes! used. Our argument is that rates are hourly rates and not per minute rates! Does the RE have the power to decide to pay only by the minute? Red 99 Fidic working on a project in Togo, West Africa.
Answer Dear Jesper, As always the devil is in the detail. It depends what is stated in your contract documents. Normally, dayworks activities are based on the time when a worker leaves his normal duties to start the daywork item until he returns to his normal activities. You could muddy the waters by asking if the RE timed your resources in this manner or only when they started the work. When I was last involved in dayworks, we worked to the nearest 15 minutes, even though we had hourly rates. The RE has the power, but you have the right to make a claim and bring the matter to the knowledge of the DAB. I suggest that you get agreement between the parties on the basis for payment and move forward. This situation is indicative of emotional behaviour by one party or the other and the objective reasonable party will win. The total amount for dayworks is likely to be small relative to the Accepted Contract Sum and thus it is better to lose the battle so that you win the war.
Construction Law/delete work

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Question Dear Peter I would your input in the subject of overhead cost in case of claims and variation. The project is a Design & Build lump sum contract under FIDIC Yellow Book-. We have had situation were the Employer has requested to delete some items of work. Under FIDIC Yellow Book is the contractor entitled to keep the overhead cost in case of a portion of work is deleted?. In case of additional work how we should proceed to request the overhead Cost.I appreciate your comment on this topic.
Answer Dear Apsara, Unless you have the equivalent of clauses 12.3 and 12.4 of the red book in the PCC, then you have some problems, because there is nothing in the yellow book that deals with valuation of omissions or variations exceeding a specific percentage. You have to define the loss of overhead recovery. You might find the article http://www.icoste.org/ZACK.pdf useful. It will show several ways of calculating the recovery or off site overheads. Realistically, I would not waste time and effort if the value of the omission is less than, say, 15% of the Accepted Contract Sum.
Construction Law/Material scarcity

Question QUESTION: Hi there, The Contractor is working on road project where there is scarcity of road layer materials. All borrow pits excaved by him and the those by the engineer yeild marginal quantities of the required material. Further search are likely to results in the same problem although the procedure involved due to conutry's laws will take long. It is also well know that the area has shortage of this required material. The contractor is claiming that this is unforseen physical condition on site and hence the road spec should be varied at a negotiated rate and that he be entitlted to Extension of Time with Cost under clause 12.2 of the Contract. The engineer is disputing this by saying that Clause 12.2 does not cover construction material since this is not a condition on site. He wants the contractor to agree to a fixed extension of time and and fixed rate since the material was used on other parts of works in 2009 in the same contract which were long completed. THe contractor is arquing that he needs a unpdate rate. THe material was not in the basic price. In this case who is right? ANSWER: Dear roberts.manyathelo, This is a public free service for the benefit of all, so I don't do private questions unless a reason is given or a donation is made (please read the comments on my page), but you can resubmit your question as a public one if you wish to, because some times people mark their question as private by mistake. Alternatively, you may have a perfectly valid reason for making this question a private one, as the subject matter is rather delicate, in which case please state the reason and I will do my best to answer your query. You may find that I have answered a similar question recently and thus the answer could be there. ---------- FOLLOW-UP ---------Answer dear roberts.manyathelo, I would ask 'What has changed since the Contract was signed? Do these changed circumstances, if any, provide a contractual basis for an EoT or varied rates? I think, from the facts above, that the answer is no to both questions and thus the Contractor has no entitlement to an EoT or varied rates.
Construction Law/ Time for completion from

Commencement date
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Question QUESTION: Peter, We have FIDIC 1999 contract. The project is located in a area with 600 over houses which needs to be acquired by the client and given to us for demolition before work can begin.Demolition is part of our scope of work. Clause 8.1 says the commencement date shall be within 60 days after the contractor receives the letter of acceptance. We received LOI on 24th Feb 2011. Sub clause 1.1.3.3 The Time of completion is 25 months from the commencement date plus any time that may lapse between the commencement date and the site handover date.( This is in appendix to the tender in relation to clause 8.2 and 8.4) Clause 2.1 was modified in Particular conditions to read" the contractor acknowledges it will not have access to, and possession of ,any parts of the site at the commencement date.The site handover date will be notified to the contractor,on no less than 2 months written notice,within 8 months from the comencement date" This means our last date for the employer to handover complete site is 24th Oct 2011. The employer started handing over parts of site to us on 3rd May 2011 and we started work on available areas.The process continued with intermittment handing over and we continued work until the date of 24th Oct 2011 arrived.The employer failed to give the complete handover by this date. Now the question is how do we determine the site handover date by strict interpertation of the above clauses? Does it mean our time for completion of 25 months has not started yet until we have compelete site handed over to us? or it will be considered in all fairness that since we started the works on 3rd May 2011,although with limited site areas, our time of completion runs from that date? Nowhere in the contract document word of complete site handover has been used.It only said Site handover in accordance to clause 2.1. We are preparing to apply for EOT but are confused as to correct interpretation of the clauses.Should we ask for interim EOT begining 25th Oct 2011( date when complete site was to be handed over) or it will be determined from the actual start of handing over process which is 3rd May 2011?.One opinion is our time for completion does not start as yet because full site is not handed over and we should claim for 25 months interim extension until full site is handed over.Other view is the engineer will not accpt this beacuse we have been working on site since 3rd May 2011. Kindly advice on the basis of all the above that I have stated. Thanks Abdul Moid ANSWER: Dear Abdul, An interesting question and one that needed some thought. I am not sure that I understand it entirely. By LOI do you mean letter of acceptance, because you give no date for the letter of acceptance. I suppose that you mean order to commence when you say LOI. LOI usually means Letter of Intent. If the LOI is the letter of acceptance, then handover must be complete, at the latest, by 60 days plus eight months or 25.12.11. If 03.05.11 is the commencement date, then handover has to be complete by 03.11.11. I am confused by your date of 24.10.11. Due to the apparent lack of clarity in the contract documents, you could be in a situation where time is at large and you have to finish within a 'reasonable' time. In any case I suggest that you produce a programme to
completion, highlighting when you need various sections to be released. The programme should be updated weekly or at least monthly and forwarded to the Employer. As with all extension of time matters, I suggest the you download and read the SCL Delay and Disruption Protocol www.eotprotocol.com as it is a good guide to the requirements for a successful claim for an EoT, even if it is not a contractual requirement. I prefer a line of balance progress chart for linear projects as it presents hindrances more clearly. the following sites might useful as a starting point http://en.wikipedia.org/wiki/Time_distance_diagram http://www.cpmtutor.com/c02/lineofbalance.html I have developed my own line of balance programme using excel, so it is not difficult. ---------- FOLLOW-UP ---------QUESTION: Peter, Sorry I should have used Letter of Acceptance instead of LOI. To cut it short: Letter of Acceptance 24th Feb 2011. Employer's liability for complete handover 24th Oct 2011.( 8 months from letter of acceptance). Employer started giving partial possession from 3rd May 2011 and we started work to mitigate delay. Employer was unsuccessful to give complete handover on 24th Oct 2011 but continued to give partial possession intermittently from 3rd May onwards. Question is: When does our period of completion of 25 months start? Will it be from the date when complete handover will be given or from 3rd May when partial possession was given and we started work? While giving answer please note very carefully the clause "The Time of completion is 25 months from the commencement date plus any time that may lapse between the commencement date and the site handover date" and " the contractor acknowledges it will not have access to, and possession of ,any parts of the site at the commencement date.The site handover date will be notified to the contractor,on no less than 2 months written notice,within 8 months from the comencement date". I hope this clarifies. Kindly advice. Thanks Abdul Moid Answer Dear Abdul Moid, I noted carefully the relevant clauses in my previous answer, but perhaps I was insufficiently clear in my answer. One interpretation could be that you have to finish each section with 25 months of handover. Another interpretation could be that you have to finish the project with 25 months of the first handover, with extensions for individual sections depending on the actual handover date, which, effectively, is almost the same as the first interpretation, except in the application of liquidated damages. As I mentioned, I believe that the Contract is unclear and you might be able to claim that time is at large. I think that you should ask the Engineer for his determination under clause 3.5 on the meaning of the Contract documents and then prepare to submit a claim under clause 20.1, prior to going to the DAB or arbitration. In the meantime, an agreed programme of works, highlighting any delay and disruption is essential for your protection.
Construction Law/ Ommission

of Provisional Sum
Question Contract :- FIDIC 1999 - Red Book. We are the Main Contractor under the Contract The Engineer is looking to omit a works which are covered by a Provisional sum and is looking to give it to some other contractor. They have adjusted clause 12 in the contract :- Delete the entire sub clause 12.4 and insert the following " Where the omission of any works form part ( or all) of a variation the value of the omissions shall be limited to the value of the measured works included in the Bill of Quantities and no allowance for preliminaries , loss "of profit, recovery of overheads or other cost shall be allowed" 1) Please confirm if this mean we can not claim loss of profit on this item 2) Is the Engineer in breach of contract. 3) What recourse would we have under the contract to make a claim against this item. Regards John Answer Dear John, 1. Looks as if you have the dirty end of the stick and you cannot claim, but then OHP for the relevant work are part of the Provisional Sum, so not included in your normal calculations - clause 13.5 B0 (ii) refers. 2. Possibly under clause 13.1 d, but it would be arguable, and do you really want to terminate the Contract on this basis? 3. Honestly, I would not bother but put the matter in the good will bank. It would be a lot of hard work and expense for little return, unless the value is more than say 5% of the Accepted Contract Sum, in which case, it should not be a Provisional Sum. You could try under clause 12.4.
Construction Law/ Interim Payment Certificate

Question QUESTION: 1-Does the contractor can request an explanation from the Engineer for why the amount of IPC is less than the submitted statement? 2-and according to sub-clause 1.3 the Engineer is obligated to send a copy of the IPC to the Contractor but does this obligation extend to the suppporting particulars attached to the IPC written in sub-clause 14.6 or the Engineer will send these particulars only to the Employer? ANSWER: Dear Haytham, 1. I would certainly ask the Engineer for an explanation of any differences between your statement and the IPC, if only to avoid repeating any mistakes or errors. It is best to clear these things as soon as possible. Of course if you disagree with the Engineer, then you are obliged to submit a claim under clause 20.1. Often I find that a contractor has over measured his work, either through optimism or due to a misunderstanding of the measurement rules. Also the Contractor is obliged to include any sums which he considers due, which might include claims disallowed by the Engineer. 2. The supporting documents would generally be the backing sheets to the Contractor's statement, plus any differences by the Engineer. It is always helpful if the Engineer sends these documents to the Contractor. Clause 1.3 could be applicable, in that the supporting documents could be defined as part of the Certificate. I think that the softly softly approach could be more profitable than standing on rights. Explain that you need the information to eliminate any errors or mistakes. ---------- FOLLOW-UP ---------QUESTION: 1-Does the Engineer is obliged to provide an explanation for the differences between the contractor's statement and the IPC (With or Without Contractor's request? 2-If the answer for the previous question is NO so, how the Contractor knows his mistakes and errors, which Items of work have been over measured by the Contractor, what's the current state approved by the Engineer (Quantities and Percent of Completion) so as to the Contractor may use in the next Statement,..............etc? Get the answer below Answer Dear Haytham, 1. I guess that we have a failure to communicate here between the Engineer and yourself. The Engineer may have sent letters refusing certain payments or advising of non-payment for noncompliant items. He may consider that further notice is not required. I would not act in this manner, but some are not so helpful. I cannot find anything which says that the Engineer is obliged to state specifically the reasons for any difference between his certificate and the Contractor's Statement. 2. Errors are likely to be repeated with increased misunderstanding and frustration. Each case needs its own solution. I have no specific advice.
Construction Law/ Advance Repayment Calculation

