Contracts - Advanced Questions Red Book Question - Answer - Fidic 87

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Contracts:advancedquestionsRedBookQuestion/Answer|InternationalFederationofConsultingEngineers
RedBook(CivilEngineering4thEd.1987)
REMEASUREMENTMODIFIEDTOLUMPSUM
QUESTION
Thefollowingqueryisinrelationtoasituationwhichhasoccurredinthecontextoftheexecutionofa
LumpSumcontract,regulatedbyastandardFIDIC(RedBook)termsandconditions.TheSpecifications
callfor"CastIron"pipes,whiletheBOQcallsfor"UPVC"pipes.TheContractorandupontheapprovalof
theEngineer,andwithouthavinganyinstructionstodoso,executedtheWorksinUPVC.Doesthisentitle
theEmployertorequestcostsavingonthisitem?Andonwhatbasis?Yourresponsetotheaboveishighly
appreciated.
ANSWER
YousaythatyouhaveaLumpSumContract.TheFIDICConstructionContractBookisaremeasurement
contractsothepaymentprovisionsmusthavebeenchangedtoprovidefortheLumpSum.Theanswerto
yourquestionwilldependonthewordingoftheseLumpSumprovisions.IregretthatFIDICcanonly
commentonquestionswhichontheinterpretationoftheFIDICGeneralConditions,soweareunableto
answeryourquestion.WefearthatthisisanindicationofwhathappensifGeneralConditionsaremodified
bySpecialProvisionswithoutduecare.
SUBCONTRCATOR'SEXPERIENCE
QUESTION
Iwouldlikeyouradviceonthedefinitionofasubcontractor,andofthefollowingtendercriteria:
"subcontractors'experienceandresourcesshallnotbetakenintoaccountindeterminingthebidder's
compliancewithqualifyingcriteria".Inotherwords,doesthismeanthatifabidderhasworkedasa
subcontractor,heisnotpermittedtoaddthatexperienceaspartofhisqualification?Iwouldlikeyour
clarification.
ANSWER
TheFIDICdefinitionofasubcontractorisgivenatSubClause1.1.2.8ofthe1999Contractfor
Constructionas:"Subcontractor"meansanypersonnamedintheContractasasubcontractor,orany
personappointedasasubcontractor,forapartoftheWorksandthelegalsuccessorsintitletoeachof
thesepersons.Differentclientshavedifferentcriteriawhenevaluatingtenders.FIDICwouldcertainly
expectthatanyclientwillwanttoensurethatthetendererhasadequateexperienceasamaincontractor
andhasnotjustworkedasasubcontractor.However,inFIDIC'sopinion,thiswouldnormallybewordedas
"Experienceasasubcontractor....".FIDIChasalsoknownclientstobeconcernedthattenderershave
reliedonaproposedsubcontractor'sexperienceandresourceswhenpreparingatenderandthenthe
namedsubcontractoriswithdrawnandanother,lessexperienced,companyisproposedafterthetender
hasbeenaccepted.However,foraninternationaltender,someclientsrequirethatacertainpercentageof
theWorksmustbesubcontractedtolocalcompanies.Inthiscasetheexperienceandresourcesofthe
proposedsubcontractorswillbeanimportantpartofthetender.Theclient'scriteriawhenevaluating
tendersdependonanumberofdifferentfactors,includingthepastexperienceoftheparticularclient.In
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ordertoascertaintheexactintentionsforevaluatingyourparticulartenderyouwouldneedtoraisethe
questionwiththeclient.
FREEISSUEMATERIALS
QUESTION
IhaveaquestionregardingClause69.1forDefaultofEmployer.WeareexecutingaContractforaProject
inPakistanunderFIDICFourthEdition,1987.TheEmployerhasassignedTheEngineerandalsoan
Employer'sRepresentative.TheEmployer'sRepresentativeisformtimetotimeactinglikeTheEngineer
andwouldliketophysicallychecktheworksatsite.Theyarealsoapplyingdeductionsonthecertificatesof
TheEngineer,suchasretentionmoneyonescalation,andalsoQuantities,etc.Theamountofthe
unauthorizeddeductionsarearound5%ofthetotalamountcertificatesissuedbyTheEngineer.Wehave
servedanoticeunderClause69.1and69.4,oftheConditionsofContracttoreducetherateofworkand
furthermore,clarifythattheClause69.1explainsthedefaultoftheEmployer,regardlessofthequantumof
amountincaseofEmployer'sfailuretopaytotheContractortotalamountdueunderanycertificateofthe
Engineer.DoyouthinkthattheabovestatementistrueanditisacaseofdefaultoftheEmployer?
ANSWER
DependingonwhatiswrittenintheContractandtheParticularConditions,generallyspeakingyouhavea
caseagainsttheEmployer.ThedamageswhichtheContractormayclaimwouldincludeinterestand/or
financingcharges.However,youmustchecktheprovisionsoftheSubclause2.1Engineer'sdutiesand
authority,toseewhatismentionedthere.ItisnotveryclearwhatisthisEmployer'sRepresentativeand
whatarehisdutiesundertheContract,.However,onewouldsuspectthatyouhaveacaseagainstthe
Employer.
BOGUSCLAIMS
QUESTION
IrequesttogivemeclarificationaboutthecorrectinterpretationofClause60.6Finalstatementinthe
FIDICConditionsofContract1987revisedin1992.ThisisaboutsubmissionbytheContractoroffinal
statementcontainingthefollowing(a)'thevalueofallworkdoneinaccordancewiththecontract,and
(b)anyfurthersumswhichthecontractorconsiderstobeduetohimunderthecontractorotherwise'.I
wantclarificationwithrespectto(b)above.DoesitincludetheClaimswhichtheContractorhasnever
raisedduringthecurrencyofcontractaccordingtoprovisionsofthecontract?Iamconfrontedwitha
disputeInwhichthecontractorforavalueoftotalworkofRs70millionhassubmittedfinalaccountsofRs
280millonbyincludingvarioustypeofclaimswhichheneverclaimedduringthecontractperiodandnow
claimsinthefinalstatementandsincetheEngineer/Employerfailedtorespond,theContractorclaimsthat
thefinalaccounthasbecomefinal.Iwouldrequestforanearlyresponseastothetrueandintended
purposeofthesubclause(b)ofClause60.6oftheGeneralConditionsoftheabovementionedFIDIC
versionforcivilworksconstruction.ShouldIincludeallbogusclaimswhatIintendtoincludeforthe
purposethatifIclaimUSD100IwouldatleastgetUSD1.HowIcanrebutthis?
ANSWER
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TheprovisionsofSubclause60.6havetobereadtogetherwiththeprovisionsofSubclause60.5andof
coursewiththeprovisionsoftheSubclause60.9.InorderfortheContractortomaintainanyclaim,he
mustincludeitinhisStatementatCompletion,ifithasarisenbythen,andinhisFinalStatement.There
areanumberofincidencesunderthecontractwhentheEmployergivestotheContractorindemnitiesoris
otherwiseresponsibletotheContractor.ClausesinwhichthisoccursandwheretheContractor'sresulting
claimsagainsttheEmployercouldariseforthefirsttimeaftertheStatementatCompletionorFinal
StatementhavebeensubmittedbytheContractorincludethefollowing:Clause19.2(Employer's
responsibilities)inrelationtosafetyClause21.3(Responsibilityforamountsnotrecovered)Clause22.3
(IndemnitybyEmployer)Clause24.1(Accidentorinjurytoworkmen)Clause25.4(Compliancewithpolicy
conditions)Clause26.1(Compliancewithstatutes,regulations)Clause70.2(Subsequentlegislation)and
Clause71.1(Currencyrestrictions).Ineachoftheabovecases,itisconceivablethattheContractorwould
wishtomakeaclaimagainsttheEmployerafterthedateoftheFinalStatement.Further,iftheContractor
wasmadeliableundertheapplicablelawtoathirdpartyinrespectofdesignwhichhadbeencarriedout
bytheEngineer,theContractorwouldwishtobringaclaimagainsttheEmployertorecoveranydamages
paidout.Subclause60.9infactbarstheclaimsnotmentionedintheStatementatCompletionandinthe
FinalStatement.Thepurposeofthesubclauseissensible,namelytoenabletheEmployertoachievea
reasonabledegreeofcertaintyastohisultimateliability.
APPOINTINGANENGINEER
QUESTION
IsitrecommendedtohaveinacontractbasedonFIDIC'sElectricalandMechanicalWorksContractan
externalexpertactingastheEngineer?OristherenoprobleminrecruitingtheEngineerfromamongstthe
Beneficiary(inourcasea"public"authority)?Wearesigningacontractshortly.TheEngineerisaccording
totheRedBook,Clause2.4PartIboundtoactimpartially.Thequestionisifthereisaninternal
incompatibilityintherelationshiptohisEmployer.