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Question Peter, My question is about calculating advance repayment in FIDIC 1999 RED Book. 14.2(a) is fine but 14.2(b) seems to be a gray area if not confusing. 14.2 (b) - Deductions shall be made at the mortistion rate of one quarter (25%) of the amount of the amount of each Payment Certificate (Excluding the advance and deductions and repayments of Retention) in the currencies and proportions of the advance payment has been repaid. Now, my question is if The contract sum is 2,000,000 Advance is 10% 200,000 Retention is 10% If in Valuation Nr.2 my Gross Work Done is 463,782 Retention is 46,378.2 Previous Gross Work Done i.e. Nr. 1, first after Advance payment is 257,260.80 Going by 14.2(b)I need to start repayment in valuation Nr.2 but will my advance repayment be calculated on gross work done in Nr.2 less retention i.e. 417,403.8 i.e. 463,782 less retention of 46,378.2??? Please shed some more light on this. Thanks Get the answer below Answer Dear Alex, I am not sure that I understand your question. Normally the first IPC will be for the Advance Payment only. The next payment will be for the value of work since the start of the Contract and thereafter, hopefully, at monthly intervals. If I understand correctly, then repayment is 25% of net interim certificate (total value to date inclusive of advance less retentions, advance payment and previous payments) - best to do an excel sheet to work out when total advance payment will be repaid.
Construction Law/ contrary to design
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Question Dear Sir , I am contacting you to inquire about an issue related to this situation , A Contractor completed the finishing of (100sq.m.) of Walls of a meeting room using solid oak wood paneling of 18mm thickness, which is priced at US$800 per square meter. The method of installation of the paneling specified in the Contract renders the paneling as permanently fixed (cannot be removed without damaging the paneling). When the work was inspected by the Engineer, it was discovered that there were two power outlets on each of three walls of the meeting room as designed, whereas the fourth wall had only one contrary to design which specifies two outlets on that wall too. The BOQ item for power outlets is priced at US$50 per outlet. What is the appropriate remedy to this situation? regards Get the answer below Answer Dear Shadi, The contractual answer is that the Contractor has to build in accordance with the design and correct any errors or omissions at his own cost. It might be possible to minimise the damage to the panelling by feeding the socket from the rear through the adjacent room, or the client might accept surface mounting of the socket and surface mounted feed, although it is unlikely. Without detailed information, I cannot give you the most cost effective solution
Construction Law/ Loss of Profit

Question Hi Peter We are on a project which changed the project management company. To facilitate the change over we had to reconcile of scope of work and contract value before moving on with the new project managers. During the reconciliation period our company's quote for the construction of bathtub framing and screeding (not part of our original tender) was accepted and incorporated into the reconciliation figure to finish the project. However when the new project managers took over they gave part of the tub framing works to the gypsum contractor. We informed them that this was our responsibility. They still proceeded and then asked us to submit a revised quote for the works we will do. We submitted the revised quote which included a figure for the loss of profit. They are stating we are not entitled to loss of profit since we did not do that part of the work.
[1]Should we be entitled to loss of profit? [2]Is there a clause in FIDIC that entitles us to this loss of profit? [3] How is the loss of profit calculated? Thanks Damien Ramdeen Get the answer below
Answer Dear Damien, 1. unlikely as it it will be a very small part of the works. Generally loss of profit only applies if the final price is more than - 15% of the original agreed price. Also you have to prove your expected profit which is not the value included in the offer, but the figure given in your annual audited accounts for the past 3 or 5 years. 2. You do not say which version of FIDIC you are using but in FIDIC 4 clause 52.3 would be relevant. 3. have a look at this article http://www.icoste.org/ZACK.pdf
Construction Law/ PB and Insurance Extension in VOs

Question Dear Sir During currency of a contract a variation order was issued and completion time extended. Consequent upon the Contractor was asked to extend the performance security and insurance covers. The Contractor claimed that he will charge the cost of arranging performance security and insurance covers for extended time. The Engineer recommended the claim on prorated basis of Bill No. 1 for General Items. The Audit raised objections that since charges of performance security was paid on lump sum unit of payment, therefore it covers the charges for extended period too, on the other since the insurances were on prime cost basis therefore it will be paid up to the limit of prime cost mentioned in the Bill No.1 I do not agree with the Audit as it is not the matter of measurement units. Please offer your comments in the matter. FIDIC 4th was used. Regards jawaid
Answer Dear Jaiwad, I support your position. The lump sum was for a specified number of months. If the number of months changes, then the lump sum is not valid any more. The Contractor could claim the actual charges for extending the bonds and insurances plus his reasonable costs and profit or it could be done pro rata if both parties agree. FIDIC does not mention Prime Costs, so I am uncertain as to the rules for prime costs, the same general principle applies. The original prime cost was for a specified duration and the duration has changed so the rule apply no longer. I guess the Audit are trying to save some money without a real understanding of construction law and that they are risking antagonising the Contractor unnecessarily.
Construction Law/ Claim for late payment
Question Dear Peter, I'd like to have you advise regarding claim for late payment to contractor. Understanding that, employer made payment to contractor late. Does contractor need to submit this claim within the specific time? Our contract is FIDIC 1999. Thank you. Khoa Get the answer below Answer Dear Khoa, The last paragraph of clause 14.8 is relevant. The Contractor has an absolute right to the payment, which means that he can take the Employer to court if he fails to pay the money. However as a matter of courtesy, I would submit a claim under clause 20.1 so that the Engineer can approve and the Employer has written justification to make the payment, especially if the Employer is a government body.
Construction Law/ Appointment of The Engineer

Question I am an engineer working in a public sector organization in Pakistan. We use FIDIC 87 for government funded projects and FIDIC 2010 harmonized edition for donor funded projects. My question is related to appointment of The Engineer, which is stated in two parts: (i) Can the Chief Resident Engineer or a Resident Engineer of a consulting firm (supervisory consultant) be appointed as The Engineer? Is it ok or there is some conflict of interest? (ii) What is the best practice around the world as to who should be appointed as The Engineer? Thanks and regards. Ijaz Ahmed Get the answer below Answer Dear Ijaz, Firstly there is a big difference between the duties and responsibilities of the Engineer under the two forms of contract. FIDIC 4 assumes and requires that the Engineer should be impartial and independent in his actions and decisions, whereas FIDIC 99, and hence MDB 2010, states that the Engineer is considered to be an employee of the Employer and is required only to be fair in his determinations. 1. no problem and no conflict of interest, provided the person appointed fulfils his duties under the Contract.
2. The best practice is to appoint a person who has the experience and and personality to fulfil his duties and responsibilities in the best interests of the project.
Construction Law/ advance payment recovery

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Question our contract is $ 1,818,459 the advance is $ 133,318 which has been recovered totally and we took back our advance guarantee. when we have come to finalize the financial issues,the client is accounting us back with the amount of the advance payment and he is refusing the fact that we have recovered it totally. we have received total of $ 1,431,448 excluding the advance payment since it has been recovered. we are not able to convince the client with this issue. please i need help and advise in how to convivnce him? Get the answer below Answer Dear Yasser, I have met this one before. The Employer is looking for a single sum equivalent to the advance payment as a receipt into his bank. You need an accountant to explain the idea of set off, where existing debts are set off against payments due until the debt is cleared. Alternatively, total value of work - total payments received (advance + IPC's) = amount due.
Construction Law/ Suspension

Question Dear Mr.Peter, My Question as follows I'm working as QS in Consultancy firm in Dubai. in our Project, We gave the instruction to Contractor to suspend the part of works due to design issues. The suspended period was 56 days which falls under Critical Path in programme. After issue of revised design the contractor submitted the revised programme for 110 days (some of additional works were added) to complete works. After submitting the revised programme for new design, the Contractor got big work in somewhere else and he wants to finish the work as soon as possible and get out from site. He mobilized the more resources without informing to us and finished the 95% of works within 30days after issue of new design date. But the Contractor submitted EOT for 110 days and prolongation cost for 110 days and ideal resources claim for suspended period.
My Questions as follows; Q1. How we can grant the Extension of Time (EOT) as per programme for 110 days where as total work will be completed within 30-40 days. Q2. How can assess the prolongation cost Case 1. based on contractor's programme and resoucres mentioned in that Clause 14 programme? Or Case 2. based on actual resources deployed at site (acceleration cost) to complete the total work. Q3. Based on present scenario Client want to takeover the works as works are substantially completed, but Contractor is not requesting us to takeover the completed work, his intention may be staying in site upto 110 days with minimum resources to get prolongation cost for total period. Under FIDIC 48.2(c) Engineer can give the instruction to contractor for handing over of works? Form of contract is FIDIC 4th Edition 1987. Thanks in advance for your prompt reply, Regards, Venu Answer Dear Venu, Not an easy question, but some thoughts for you. Q1. EoT and variations are judged in the logic of the contract not reality. If the logic says that 110 days are due then you give that extension. However, it would be better to consider reality and think about acceleration costs. Q2. This question is really another aspect of Q1 and the same logic applies. Q3. Considering that the Employer wants early possession, then it would seem to be in the interest of both parties that acceleration costs be agreed. Remember prolongation costs are paid relative to the period of delay, not the extension after the original time for completion. If the works are complete, one assumes that Employer will demobilise all time related resources, such as the Engineer and so the Contractor would not have the basis for costs. The Employer could terminate the Contract, but that could lead to more troubles. Clause 14.8 c still needs the Contractor to request a certificate. I suggest that there is an opportunity for a win win situation here and that you can arrange it. Manish Gupta
First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.
Experience
Value . . . It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do. The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run. And if you do that, you will have enough to pay for something better. . . . John Ruskin (1819 - 1900) "We are too poor to buy something cheap" .Romanian Proverb 2002 A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633) I said it in Hebrew, I said it in Dutch,
I said it in German and Greek: But I wholly forgot (and it vexes me much) That English is what you speak!" Hunting of the Snark - Lewis Caroll Match your presentation to the reader! The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Construction Law/ Rights