ANSWER
Thebasisuponwhichthe1987YellowBookandRedBookiswrittenisthattheEngineerisappointedby
theEmployer,butthatheisindependentofbothpartiesi.e.,heisanindependentthirdparty.Inmany
casesheisrequiredtogiveimpartialdecisionsinfactunderClause2.4oftheYellowBookheisrequired
toactimpartiallyatalltimeswhenexercisinghisdiscretion.IftheEngineerisanemployeeoftheEmployer
e.g.,someonefromtheEmployer'sEngineeringDivisionthereisabigriskthathewillnotbeina
positiontoactimpartially.Althoughhemaybeveryexperiencedandcapablefromatechnicalpointof
view,andabletohandlealltechnicalmatters,hemaynotbefreetomakedecisionswhichinvolvefinancial
arrangements,etc.inafairandimpartialmanner.Itisnotimpossible,norunknown,fortheEmployerto
nominatehimselforoneofhisownstaffasEngineer,butitisrareandcertainlycausesproblems.Thetext
ofanyclausesreferringtotheimpartialityoftheEngineerwillprobablyneedrevisingatsomestage,aswill
theprovisionsforhandlingclaimsanddisputes(Clauses2and50).Theprincipleofusinganemployeeof
theEmployerasEngineerwouldbemoreacceptableifaDisputeAdjudicationBoard(DAB)wasintroduced
toreplacetheprincipalprovisionsofClauses2and50.1todealwithclaimsanddisputes.
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STANDARDLETTERS
QUESTION
IamaCivilEngineer,presentlyworkingasContractsManager.Foreign(nonBritishnationality)engineers
usuallyhaveanunderstandingofthecontractdocumentandtheassociatedentitlements/obligations,but
alwaysexpressdifficultyincomposing(orrespondingto,iftheyareon"theotherside",correctlyworded
"standard"letterstotheRE,EngineerorEmployerincompliancewiththerequirementsofthevarioussub
clauses.Doyouhavesuchapublication?
ANSWER
Theonlybookwhichwecanrecollectis"MusterbriefeinEnglisch"(ISBN3762526079)althoughits
standardlettersarenotsuchaswewouldprefertoendorse.Althoughwewillreviewthesituationwith
regardtothenewFIDICContractsGuide,FIDIClackenthusiasmfortheveryconceptofstandardletters,
whichseemstobetiedupwiththeconceptofavoidingthinkingaboutthesituation.However,wedo
recognisethevalidityofconcernsexpressedbythosewhosefirstlanguageisnotEnglish.Thus,
"MusterbriefeinEnglisch"hasbeenrepublishedasanelectronicedition(itgoeswiththe1987RedBook
civilworkscontract).AnupdatedversionforusewiththeConstructionContract1stEdition,1999,theRed
Booksuccessor,willbepublishedbyFIDICin2009(FIDIChasacquiredthecopyrightofMusterbriefein
Englisch).ItshouldbenotedthatEdwardCorbett'sbook"FIDIC4th"containssomestandardletters.
Thesehavebeenincorporatedwithpermissionintheelectronicversionof"MusterbriefeinEnglisch"
publishedbyFIDIC.
APPENDIXTOTENDERDATAMISSION(CONTINUED)
QUESTION
Ibelievethiscasedoesnotconstituteaquestionofmistakeincontracttobedecidedundertheapplicable
law.Thescheduleofpricesoflabourandmaterialsisaprovisionforthetenderertoindicatehisprice(cost
plusprofit)onwhichhehadbasedhisContractPrice,inorderfortheEngineertoascertainthevalueofan
itemofworkthathadbeenexecuted(possiblyunderavariationorder)andforwhich,orforasimilaritem
ofworkofwhich,nopricecouldbefoundintheBillofQuantities(BOQ).Thusthescheduleofpricesof
materialsandlabouronlyassiststheEngineertodeterminetheoverheadsandprofitsoftheContractor,
underthetermsofthecontract,thathastobeaddedtothebasiccostofexecutinganitemofwork,which
theEngineercanalwaysreadilydetermine.Ifprovisonhadbeenmadeinthecontractforpaymentforprice
escalations,thensuchpaymentshadtobedeterminedbyreferencetopriceescalationindices,published
byanacceptedauthority.Astowhichsourceorpublicationistobeusedforthispurpose,dependsonwhat
wouldhavebeenreasonablyexpectedtobeinthemindsofthetwopartiesatthetimeofenteringinto
contract.