of the Employer withholding Payment Certificate
Question QUESTION: Good day! I am a Quantity Surveyor here in Hanoi Vietnam. Our Project is a Cable Bridge. We are using FIDIC 1987. I just have a question below, for further clarification. Since until now, the issue has not yet been resolved. Does the employer have the right to withhold the Payment Certificate let's say from the month of November 2011 which was already been certified by the Engineer and to be submitted to the Employer (Project Manager) for evaluation, his signature and final approval for payment. The reason is that the Employer side does not agree with the Calculation of the quantity of the Steel Materials. The contractor has already replied to the Employer regarding the clarity of the calculation method used, the software used, and with the sample how it is done. This was confirmed and agreed by the Engineer. However, the Employer is still not satisfied. To-date, IPC since November 2011 until now is pending due to this issue. The Contractor has already sent a letter requesting to continue the checking and payment until the issue will be resolved the soonest since it is just interim and subject to be checked and will not affect the final measurement in principle. Actually, I have been reading the contract and haven't found any stipulations that state that the Employer have the right to withhold or stop the payment. Even in Engineer's Duties and authority Clause 2.1 of the Particular condition, there's only a certain or specific stipulations that the Engineer needs the Employers approval, most of it is in Variation and extension of time. Hope you could give me some clarity with this matter. Thank you and hope to hear from you. ANSWER: Dear Syril, Once the Engineer issues the IPC, it becomes a due debt, payable within the terms of the Contract. Non-payment of an IPC amounts to a breach of contract. Sub-Clauses 69.1 and 69.4 are relevant to your situation. You have the right to terminate suspend or slow down the work and, of course, to reimbursement of your financial charges due to late payment of the IPC's, together with an extension of time, but you must submit your claim under clause 53 in good time. I suggest that you get legal advice with respect to the effect of the applicable law before proceeding with a clause 60.1 or 69.4 notice. ---------- FOLLOW-UP ---------QUESTION: The issue is regarding the quantity calculation of steel structures for payment purposes. The Employer disagrees with the calculation and required the Contractor and Engineer to re-calculate, explain the wastage ratio, net ratio. The Contractor has resubmitted recalculation which was confirmed and agreed by the Engineer.
The Contractor explained to the Employer how the calculation was done, the software used and answered all the queries of the Employer which was agreed and supported by the Engineer based on their own analysis of the Contractors explanation and which follows the Clause 8.22.1 Measurement, Technical Specification. As per the employer, they have already accepted the previous Payment Certificate and will not continue with the next Payment Certificate until this issue will be resolved which the Contractor considers not wise decision since the Project is until end of 2014. The Contractor is doing its best to comply all the requirements and queries as soon as possible. Answer Dear Syril, The reason for withholding payment is immaterial and irrelevant. The Engineer has certified payment and thus payment is due. If the Employer has a problem with the Engineer's calculations then he should penalise the Engineer, not the Contractor, and ensure that future calculations are to his satisfaction. I stand by my earlier comments
Construction Law/ Suspension of Work

Question Dear, Our contract is under FIDIC MDB Harmonized 2006. Currently we encounter serious problem at Site due to disruption from local people and this situation force us to interfere with them meanwhile as per contract the contractor shall not interfere with the public (Sub-clause 4.14). The Engineer and the Employer did not take any necessary measure to resolve the problem. The problem as following: The contractor obligate to build side ditch alongside the road and the land acquisition was completed within the Right of Way. However, after the side ditch completed waterways can not be built due to located outside the RoW and the land is not acquisition yet by the Employer. Due to this problem, in terms the heavy rainfall comes it will inundate homes, bush, or rice field. The victim claim to the Contractor to indemnify their loss and threaten the Contractor. My question, is there any legal room for the Contractor to suspend the Works or even terminate himself due to this situation? Best Regards,
Answer Dear widyapraja, It is not a case of force majeure as the solution lies with the Employer. I do not think that you have a case to suspend the work and suspension would not help you but you might terminate under clause 16.2.d. It could be that the Employer does not have the finances or the resources to buy the land. If you have built the drains and there is a real chance of flooding, then you have an obligation to keep the site free of water. What happened before you built the road? Did the water flood the local properties then? Have you asked the police to protect your workers? Is it possible to run the water into local rivers or streams? Is it technically possible to build soakaways within the RoW to minimise the potential for flooding? What would be the cost? Perhaps you could suggest possible solutions without accepting any design responsibility.
Did you consider asking for help from the funder?
Construction Law/ Payment

of General Items
Question Bank Harmonized Edition FIDIC 2005. Ukraine The Contractor is currently in delay. The time for completion has expired. No EOT has been issued. Included in the General Items are such things as: Offices for the Engineer and the Contractor. (Lump sum) Laboratories for the Engineer and the Contractor.(Lump Sums) Living Accommodation for the Engineers staff (Lump Sum) Vehicles for the Engineer (Time based) Can you please advise me whether in the above circumstances payment should be made to the contractor for those General Items. Regards Glyn Gatland Get the answer below
Answer Dear Glyn, In this situation the Contractor is responsible for all costs incurred after the end of the contractual time for completion, including those stated. If an EoT has been requested, care is needed, because the Contractor would be entitled to recompense for applicable costs and interest for any extension of time. I presume that the lump sum items are for the supply rather than the monthly costs, or that the lump sum includes monthly costs for the specified period and thus there should be no reduction in these items.
Construction Law/ Increase of Cost

Question Dear Sir, Can overheads and other charges (excluding allowance for profit) be included in cost increased worked out under sub-clause 70.1. Thanks and best regards, Ahmad Get the answer below
Answer Dear Ahmed, I assume that you are using FIDIC 4 as the form of contract.
Generally indexation is applied to the net value of the IPC, which included overheads, charges and profit, rather than individual resources, such as labour or fuel. It all depends on what your contract says in part II.
Construction Law/ Lump

sum contract
Question In L.s contract can the buyer omit some quantity from a certain item for example a boundary wall 200MR and the buyer instructed the seller to execute only 150 MR. In this case is the buyer entitled to deduct the unexecuted quantity? Best Regards Get the answer below
Answer Dear Ahmed, You do not state the form of contract, nor the applicable law, so the following comments are generic. You probably have the right to delete the item, provided that you do not award the work to another contractor, and to ask for a reduction in the Accepted Contract Sum. However, the argument will come with agreement on the amount to be deducted. I suggest that you are generous in your dealing with the Contractor, since the variation is caused by the Employer rather than the Contractor
Construction Law/ Variations and adjustments as per cl.13.1

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Question Dear Sir, I am working as RE for road project under FIDCI Harmonized edition 2006. There is a lump-sum provision "Towards cost of relocation of Public utilities" in the BOQ. Contractor quoted 37.49 percent less. Now after completion of more than 50% of utility shifting works contractor raising an issue that the work in question is a variation in accordance with sub clause 13.1 (b) of contract due to the changes to the quality and other characteristics of any item of work as the utilities are erected afresh. They intend to claim new rate pursuant sub clause 20.1. Please note contractor himself carried out some utilities works under turnkey basics with the local authorities. I would like to seek a clarification from you whether the contractor are entitled for the new rate or not. How this claim can be rejected?
Answer Dear Saravanan, I am not sure if I have understood your situation correctly. Was the lump sum a provisional sum or a straight lump sum? Was the description in the BoQ of the work 'relocation' or provision of new services? Was the actual work 'relocation' or provision of new services? If it was a provisional sum, then the Contractor has the right to claim extra payments. If the
nature of the work has changed from relocation to provision of new services, then the Contractor has the right to claim extra payments. Also the description 'towards the cost ...' implies that this item will not cover the complete cost of the relocation of services. How can the claim be rejected? I cannot say without further information.
Construction Law/ communication
process
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Question Dear Sir, I am contacting you to inquire about an issue related to the role and the communication process that should be considered between three parties (project owner or his representative, office contracted for the implementation of the project commissioned by the owner Contractor, and the office of monitoring and supervision for the implementation commissioned by the owner engineer) in order to implement a certain building project. My office works as a monitoring and supervision office for the implementation of a building project. During our work, I have noticed that the implementation office contractor has contacted the owner directly (not through our office) regarding some issues such as extending the implementation contract period, extending the delivery date of some items, some problematic financial and technical issues, submit the monthly reports (which must be submitted to the monitoring office) to the project owner, complaining about the monitoring and supervision office, and complaining about the design layouts. Our office was ignored during this process, and only a copy of the exchanged letters was sent to our office. Our office complained about this for the implementation office, and asked them not to send the monthly reports to the owner directly but through the monitoring office, this is to avoid any confusion between the three parties. We have also contacted the owners office asking them to contact the implementation office contractor through the monitoring office, this is necessary for us to follow up and to let our office do its job efficiently. Unfortunately, we didnt receive any response from either of the offices. Recently, they have contacted the owner regarding some very technical issues, it seems that they ignored all our requests. Again, only a copy of the exchanged letters was sent to our office. This situation resulted in some problematic financial and project delivery work and time plan issues, as the monitoring office cant approve many of the implementation office financial requests as there is no justifications and no supporting documents. I would like to inquire about the action that we should follow considering FIDIC 1999 statements and regulations? More specifically, how do FIDIC 1999 regulate the communication process between the three parties mentioned above? Best Regards,
Answer Dear Shadi, Welcome to the real world. Clause 1.3 controls communications and states that notices between the parties must be copied to the Engineer. Only the Engineer can give instructions, variations or certificates, such as Interim Payment Certificates. You now have a problem because you have allowed the Contractor to bypass your authority. You will have to find a way to reassert your authority. Of course you cannot authorise payments which do not comply with the Contract. If the Employer has agreed payments without your involvement, then you need an instruction from him to release those payments to protect yourself, because
those payments could be illegal. You need to tread very very carefully, or you will be removed from the project. In some respects removal might be the best long term solution, as you will be released of all legal responsibility. Why is the Contractor bypassing you and how do you regain his respect? You must work hard to prove that you are the Employer's shield against all problems and the Contractor's shield against difficulties. I wish you good luck.
Construction Law/ Fidic Clause 13.1 Right to Vary

Question QUESTION: Dear expert, I would like to ask a question with regard to the extent of Engineer's right to instruct variation. We are constructing a dam project, in the Contract, there is no cut-off wall underneath dykes, now the Engineer intends to newly introduce cut-off wall to the dykes as an variation. This new cut-off wall may cost millions of dollars. My opinion is that the new cut-off wall is a change of scope of Works, the Engineer shall not have the right to change the Contract, that is saying, the Engineer shall not have the right to instruct this variation. Is my understanding right? Please give some advice. ANSWER: Dear Frank, I refer you to clause 13.1 e where the Engineer can order 'any additional work, Plant, Materials or services necessary for the Permanent Works, including any associated Tests on Completion, boreholes and other testing and exploratory work,' What is your problem? Are you afraid that the Employer will not have the funds or that you will not have the resources to do the work. It is the same type of work as you are doing already. You are not saying something. Let me know what your real problem is and I might be able to advise you.
Answer Dear Frank, If the Engineer is insisting on a specific construction method, then he must pay all the costs, including extra supervision, lower production rates etc. As the environment is different, river bed versus dry area, he cannot insist on the same rates. I suggest that you write stating that you will follow his instructions, but he should note the difference in costs, and also your disclaimer regarding extra costs, delays etc. I suggest that you fight the Engineer where you can win and for the rest, let him pay to have his preference.
Construction Law/ lum sum

Question Dear sir once the lum sum contract BOQ the item does not inlude in the BOQ but shown on drawing and specfied in spec such a case Does the contractor able to claim those work under bill omission letter? Does engineer able to issue the Engineering Instruction as a variation? Narendran Answr Dear Narendran, Generally there are definitions in the tender dossier stating that all the work shown on the drawings or required by the technical specifications must be included in the offer. Thus the bidder must include for an item if it is shown on the drawings but not included in the BoQ. The Engineer does not have to issue a variation or instruction if the item was shown on the tender drawings. If the item is introduced by a new drawing after contract signature, then it needs an instruction and variation order, with a revision to the Accepted Contract Sum.
Construction Law/ commencement without notice from

Engineer
Question A "FIDIC 1987 " based contract has been awarded, and agreement signed. Contractor has been taken to site by the Engineer. Engineer did not issue notice to commence within 56days stipulated in appendix to tender. The Contractor started work after the 56 days only to be instructed after 4months that the Employer has instructed that all new contracts awarded by the government should be suspended. After a year the Employer agrees again to continue the project under the same contract conditions and to the same contract, except adding new drawings and breaking the contract into 2 phases. Does the contractor have entitlement to loss and expense. work done prior to suspension? Get the answer below Answer Dear Heyford, It depends on what was work was done before the suspension. As there was no Order to Commence, the Contractor should not have started the Works. However he would have had some expenses in mobilising the resources for the Contract in the reasonable expectation that he would receive the Order to Commence within the stated period. In general, I would say that he cannot claim for loss and expense for work done prior to the suspension. Of course he should be paid for any items that are part of the permanent works. Of course the Contractor can claim for costs and an extension of time due to the suspens
VO Clause 52.2 FIDIC 4th Edition

Expert: Florin NICULESCU - 7/22/2008
Question QUESTION: 1. Lets say Contract Cost stated in the Letter of Acceptance is US dollar 100 a. Quantity of Excavation is 1 m3 b. Rate of Excavation is US dollar 1 c. Amount of Excavation is US dollar 1 2. Now there is a variation of 200 % in excavation item and new quantity becomes 3 m3. New amount becomes US dollar 3 with same rate of Us Dollar 1 3. Now as per clause 52.2 of CoC part-II FIDIC 4th Edition Provided further that no change in the rate or price for any item contained in the Contract shall be considered unless such item accounts for an amount more than 2 percent of the Contract Price as stated in the Letter of Acceptance and the actual quantity of work executed under the item exceeds or falls short of the quantity set out in the Bill of Quantities by more than 25 percent. 4. Before variation, excavation item accounted for an amount less than 2 % of the contract price stated in Letter of Acceptance. 5. But after variation, excavation item will account for an amount more than 2 % of the contract price stated in Letter of Acceptance. 6. Now question arises that as per clause 52.2 of CoC part II FIDIC 4th Edition, can new rates be applied for the above mentioned variation mentioned in para 2. 7. If yes to para 6 then there is a problem that clause 52.2 of CoC Part II does not mention to apply new rates after variation as actual excavation item account for an amount less than 2 % of the contract price stated in Letter of Acceptance. 8. If No to para 6 then there is a problem that contractor can request Engineer to do variation in parts as per following detail. Contract Cost as per letter of Acceptance = Us dollar 100 a. 1st variation Order: In 1st stage there is a variation of 110 % in excavation item and new quantity becomes 2.1 m3. New amount becomes US dollar 2.1 with same rate of Us Dollar 1 b. 2nd variation Order: In 2nd stage there will be a further variation of 42.876 % in excavation item and new quantity becomes 3 m3, now new amount can be more then US dollar 3 with new rate. As in case of 2nd Variation Order Clause 52.2 CoC Part II will be applicable. 9. It means if you implement same clause in a different way you have a different financial impact. 10. As a matter of crux, mostly international organizations use said FIDIC clause as mentioned above in para 3 which have ambiguity. Why not its better to use clause 52.2 FIDIC Condition of Contract Part I, 4th Edition. ANSWER: Dear Aasim, Thank you for your thorough question. Firstly, I am surprised you don't indicate anything about Sub-Clause 52.3 that deals precisely with large variations of quantities. Prior to giving an answer to your query, I would suggest you check that Sub-Clause too, both General and Particular, as obviously, one must consider all Contract provisions prior to making a decision.
Also, under Para 3, you do not indicate where precisely that new paragraph is inserted in the General Sub-Clause. Is it in the beginning/middle/end, is it replacing an existing paragraph? I am particularly interested in that, as in fact Sub-Clause 52.2 simply says the Engineer is allowed to fix new rates and conditions when such new rates may be fixed, rather than indicating a calculation method for new rates. Please thus have a look at the matter, from that prospective too and if still unclear, please do come back with these information and will gladly develop the answer. Good luck, ---------- FOLLOW-UP ---------QUESTION: Clause 52.3 relates variation exceeding 15 % on the issuance of taking over certificate. It has no concern with power of Engineer to fix rates i-e clause 52.2 Power of Enginerr to Fix Rate New paragraph mentioned under para 3 is inserted after 1st paragraph of clause 52.2, General Conditions of Contract part I, FIDIC 4th Edition reprinted in 1992. Keeping in view my earlier submission and clarification to your queries, Looking forward for your detail reply With Best Regards and thanks Aasim ANSWER: Hello Aasim, Thank you for coming back and for the additional details. I know precisely what those Sub-Clauses are dealing with and that was my point: you are talking about changing rates due to large variation of quantities, respectively 52.3 should have been used. That Sub-Clause does not give the ambiguities generated by the said modification of Sub-Clause 52.2, which deals with something different and is rather a general statement. If you carefully read the Sub-Clause 52.3, you'll it actually contains precisely what says that new paragraph under 52.2, except it indicates different percentages and it's clearer formulated. Now, beside the ambiguities you mentioned, there is another one generated by reading the two Sub-Clauses together, as part of the Contract. What percentages shall you apply? The ones under 52.2, or under 52.3? Read carefully the two together and you'll see my point. Now, let's try looking at the issues you indicated and try answering them. I'll take the issues in the order you listed them: Note 6: yes, you're right, you have an item above 2% and new price can be considered. Note 7: You should always read the Contract as a whole, i.e., once you have a quantity increase, formalised in one way or another, then you have to apply the contract provisions. Even if no particular Variation Order is issued, the difference shall be shown by the remeasurement results and that will entitle Contractor to claim for a new rate, applicable to the whole of the quantity. Note 8: not applicable in the light of the above. Hope that answer your original query.
But what will you do with Sub-Clause 52.3 that is still in place and applicable?! Good luck with that and please keep me posted with the outcome. ---------- FOLLOW-UP ---------QUESTION: You have given very good explanation to my query. I also considered that new rate will be applied to the whole quantity of an item for the variation mentioned in Para No. 2. Now the question comes regarding clause 52.3 which is stated as under:Variations Exceeding 15 per cent If, on the issue of the Taking-Over Certificate for the whole of the Works, it is found that as a result of: (a) all varied work valued under Sub-Clauses 52.1 and 52.2, and (b) all adjustments upon measurement of the estimated quantities set out in the Bill of Quantities, excluding Provisional Sums, dayworks and adjustment of price made under Clause 70. but not from any other cause, there have been additions to or deductions from the Contract Price which taken together are in excess of 15 per cent of the "Effective Contract Price" (which for the purposes of this Sub-Clause shall mean the Contract Price, excluding Provisional Sums and allowance for dayworks, if any) then and in such event (subject to any action already taken under any other Sub-Clause of this Clause), after due consultation by the Engineer with the Employer and the Contractor, there shall be added to or deducted from the Contract Price such further sums as may be agreed between the Contractor and the Engineer or, failing agreement, determined by the Engineer having regard to the Contractor's Site and general overhead costs of the Contract. The Engineer shall notify the Contractor of any determination made under this Sub-Clause, with a copy to the Employer. Such sum shall be based only on the amount by which such additions or deductions shall be in excess of 15 per cent of the Effective Contract Price. In my opinion 52.3 will be applied when an accumulation of variation and changes in quantities none of which qualifies under clause 52.2 for re-rating. Because 52.3 is applicable subject to any action already taken under any other sub-clause of this clause. Now I still mean that 52.3 will be applicable in case 52.2 has not been applied. In my case of variation clause 52.2 has been imposed therefore we dont need to apply clause 52.3. Submitted for your opinion Regards and thanks again Aasim Get the answer below Answer Dear Aasim, Thank you for coming back. That may be an interpretation, or a compromise to use the two overlapping Sub-Clauses. But suggest you formalise it through an Addendum or something, otherwise you still have that problem. In my opinion, when Particular Conditions were made, someone made a mistake and did not notice that, but obviously now it's somewhat late. All you can do is to get the Engineer/Employer to acknowledge that and make an Addendum to sort that out.
I strongly believe that modification should be deleted and replace the percentages in the next SubClause. Obviously, it's an opinion, other solutions may be identified as well. Hope that helps.
Construction Law/ FIDIC Conditions- VO

Question QUESTION: Clause 52 of the conditions states that if the quantity of any Item exceeds 125 percent of that provided in the Bill of quantities in the Agreement the Contractor will be entitle to a new rate for the Item. The question is whether the NEW rate will be applicable to the ENTIRE quantity or to the quantity exceeding 125 percent of the BOQuantity. I would love to hear from you. ANSWER: Hi, I apologise for the delayed response, but I had to find a copy of the 4th. Edition to check the wording, as I had no memory of reference to items exceeding the original quantities. I presume that you are referring to the special conditions of FIDIC 4th Editions, rather than the general conditions, which has no comment regarding increases in individual items. As I have not seen the actual wording in your contract, the following comments are general in nature. The last sentence of clause 52.3 of the GC is quite clear. The extra sum only applies to work which exceeds the original amount by the stated percentage. Generally, it is assumed that the Contractor has allowed for a variation, plus or minus, as stated in the GC or SC, from the stated Contract quantities or Contract Price. Thus the extra sum or rates apply to the difference greater than the stated allowable variation, not to the total amount. Further the amended rate must conform to the logic of the Contract. If the Contractor under priced or over priced his original unit rate, then neither he nor the Employer is allowed to revise the basis for the price. For example if the item concerned asphalt, the effect of increased bitumen prices cannot be included in the new rate. It is normal to restrict a clause referring to changes in quantities to 'major' items, which are defined as those exceeding x%, normally 2-3%, of the Contract Price. I hope that the above answers your query. If I have misunderstood anything, please submit a follow up. ---------- FOLLOW-UP ---------QUESTION: Dear Sir, I forgot to give the exact wording of our tender clause. It reads as below. 38.1 If the final quantity of the work done differs from the quantity in the Bill of Quantities for the particular item by more than 25 percent provided the change exceeds 1% of initial Contract Price, the Engineer shall adjust the rate to allow for the change." I think this is quite clear and unequivocal. Regards, NGThatte ANSWER: Hi NGThatte, The Engineer shall adjust the rate. The Engineer has to take account of when the change is known
and adjust the rate accordingly . up or down as appropriate. There is no indication that it should be for all or part of the total quantities, merely when it should be changed. Remember that the economies of scale could apply, leading to a reduction in the rate for the total quantity. It is not the purpose of this free service to write detailed justification for claims or to defend them. The internet is out there and you can research cases just as easily as I. If you want detailed advice, then send me a private question, which will not be available to other viewers, stating your proposed fees and giving contact details. I look forward to hearing from you. ---------- FOLLOW-UP ---------QUESTION: Thank you very much for your kind reply. I know I may be annoying you. But your answer pertained to the excess in the work as a whole ( for which Clause 52.3 would apply.) My question pertained to excess in quantities of individual Itmes.I once again request you kindly to give your valued opinion whether the new rate as decided by the Engineer will apply to the WHOLE quantity or ONLY to quantities beyond 125 % of the original quantity. Regards, NGThatte Get the answer below Answer Hi Please read this answer very carefully and do not assume that I did not answer your question. My answer referred to your clause 38, not 52. I have no idea of the circumstances or the reason for increasing the quantities, nor the stage at which it became apparent that the quantities were to exceed the limits set in your clause 38.1 (?), which is normally about examination of the works before covering up and not rates. Thus I am unable to give you a definitive answer as to whether the revised rate should cover the total quantities or only the excess over the stated amount. Considering your earlier approaches, if you were submitting the case to me, then I would probably state that the rate should be decreased due to the economies of scale and that it should apply to the whole of the quantities provided under the contract, but then you might claim that I was being vexatious and unreasonable, but you might find it difficult to prove. If you have an increased rate for part of the quantities, thank the Engineer kindly and put the money in the bank without further discussion. I repeat.... The Engineer shall adjust the rate. The Engineer has to take account of when the change is known and adjust the rate accordingly . up or down as appropriate. There is no indication that it should be for all or part of the total quantities, merely when it should be changed. Remember that the economies of scale could apply, leading to a reduction in the rate for the total quantity. It is not the purpose of this free service to write detailed justification for claims or to defend them. The internet is out there and you can research cases just as easily as I. If you want detailed advice, then send me a private question, which will not be available to other viewers, stating your proposed fees and giving contact details. I look forward to hearing from you.
Variations in Construction Contracts Filed in Contract Administration on Sep.24, 2011
Variations in Construction Contracts Variations in construction contracts can mean changes to the terms of the contract or it can mean changes to the scope or character of the works. In this article, Lim Chuen Ren looks at variations in construction contracts in the latter sense. Variations to the scope of construction works are necessary because no project is impeccable and changes are required to meet unforeseen circumstances or changed requirements. Thus, variation can be in the form of additions, omissions or substitutions. Functions of Variations Clauses Variation clauses are a common feature in construction contracts. It is useful to note, at the outset, that the proprietor is not entitled as of right to direct variations (Ashwell Nesbitt v Allan & Co (1912) Hudsons Building Contracts (4th ed) Vol 2 at page 462). Hence the need for a variation clause. Secondly, they ensure that contractors can recover payments for variations properly directed (Knight Gilbert Partners v Knight (1968) All ER 248). Issues Concerning Variation Broadly, problems concerning variations arise in three areas: scope (was it a variation or was the contractor bound to do it anyway?); non-compliance with procedural requirements; and valuing the variations. Whether the variation work is within the scope of the contract will depend, firstly, on the terms of the contract, which sometimes beg the question: what is the contract? In many cases, the documents forming the contract are defined. An example is clause 1.1 of PC-1 (PC-1, 1988 Project Contract by Property Council of Australia) which provides: Contract The contractual relationship between the parties is constituted by: (a) the Formal Agreement to which these Conditions of Contract are attached; (b) these Conditions of Contract; (c) the Contract Particulars; (d) the Works Description; and (e) the other documents (if any) referred to in the Contract Particulars. Even without such explicit provisions, it is probably true to say that the court will not confine itself to the written agreement alone in determining the scope of the contract: specifications, drawings, correspondence, etc, all form part and parcel of the contract. Having determined the contract documents, there is the further issue of inconsistencies in or between parts of the contract. Different contracts deal with the issue differently. FIDIC, in clause 5(2), provides for a priority list of documents as follows: The several documents forming the Contract are to be taken as mutually explanatory of one another, but in the case of ambiguities or discrepancies the same shall be explained and adjusted by the Engineer who shall thereupon issue to the contractor instructions thereon and in such event, unless otherwise provided in the contract, the priority of the documents forming the contract shall be as follows:
(i) The contract Agreement (if completed). (ii) The Letter of Acceptance. (iii) The Tender. (iv) Part II of these conditions. (v) Part I of these conditions. (vi) Any other document forming part of the Contract. The JCC-D 1994 contract (section 2, JCC-D 1994 Building Works Contract without Quantities issued by the Joint Contracts Committee, Australia) provides for a similar precedence of contract documents but goes one step further by requiring the contractor or architect, if they discover any discrepancy, to inform the other. The architect will then give to the contractor an instruction explaining, determining or correcting the discrepancy. Implied or Necessary Works As indicated, whether a particular work is a variation will depend on whether it comes within the general scope of the contract. Some works, although not specifically described, are nevertheless considered as implied or form a necessary part of the contract. An early case on this point is Williams v Fitzmaurice (1858) 157 ER 709. In that case, the contractor undertook to provide the whole of the material mentioned or otherwise in the foregoing particulars necessary for the completion of the work and to perform all works of every kind mentioned and contained in the foregoing specifications for the sum of 100.00 pounds. Flooring was not specifically mentioned and the issue was whether it was included in the contract. The court held that it was. Similarly, in Walker v Randwick Municipal Council (1929) SR (NSW) 84 the contractor agreed to do and perform the whole of the works required in or about the construction of a concrete retaining wall. In performing the works, Walker had to remove a sandbank to construct the retaining wall. The plan (which was not incorporated in the contract) showed the bank to be 6 feet wide. Walker claimed the bank was in fact 12 feet wide and claimed for work and labour in removing the extra 6 feet. The majority of the court held that the contract was an entire one to build a retaining wall at a fixed price and that the risk lay with contractor. Rogers J said (at page 87): The contract is not to perform the work set out in any plan; all work necessarily required for the construction must be done whether set out in the plan or not. Formal Requirements Written Directions A variation is usually effected through an instruction from the principals architect or superintendent. Such instructions are usually required to be in writing. Whether this is a pre-requisite to the contractors right to recover payment will depend on whether the requirement is a condition precedent. This is a matter of interpretation of the contract. Lord Blackburn in District Road Board of Broadmeadows v Mitchell (1867) 4 WW & AB (L) 101 (FC) has this comment: It is common enough to have provisions, as these are here, more or less stringent, saying that no extra work shall be paid for unless it is ordered in writing by the engineer, and if such conditions are properly made, and there is nothing fraudulent or iniquitous in the way they are carried out, these conditions would be quite sufficient and effectual (Tharsis Sulphur & Copper Co v Melvoy & Sons (1878) 3 AC 1040 at pages 1050-1051). What constitutes writing is sometimes also an issue. In Wormald Engineering Ltd v Resources Conservation Co (1992) 8 BCL 158, sketches in the architects office describing the variations to be done was held not to be sufficient to satisfy the clause requiring alterations to be directed in writing in the architects hand, but in Bedford v Borough Of Cudgegong (1900) 16 WN (NSW) 142, a letter signed by the architect authorising the work was held to be sufficient.
Recovery in the Absence of a Written Direction Whilst failure to comply, on the whole bars, a claim, there have been cases where courts have allowed the contractors to recover on the basis of an implied promise to pay: Liebe v Molloy (1906) 4 CLR 347, or estoppel: Update Constructions Pty Ltd v Rozelle Child Care Centre (1990) 20 NSWLR 251, or on the basis of unjust enrichment standing by and taking the benefits: Hill v South Staffs Railway (1865) 12 LT (NS) 63, or on the basis that the works ordered are outside the scope of the contract and, therefore, constitutes a separate contract: Pavey & Mathews v Paul (1987) 61 ALJR 151. Limitations on the Power to Vary Variation clauses, even if widely drafted, nevertheless have limitations. One such limitation is the issuance of the practical certificate of completion. Commissioner of State Bank v Constain (1983) 3 ACLR 1 illustrates the point that the power to order variations is not in force after the certificate of practical completion as it then reaches the stage for maintenance and rectification of defects. This restriction is now reflected in AS 4000 Clause 40. Secondly, the contractor is not required to undertake works that are outside the scope of the variation clause itself. As Cook J in J & W Jamieson Construction v City Of Christchurch (unreported, 8 November 1984, Christchurch High Court) said: To my mind, if a variation may fairly be said to be a change to the works as these described, whether it comprised an addition, reduction or substitution to the works or effects the carrying out of the works, then it is a variation which the contractor is under an obligation to carry out, if it is beyond that, it is not. A third limitation that is sometimes canvassed is this. A variation is defined as something which bears some relationship to the current contract works (Blue Circle Industries plc v Holland Dredging Co Ltd 37 BLR 40 per Purchas LJ). Thus, the variations directed must be of a character and extent contemplated by, and capable of being carried out under, the provisions of the contract (AS 4000 Clause 36.1). A similar qualification is to be found in the JCCD 1994 Contract, Clause 6.10.01 (Unless otherwise agreed all Variations shall be within the general scope of this Agreement so as to be of a character and extent contemplated by and capable of being executed under the applicable conditions of this Agreement.). Clauses like these prevent the proprietor from effecting fundamental changes to the building design or works under the guise of variations. Other limitations relate to the right of the proprietor to omit works from the contractor. Generally, the power to vary the scope of works does not allow a proprietor to deprive the contractor of the benefit of that work altogether. In Commissioner of Main Roads v Reid [1974] 131 CLR 378 (see also JA Berriman v Carr (1953) 89 CLR 327), a clause in the contract allowed that: if sufficient topsoil to meet the requirements of the works cannot be obtained within the right-of-way, the engineer may direct the contractor in writing to obtain top soil from other approved locations. The contract also contained a clause allowing the engineer to omit any of the works. The engineer, instead of allowing the contractor to obtain the required topsoil from other approved locations, decided to omit the works from the contractor and awarded the works to another contractor, at a cheaper rate. The High Court of Australia held that the clause only gave the engineer the choice between directing the contractor to obtain the topsoil or to omit the works. It did not confer on the engineer the right to have the works performed by a third party. Stephen J (at page 382) made the point that:
Were he [the engineer] legally entitled to do so it would, I think, run counter to a concept basic to the contract, namely that the contractor, as successful tenderer, should have the opportunity of performing the whole of the contract works. Chadmax v Hansen & Yunken Pty Ltd (1985) BCL 52 is a case that illustrates the dilemma sometimes faced by the main contractor when compelled by the proprietors to omit certain works. In this case, the subcontractor was engaged to install wallflex to stairwells and corridors. The architect subsequently deleted a substantial portion of that particular work from the main contract and the main contractor did likewise with the subcontract. The subcontractor sued the main contractor for repudiation of contract and succeeded. The judge in the first instance, Brebner J, commented that: I would have held that the power in the defendant to require increases or decreases in or omissions from the sub-contract work or changes in the character or quality of any material a work could not be construed as a power to cancel virtually the whole of the subcontract works. The main contractor joined the owners as a party to the action but, unfortunately for the main contractor, the wallflex works in the main contract constituted only a minor part and their omission from the main contract was held to be within the general scope of the contract. Valuing the Variation If the variation falls within the terms of the contract, the rates prescribed will be used to value the work. Clause 36.4 of AS 4000 is one such clause, which also allows a reasonable sum for profits: 36.4 Pricing The Superintendent shall, as soon as possible, price each variation using the following order of precedence: prior agreement; applicable rates or prices in the contract; rates or prices in a priced bill of quantities, schedule of rates or schedule of prices, even though not contract documents, to the extent that it is reasonable to use them; and reasonable rates or prices, which shall include a reasonable amount for profit but not overheads. That price shall be added to or deducted from the contract sum. In most cases, valuation using the rates prescribed in the contract presents no real problem. But what is the position if the contract is terminated or if the works are carried out under a separate, and usually oral, contract? In such cases, the courts will usually award a reasonable rate or a rate on a quantum meruit basis. As Giles J said in Atlantic Civil Pty Ltd v Water Administration Ministerial Corpn (unreported, 16 October 1992, NSW Supreme Court): [A] variation was to be valued in accordance with schedule rates so far as applicable or, in the absence of agreement, by determining a reasonable rate a price. No doubt the referee considered that the Schedule rates were inapplicable, and when he referred to a quantum meruit basis under the contract I consider that he meant a reasonable sum for the additional work. Thus, the referee was not assessing a sum outside and in defiance of the contract. In my opinion the defendants submission was based on a misconception of the report. Conclusion Variation is almost an inevitable part of any construction claim. Given the competitive environment that the construction industry is usually in, many contractors probably rely on the proprietors variations to make a reasonable return for their contracts. In addition, variation works commonly
affect the completion date and, therefore, impact on delay claims by the proprietor. This explains, to some extent, why the resolution of issues concerning variations is never easy, especially if the dispute is heard way after the building is completed and records are scarce, making physical measurement of the works completed difficult. Lim Chuen Ren CR Lim Construction Lawyers, Melbourne
Contract variations
Filed in Contract Administration on Sep.14, 2008 By Dennis Brand A contract can be varied in one or two ways: either by a variation to the contract terms or the scope of works. The latter is the one that most of us will think of when the term variation is used. Variation to the contract terms (or conditions) also referred to as an amendment to the contract amounts to the same thing. It is a change to the terms that the parties had agreed and accepted when the contract was signed. To vary the terms and conditions of a contract the same degree of formality is required as was the case with the original contract. It must be in writing, signed by the respective authorised party representatives, and in same form as the original contract eg signed under hand or executed as a deed. However, the more common understanding and indeed use of the term variation relates to a variation in the scope of works. Changing works A contract will usually, but not always, provide a method that allows a client to make changes to the scope of works. By signing to this the contractor effectively consents to such changes being made. Some contracts provide a method that allows the contractor to propose changes. If the employer rejects these proposals the contractor has no right of redress. A more usual form of variation provision that allows the employer to alter the scope of works will also provide that the contractor is compensated for any additional costs and, where appropriate, given an extension of time. While it is almost a matter of course that when a contractor seeks compensation for extra costs they will also claim an extension of time, it is by no means certain that this will be granted. There are also circumstances when a contractor may be granted an extension of time but as they have not incurred any additional costs they will receive no financial compensation. Variation payments In construction and engineering contracts, the basis of payment to the contractor in respect of any variation will usually be established in the contract eg bill of quantities. The contractor will ultimately be required to give notice of their intention to claim a variation and provide the employer with supporting documentation within a specified period. Failure to provide such information will result in the application being rejected. Moreover, some contracts provide for a time limit to provide this information and failure to do so within the specified time may result in rejection of the application, even though it may not have been without merit. Often a contract will provide for the notice, documentation and supporting information to be submitted to a supervising engineer. Depending on the contract terms the engineer may have authority to agree variations, including the assessment of compensation and time extensions.
Usually in the first instance such authority is subject to the employers approval. Subsequently, depending on contract terms such as FIDIC, the engineer may need to give a formal decision independently of the parties. Variations V claims Variations must not be confused with claims. It is often said that a contractor is claiming a variation, but this actually means that they are making an application for variation. Any claim in respect of the variation only occurs if the employer or engineer rejects the application and the contractor disagrees with the decision and wishes to pursue a claim. Variation generally occurs as a result of a change made to the scope of works. Changes are made for differing reasons such as design or cost, and can just as easily decrease the scope of works as increase it. Some contracts contain a provision that triggers a variation in the event of certain quantities being increased or decreased in excess of a fixed percentage; this is not unusual with civil works, where many quantities are forecast. Another example of variation is where the contractor is required to change the timing, order or sequence of the work. While they will be carrying out the same work with probably the same quantities, by requiring them to do it at a different time or in a different sequence to that previously agreed may need additional deployment of labour or equipment in order to accommodate the change. Some forms of variation require the contractor to perform the work in a different way. This may result in a need for more or different equipment and labour skills. In such circumstances variations required by the employer do not usually need the contractors consent. Claims by the contractor however usually arise from failure on the part of the employer. It is also possible that the claim may arise because of some outside event that has affected the contractors work. Generally the contractors right to make a claim arises from the General Law, therefore consent or approval of the employer is unnecessary. Construction Week
WHEN DOES A VARIATION IN CONSTRUCTION BECOME A SEPARATE CONTRACT? Filed in Construction Law, Contract Administration on Mar.17, 2011 Variations Clause Most standard forms of contract include a clause under which the employer or his representative is able to issue an instruction to the contractor to vary the works which are described in the contract. A change in shape of the scheme, the introduction of different materials, revised timing and sequence are all usually provided for by the variations clause. It will also usually include a mechanism for evaluating the financial effect of the variation and there is normally provision for adjusting the completion date. In the absence of such a clause the employer could be in a difficulty should a variation to the works be required. The contractor could either refuse to carry out the work or undertake the work and insist upon payment on a quantum meruit or fair valuation basis. Calculation of the price for the extra work applying this method could involve payment well in excess of the contract rates.
Separate Contract Even where a contract includes the usual variations clause there may be circumstances which could lead to additions or changes introduced by the employer which falls outside the variations clause.
Contractors who find themselves with unattractive contract prices would find it to their advantage to be able to argue that a change introduced by the employer fell outside the variations clause thus leaving the way open to argue that payment for the change should be on a quantum meruit or fair valuation basis. This situation arose in the UK case of Blue Circle Industries v Holland Dredging Co (1987). The works involve dredging in Larne Lough in Ireland to enable larger vessels to dock. The tender referred to the dredged material being deposited in areas approved by the public authorities, the intention being to discharge the material excavated in suitable areas in the lough. Resistance to the plan came from several quarters including the Larne Harbour Board and as a result an alternative plan was agreed to use the excavated material to form an artificial bird island. It was argued by the contractor that this was not a variation to the works within the confines of the contract but a separate contract in its own right. The decision in Thorn v Mayor and Commonalty of London a case heard way back in 1876 influenced the court. In this case it was held that if the additional or varied work were so peculiar, so unexpected and so different from what any person reckoned or calculated upon to such an extent that it is not contemplated by the contract then it would constitute a separate contract. The judge in the case considered that the construction of the bird island was wholly outside the scope of the original dredging contract and therefore constituted a separated contract. Experience In The USA The position in the USA is similar but more developed. It addresses a situation where a large number of changes are instructed which individually fall within the ambit of the variations clause but collectively have the effect of completely changing the scope of the works. This situation is referred to as either abandonment or cardinal change and deals with the situation where the employer makes excessive changes to a project beyond what the parties reasonably could have anticipated at the time the contract is entered into. Courts will look at a number of factors in helping to decide whether the changes have been excessive. The starting points are the size, complexity and expected duration of the contract. Other factors to be considered are the number of changes, how many changes were anticipate when the project started, the magnitude of the work involved in the changes and the length of time in which such changes were made. There is no required intention on the part of the employer to abandon the contract by introducing excessive changes; this will often be implied as a result of constant interference or change. If the parties ignore the procedural provisions of the contract with regard to variations this could help influence the court into accepting that abandonment has occurred. Conclusion It is difficult to be hard and fast as to when additional or changed work will constitute a separate contract or convert the contract the parties entered into a different one. Courts in the USA seem to be more sympathetic to the contractors case for abandonment or critical change than in most other countries. Courts and arbitrators in the UK and like jurisdictions find themselves in the long grass when trying to decide what is due if payment is to be on a quantum meruit or fair valuation basis. They feel more comfortable in dealing with additions or changes priced at contract rates and are inclined to play it safe in holding that the facts as presented have not resulted in a separate contract. Employers who are perhaps starting to feel uneasy about the prospect of the USA attitudes creeping into the thinking of judges or arbitrators could give consideration to rewording the variations clause to give a wider definition of additions and change.
Construction Law/ Partial Handover

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Question We are using an EPC FIDIC contract. There is no sectional completion in the contract. The client now want to take over a certain part of the work and is preparing to issue a partial take over certificate. My questions are 1) Will the defects liability for that part of the work start on the date of hand over the section of the work? 2)Will we be entitled to one moiety of the retention money for the value of that section of the work? 3) What are procedures shall we need to take care? Get the answer below
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Construction Law/ IPC after Completion Date of Project.

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Question Dear Sir I would like receive your advice on the following. We are the Supervision Consultant for a Project based on FIDIC 1987 in Dubai, which is to be completed by 26 December 2011. However the Contractor has not yet substantially completed the project. No EOT has been officially awarded yet, neither have Liquidated Damages been levied on the Contractor, although the Contractor submitted an EOT claim prior to 26 December 2011 which is yet to be reviewed/addressed by the Employer. The Contractor has submitted an Interim Payment Application on 19 March 2012 for the Works done up to February 2012 to us. (After the official completion date) We would like to receive your valuable advice that, as a Supervision Consultant, whether we can
evaluate and recommend this IPC to the Employer for payment or not.
Construction Law/ FIDIC Redbook 1999 Clause 12 and 13 Applicability

of Contract BoQ Rates
Question QUESTION: Please provide your view on the principles that govern the applicability of the method of measurement and contract bill rates in valuing a significant item of measured work in a FIDIC 1999 Red Book contract. The contract conditions states that the items described in the bill of quantities is to be measured in accordance with the Standard Method of Measurement Seventh Edition (SMM7). During the course of the project the Engineer issued instructions to the Contractor that changed the pile specifications from 12 metre square to 16 metre octagonal. The Engineer and Contractor quickly agreed a new rate for the supply of each pile based on the rate in the BoQ for the supply of the 12 metre square piles. The Engineer also issued construction drawings that led to a reduction in the number of piles compared to that specified in the BoQ reducing the physical number required by approximately 30%. This item is not disputed. Based on the piling criteria provided and the ground conditions all piles were driven in accordance with the construction drawings. The Contractor maintained daily logs which were regularly inspected and signed off either by the Engineer or his representative on site. The piling logs are accepted as accurate, this item is not disputed. The Bill of Quantities indicated that the average pile cut off length would be 300mm. However, the construction drawings issued by the Engineer indicated that this should be increased to 900mm, tripling the cut off length per pile, and confirmed by the Engineer in a written note. Unfortunately, the combination of the change in the pile specification and length, and piling criteria supplied by the Engineer and ground conditions conspired to make the average cut off length just under 2.5 that specified in the construction drawings. Both the BoQ and SMM7 specifies that pile cut off lengths shall be measured in metres, and the Contractor provided an associated rate per metre. However, the Employer has objected to the Contractors per metre pile length cut-off rate because their budget for this item was exceeded by approximately 5.7 times that planned. THE DISPUTE: The Contractor is insisting the he be paid in accordance with the Contract Bill rates he supplied in his winning tender bid. He is also insisting on the application of SMM7 and description of the BoQ item and the associated unit of measure be applied to the actual pile cut off lengths recorded in the piling logs to determine the value of the works for this item. The Employer is insisting that either: - There is an error in the BoQ and the unit of measure should be changed to number and that cut offs be measured once per pile instead - The Contractors rate be reduced because it is unreasonably high - The Engineer had no authority to issue an instruction to the Contractor that could have had the effect of increasing their costs by 5.7 times that expected - The Contractor tricked the Engineer into issuing an instruction to change the pile specification and length THE QUESTIONS: - How should this BoQ item be measured? (in accordance with the Contract & SMM or other method?) - Should the Contractors bill rate for this item apply?
- Are there grounds for the Employer to request a change to the Contractors rate for this item? - Does the Employer have any recourse against the Engineer? ANSWER: Dear Keith, A complicated question which almost sounds as if it is a homework question. I am not sure if I have understood it correctly. Also I do not have a copy of SMM7 with me so I cannot comment on its involvement. To my mind it is a contractor risk if the cut off is longer than specified on the drawings and thus the contract rates and lengths are to be applied. Why was the cut off so long? Was it because of an Employer risk or because of the Contractor's working method? 1. 2. 3. 4. Measure in accordance with contract & SMM. Apply contract bill rate in accordance with Contract & SMM - i.e. to a length of 900 mm. No. Only if he can prove that the Engineer was corrupt or negligent.
---------- FOLLOW-UP ---------QUESTION: Peter, It was not an exam or homework question but a synopsis of a live and current issue. My current thinking is as follows: 1. FIDIC Redbook gives the "design risk" (see sc17.3) and risk associated with "unforeseeable physical conditions" (see sc4.12) to the Employer 2. The Engineer issued an instruction to increase pile length/specs, and he also issued the criteria that governed when the contractor should stop driving a pile 3. The Contractor is obliged to follow the Engineer's instruction unless a good reason can be provided (see sc3.3, 4.1 and 13) 4. Given the above the Contractor must follow Engineer's instruction 5. The question of how the cut-off length should be measured is the next issue. The Contract stated that the BoQ is measured in accordance with SMM7 and it stated that a per metre rate was required, Section D30 in SMM7 states that pile cut-off length is measured in metres and describes what the measurement should include 6. The next question is whether there is room for the Employer to request a re-rate. The particular conditions deleted sc12.3(a). This leaves SC12.3(b) and in this case whether the contract bill rate applies or not is up for grabs as the additional work is a result of the Engineer's variation instruction. However at any new rate must be based on the rates for similar items, whatever new rate is derived it will be similar to existing one. 7. The contract rate used by the contractor is high, and if the job were to be repriced it may be a fifth of its current value, however according to the court decision in "Dudley Corportion -v- Parsons and Morrin Ltd (1959) CA, 8 April" - the rate in the contract bill must stand. My supplementary question to you is, is there a flaw in my reasoning? Thanks in anticipation.
Answer Dear Keith, When considering the valuation of variations, my preference is for Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2000]CA BLR247 and [1999]TCC BLR123 - you can find a commentary on this case at http://www.atkinson-law.com/library/article.php?id=292 You did not state why the cut off length was so much greater than that shown on the drawings. Without specific evidence, they must be paid in accordance with the drawings. Generally cut off lengths are chosen to ensure that any contaminated concrete is removed before the pile cap is cast. If the Contractor casts too much, then he will have to remove more hardened good concrete, which is hard work and expensive. If these are precast driven piles, with an uneven foundation
Field Code Changed
level, rather than cast insitu, then there could be a case for paying for the actual cut off length. The actual situation is unclear from your statements. If this item were to be repriced you would open the door to the Contractor repricing other items where he has underpriced an item. I would not recommend this action. Also the Contractor could be so irritated that he took the case to arbitration, when no one would win except the lawyers. Persuade the Employer to accept the fact that he chose the lowest tender and so there would be some errors. I guess that this extra cost is relatively minor compared the Accepted Contract Sum, but it appears to be becoming and emotional subject for everyone, which is dangerous for all. Subject to the above, there appear to be no flaws in your reasoning.
Construction Law/ Price Adjustment Under FIDIC

Question Hi Peter: If the Employer wishes to only allow price adjustments under Subclause 13.8 after 12 months of commencement date, is it possible to define a different base date than the standard date (i.e., 28 days prior to bid submission), and make this change a PCC? Get the answer below Answer Hi Prianka, Anything is possible, provided it is done before the deadline for submitting the tender but I would not advise it. If you do it after tender submission, be ready for claims. The purpose, of defining the base date, is to introduce certainty into the Contract, so that all tenders are based on the same premise. What date would you use? Tender Submission date? Contract signature date? 6 or 12 months after tender submission or contract signature? Contract signature could be delayed for many reasons so the Contractor has a new risk to price and different bidders will price it differently. Are you trying to reduce inflation payments? Not really useful because competent contractors will allow for the reduced inflation payments in their bids and incompetent contractors will exclude the inflation and run the risk of going bankrupt. Either way no advantage to the Employer.
Construction Law/ Taking
over cert.
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Question Hi Peter, As per Fidic red book 10.2 sub c, I have requested a TOC for the whole of the works, I specifically asked for it to be back dated to the date that the works were taken over by the client. They have not acted within 28 days in any way on this,resulting in this certificate now deemed to be issued. My question is; Which date is accepted as applicable, the 29th day after our actual request for the TOC were been submitted, the date specified in our request, or the 29th day after that specified date ? Hope my question is not too muddled. Thanks for your input. Get the answer below
Answer Dear Jaco, You do not define what is meant by 'taken over by the client'. Normally, taking over requires the issuing of a Taking Over Certificate. How was the taking over shown? Sub-clause 10.2 (a) is relevant to this question. 'However, if the Employer does use any part of the Works before the Taking-Over Certificate is issued: (a) the part which is used shall be deemed to have been taken over as from the date on which it is used, ....' However, a word of warning. The above comment depends on the type of project and anything in the Particular Conditions or local legislation. For example, the Employer might expect to use a portion of the project before it is taken over, such as is the case with a road project. In some countries, local legislation prohibits the Employer taking over the project without certain statutory procedures. I would discuss the problem with the Engineer to uncover the reason for delay before submitting a request to the DAB for resolution.
Construction Law/ Performance

Bond
Question Under Fidic (1999) red book, if the contractor's performance bond expires and he make no attempt to renew it, can the employer take action under clause 18 and pay or should the employer take action under clasue 15.2? Get the answer below
Answer Dear Navin, It all depends on your relationship with the Contractor. Clause 4.2 a deals specifically with the Contractor's failure to extend his Performance Security. If it has expired, then it is probably too late. Clause 18 refers to insurance rather than securities, and is a different situation. If the Contractor is unlikely to finish the project, then I would apply clause 4.2 a and clause 15. However, if he is likely to finish the contract, tread with care, because calling in a Performance
Security is an emotive event for Contractors and has far reaching effects on their credit rating.
Construction Law/ Variation

Claim
Question Greetings, I'm representing a Client for one of the project in Dubai, where the Contract is a Lump Sum Contract. However, it was agreed that certain element of works such as reinforced concrete and external works is to be re-measured based on works compeleted at site. For your information, Form of Contract used is FIDIC 1987 4th Edition (Red Book). Several items under external works were not included in the BOQ, but it is clearly shown in the drawings and required for the completion of works. My question are as follow: a) Can the Contractor consider these missing items as a Variation since it was not included in the BOQ and the External Works is already agreed to be re-measured since beginning. b) Can the Client rejects this Variation claim on the basis that the Contract is Lump Sum and it is the Contractor's full responsibility to make sure that all items are considered in the Contract Price as shown in the Contract Document (BOQ, Drawings, Specifications). Get the answer below
Answer Dear Mohd, Obviously, the Employer or his advisers has made a mistake. If you make a mistake then you must pay for your error. He says the external works will be remeasured and then omits items from the BoQ. The Bidder does not know if these works are to be provided by him or by another party without guidance in the tender documents. If external works, without detailed limitation or definition, are to be remeasured, then the omitted items must be considered a variation and paid for, even if they were shown on the tender drawings. Consider the inverse. An item is included in the BoQ for external works, but not shown on the drawings for external works and is not provided. Will you pay for this item using the same argument that it is a lump sum contract and thus must be paid for?
Construction Law/ F idic
red book
Question QUESTION: Peter, a Piping contract started out as a red book contract on a 'like for like replacement' basis. a Couple of weeks into the contract it is realized design is a requirement as piping materials differ but there is no design, what now ? Thanks ANSWER: Dear Jaco, You ask the Employer to provide the design. Do not accept any design responsibility under any
circumstances. Do not make any proposals regarding material or pipe size. Let the Employer's advisers earn their money or they will penalise you. The road to hell is paved with good intentions and no good deed goes unpunished. Give notice of when the information is needed and the effect on your programme and wait for the information to arrive. If it does not arrive then claim for an extension of time. It will be cheaper for everyone. The above may sound cynical and unhelpful, but it is based on bitter experience. There are many examples in this section of where contractors have tried to be helpful and they have lost money. ---------- FOLLOW-UP ---------QUESTION: Peter, So it remains the employer's responsibility until such time it is changed to a yellow book, could/should this happen ? Ok, the project has appointed a design engineer (on original red book contract), and design has taken 6 months to complete, we have been on site doing work in other areas, Ext. of time approved, so no harm. Does the construction period/phase as per program now start upon completion/final approval of design ? ANSWER: Dear Jaco, So it seems that you were just checking to see if you had done the right thing. The Time for Completion started with the Order to Commence. If you have sufficient extension then the Time for Completion is increased in line with the extension. ---------- FOLLOW-UP ---------QUESTION: Peter, Indeed, thanks. Maybe I am a bit unclear on this. If the employer had given various extensions of time over the life of the contract, and indeed settled costs such as P&G's etc., does this nullify his right at the end of the project to submit any claims under the Delay damages clause ? Thanks for your time on this. Answer Dear Jaco, Extensions can be awarded due to Employer's risks, such as late issuing of information, but the Contractor can be delayed by his own actions or inaction, such as insufficient resources. If you do not complete the project within the contractual (extended) Time for Completion, then the Employer has the right to claim delay damages in accordance with the Contract.
Construction Law/ Contract Claim

Period
Question South Africa, With reference to the Fidic Red Book 1999, Should the Contractor have a claim or entitlement against the Engineer / Employer and the Engineer / Employer continually delay the outcome, what is the Contractors resolve to finalize an outcome. After notifying the Engineer about a possible claim, what is the time period in which to submit the claim or in which to finalize the claim.
Answer Dear Bryan,
Unfortunately, this situation was quite common under FIDIC 4, but now FIDIC 99 has moved to avoid delays in settling claims. Clause 20.1 of FIDIC 99 is quite clear about the timing and procedures for submitting and deciding claims. The Contractor has 28 days to submit notification of a claim and 42 days to submit details of the claim. The Engineer must respond within 42 days, after receipt of the notice to the claim, with either approval or rejection with detailed reasoning, even if he has not received full details. If he does respond with this period, then the Employer is in breach of contract. All periods can be extended by mutual consent in writing, but without mutual consent the stated periods must be observed. How to resolve the problem? It depends on the effect of the claim. It the claim is for an Extension of Time, then there is a possibility that the time for completion becomes ineffective and the Employer loses the right to impose damages for delayed completion. There is a good paper on 'time at large' by White and Case on the internet. If the claim is for money only, then the Employer becomes liable for financing charges for the amount of the claim.
Construction Law/ termination

bond
by employer and no return of performance
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Question QUESTION: I am from Trinidad and Tobago & we were awarded a government contract in May 2010, the project was suspended in October 2010 in accordance with fidic clause 8.8, the project was then terminated in July 2011 under fidic clause 15.5 and works of a similar nature awarded to 2 different contractors in February 2012 with the handing over of our project to the employer in March 2012.To this date the performance bond has not been returned/released. What legally can be done and is this sanctioned in FIDIC ANSWER: Dear John, You do not give the reason for the suspension, nor for termination. You do not say if you followed the procedures in sub-clauses 14.10 - 14.14. The Performance Security should be returned within 28 days of delivering the Performance Certificate which is issued 28 days after the end of the last Defects Notification Period. Procedures after a termination by Employer are not totally clear. If the project was terminated for cause, then the Employer may wish to call the Performance Security to cover his costs in appointing new contractors. I need more information before I can give you a definitive answer. ---------- FOLLOW-UP ---------QUESTION: GOOD DAY MR. ELLIOT THANK YOU FOR YOUR RESPONSE HOWEVER THE ADDITIONAL INFORMATION YOU REQUIRED ARE AS FOLLOWS, YES WE DID FOLLOW THE PROCEDURES IN SUB CLAUSES 14.10-14.14. THE SITE WAS SUSPENDED WITH NO REASON AND SUBSEQUENTLY TERMINATED WITH NO REASON. WHAT I DO KNOW IS THAT THE GOVERNMENT CHANGED IN MAY 2010 AND WORKS WERE NOT COMPLETED. THE COMPLETED WORKS WERE MEASURED AND ACCOUNTED FOR AND WE RECEIVE A LETTER OF RECOMMENDATION FROM THE EMPLOYER ON A JOB WELL DONE. THE PROJECT WAS HANDED OVER IN MARCH 2012 AND THE PERFORMANCE BONDS STILL HAS NOT BEEN RELEASE. LOOK FORWARD TO YOUR RESPONSE.
Answer Dear John, It would seem that there is no reason to withhold the Performance Security and that it should be returned. Perhaps the Employer has lost it and will issue an indemnity to cover the loss. If it is not valid, then it is unlikely that there will be a call on it. If the Employer cannot or will not return it, then I think that you have to resort to legal procedures to get it returned. You could make a further claim for the costs involved in the late return, including any costs imposed by the issuer or lost opportunities due to restricted credit facilities. Incidentally, as a matter of Net courtesy, leaving the CAPS LOCK on is regarded as SHOUTING AND A LITTLE RUDE.
What Is a Performance Bond Insurance?

By Performance Bond guarantees for the satisfactory completion of a project. This will require
having a collateral property or investment to back up the requirements of the surety agency. A performance bond is usually issued by a bank or an insurance company, both of which act as a surety. How Do Performance Bonds Work? The Government requires performance bonds and payment bonds for projects to protect the tax payers investment. The private sector also requires the issuance of performance bonds. Common performance and payments bonds for government projects consist of building bridges and roads. If the contractor does not completion the project specified in the contract the surety bonding company will either pay for the completion of the project or hire a contracting firm to complete the project. A performance bond will protect the owner against possible losses in a case a contractor fails to perform, or is unable to deliver the project as per established and the contract provisions. Sometimes the contractor defaults or declares himself in bankruptcy, and then in those situations the surety is responsible to compensate the owner for the losses. Such compensation is defined as the amount covered under the performance bond. Payment from the performance bond is available only to the project/property owner. No one else can make claims against it. In order for a performance bond to be effective, the contract must be specific about the work to be done. A contractor cannot be held accountable for vague descriptions that are open to interpretation. Benefits of Performance Bonds Performance bonds ensure that:
The owner of a project is assured of the completion of the project. The owner does not need to incur additional costs.
There are also some drawbacks with the Performance Bonds. The drawbacks of performance bonds are:
Sometimes, the surety tries to establish that the owner did not comply with the technical conditions of a bond to avoid paying the compensation. Sometimes the surety will try to prove, that the owner may have to settle for the least expensive remedy to the problem. The owner needs to quantify the losses that might have been suffered when a trader or contractor fails in their performance. If the owner underestimates the losses and the future cost of the completion of the project, the owner may not be able to recover the shortfall from the surety.
Performance Bonds Requirements Surety and financial institutions have different requirements depending on the capacity of the contractor, the volume of the project being ensured and the projects challenges. Usually they ask for the following:
At least two years of CPA prepared financial statements. Copy of the contract that is being awarded. Application of the surety. If you own real estate, it will help you and will accelerate the process.
Performance Bonds and Other Insurances

Bid Bond Insurance Builder's Risk Insurance Construction Insurances
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Construction Law/ Re-measurement

under FIDIC 99 Red Book
Question I am working in United Arab Emirates and Our Building Construction project Main works on remeasurement basis under FIDIC 99 Red book. We have item X shown in the Tender Drawing but not in the BOQ. How we consider this item as per the following documents. 1. Tender Query. No Query from any bidder at the Tender stage. 2. BOQ - The works shall be measured and paid for only against items listed in the bills of QTY and at the respective rates inserted against these items. - Drawings, Spec, Condition of the Contract and Bill of Quantities and all other Contract documents are complementary and if any item is included in any of them, it shall be deemed included in all. - Pricing. The Contractor's unit rates are to be fully inclusive value of the work described and must include all related work, accessory or consumable materials, incidental labour, supervision, administration, tools, construction equipment, overhead and profit and all costs and expenses which may be required in and for the completion of the work described together with all costs and expenses in complying with all general risks, liabilities and obligations set forth or implied in the Drawings, Specifications and Conditions of Contract.
3. Drawings. Work included in the Tender Drawing with All details. 4. Condition of Contract. - Sub Clause.12.2.(b) the method of measurement shall be in accordance with the BiII of Quantities or other applicable Schedules. - Sub Clause 12.3 amended in particular Condition as per the following. -delete Sub Clause (a) in its entirety. - delete Sub Clause (b)item (i). 5. These Bills of Quantities have been measured generally in accordance with the Rules of POM(I). As per above details please answer my question,It is included in Contractor's price or it is a variation and what is normal practice in re-measured Contract. I also welcome Experts/readers input from the UAE as per their local experience Thanks Answer Dear Muhammad, It is not included in the Accepted Contract Sum and should be paid as a separate item. The case is similar to that of a discrepancy between the BoQ and the drawings. If the quantities on the drawings differ from those in the BoQ, then the contract price is adjusted to match the actual quantities. Deletion of sub-clause 12.3 a means that there is no adjustment if the quantities vary greatly from those shown in the BoQ, which is daft as, if the quantities increase, then the rate will be reduced through economies of scale. Deletion of sub-clause 12.3 b) i) means that there is new price if an item is instructed through a variation order, but I cannot see that deletion being effective. Neither of these clauses are relevant to the current situation. Think of the parallel situation where an item is shown in the BoQ, but not on the drawings. That item would not be paid on a remeasurement contract. There must be consistency of approach.

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Construction Law

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Construction Law/Daywork Rates

Expert: Peter M. Elliott - 6/7/2012

Construction Law/delete work

Expert: Peter M. Elliott - 6/17/2012

Construction Law/Material scarcity

Construction Law/ Time for completion from

Expert: Peter M. Elliott - 6/11/2012

Construction Law/ Ommission

Construction Law/ Interim Payment Certificate

Construction Law/ Advance Repayment Calculation

Expert: Peter M. Elliott - 5/27/2012

Construction Law/ contrary to design

Expert: Peter M. Elliott - 5/27/2012

Construction Law/ Loss of Profit

Construction Law/ PB and Insurance Extension in VOs

Construction Law/ Claim for late payment

Expert: Peter M. Elliott - 5/19/2012

Construction Law/ Appointment of The Engineer

Construction Law/ advance payment recovery

Expert: Peter M. Elliott - 5/15/2012

Construction Law/ Suspension

Construction Law/ Rights

of the Employer withholding Payment Certificate

Construction Law/ Suspension of Work

Did you consider asking for help from the funder?

Construction Law/ Payment

Construction Law/ Increase of Cost

Construction Law/ Lump

Construction Law/ Variations and adjustments as per cl.13.1

Expert: Peter M. Elliott - 4/14/2012

Construction Law/ communication

Expert: Peter M. Elliott - 4/12/2012

Construction Law/ Fidic Clause 13.1 Right to Vary

Construction Law/ lum sum

Construction Law/ commencement without notice from

VO Clause 52.2 FIDIC 4th Edition

Construction Law/ FIDIC Conditions- VO

Variations in Construction Contracts Filed in Contract Administration on Sep.24, 2011

Construction Law/ Partial Handover

Expert: Peter M. Elliott - 10/7/2011

Construction Law/ IPC after Completion Date of Project.

Expert: Peter M. Elliott - 3/30/2012

Construction Law/ FIDIC Redbook 1999 Clause 12 and 13 Applicability

Field Code Changed

Construction Law/ Price Adjustment Under FIDIC

Construction Law/ Taking

Expert: Peter M. Elliott - 3/22/2012

Construction Law/ Performance

Construction Law/ Variation

Construction Law/ F idic

Expert: Peter M. Elliott - 3/15/2012

Construction Law/ Contract Claim

Answer Dear Bryan,

Construction Law/ termination

by employer and no return of performance

Expert: Peter M. Elliott - 3/12/2012

What Is a Performance Bond Insurance?

Performance Bonds and Other Insurances

Construction Law/ Re-measurement

under FIDIC 99 Red Book

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