ANSWER
WeassumethatthisinquiryisaboutFIDIC1999ConditionsofContractwhereinthe199RedBookSub
Clause13.8itsays:"13.8(AdjustmentsforChangesinCost)InthisSubClause,"tableofadjustment
data"meansthecompletedtableofadjustmentdataincludedintheAppendixtoTender.Ifthereisnosuch
tableofadjustmentdata,thisSubClauseshallnotapply.IfthisSubClauseapplies,theamountspayable
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totheContractorshallbeadjustedforrisesorfallsinthecostoflabour.Goodsandotherinputstothe
Works,bytheadditionordeductionoftheamountsdeterminedbytheformulaeprescribedinthisSub
Clause.TotheextentthatfullcompensationforanyriseorfallinCostsisnotcoveredbytheprovisionsof
thisorotherClauses,theAcceptedContractAmountshallbedeemedtohaveincludedamountstocover
thecontingencyofotherrisesandfallsincosts.Theadjustmenttobeappliedtotheamountotherwise
payabletotheContractor,asvaluedinaccordancewiththeappropriateScheduleandcertifiedinPayment
Certificates,shallbedeterminedfromformulaeforeachofthecurrenciesinwhichtheContractPriceis
payable.NoadjustmentistobeappliedtoworkvaluedonthebasisofCostorcurrentprices.Theformulae
shallbeofthefollowinggeneraltype:Pn=a+bxLn/Lo+cxEn/Eo+dxMn/Mowhere:"Pn"istheadjustment
multipliertobeappliedtotheestimatedcontractvalueintherelevantcurrencyoftheworkcarriedoutin
period"n",thisperiodbeingamonthunlessotherwisestatedintheAppendixtoTender"a"isafixed
coefficient,statedintherelevanttableofadjustmentdata,representingthenonadjustableportionin
contractualpayments"b","c","d",...arecoefficientsrepresentingtheestimatedproportionofeachcost
elementrelatedtotheexecutionoftheWorks,asstatedintherelevanttableofadjustmentdatasuch
tabulatedcostelementsmaybeindicativeofresourcessuchaslabour,equipmentandmaterials"Ln",
"En","Mn",...arethecurrentcostindicesorreferencepricesforperiod"n",expressedintherelevant
currencyofpayment,eachofwhichisapplicabletotherelevanttabulatedcostelementonthedate49
dayspriortothelastdayoftheperiod(towhichtheparticularPaymentCertificaterelates)and"Lo","Eo",
"Mo",...arethebasecostindicesorreferenceprices,expressedintherelevantcurrencyofpayment,each
ofwhichisapplicabletotherelevanttabulatedcostelementontheBaseDate.Thecostindicesor
referencepricesstatedinthetableofadjustmentdatashallbeused.Iftheirsourceisindoubt,itshallbe
determinedbytheEngineer.Forthispurpose,referenceshallbemadetothevaluesoftheindicesat
stateddates(quotedinthefourthandfifthcolumnsrespectivelyofthetable)forthepurposesof
clarificationofthesourcealthoughthesedates(andthusthesevalues)maynotcorrespondtothebase
costindices.Incaseswherethe"currencyofindex"(statedinthetable)isnottherelevantcurrencyof
payment,eachindexshallbeconvertedintotherelevantcurrencyofpaymentatthesellingrate,
establishedbythecentralbankoftheCountry,ofthisrelevantcurrencyontheabovedateforwhichthe
indexisrequiredtobeapplicable.Untilsuchtimeaseachcurrentcostindexisavailable,theEngineershall
determineaprovisionalindexfortheissueofInterimPaymentCertificates.Whenacurrentcostindexis
available,theadjustmentshallberecalculatedaccordingly.IftheContractorfailstocompletetheWorks
withintheTimeforCompletion,adjustmentofpricesthereaftershallbemadeusingeither(i)eachindexor
priceapplicableonthedate49dayspriortotheexpiryoftheTimeforCompletionoftheWorks,or(ii)the
currentindexorprice:whicheverismorefavourabletotheEmployer.Theweightings(coefficients)for
eachofthefactorsofcoststatedinthetable(s)ofadjustmentdatashallonlybeadjustediftheyhavebeen
renderedunreasonable,unbalancedorinapplicable,asaresultofVariations."Theclauseisveryclearand
unfortunatelythequestionraisedisnotrelatedtoaninterpretationofaSubSlause.
FAIRNESSOFDEDUCTIONS
QUESTION
Asourprojectisalumpsumcontract,theclienthasreducedsomeoftheitemsandisdeductingsuomeof
ourpaymentamountsfromthemonthlycertificate.Isitfairtodeductanamount?
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ANSWER
AlthoughitisnotforFIDICtocommentonthe"fairness"ofaparticularcircumstance,itistheFIDIC
philosophytopublishConditionsofContractthatadoptanapproachoffairnessandbalancedrisk
allocationbetweenthepartiesasaprimaryfocus.Further,FIDICcanonlycommentingeneraltermson
theinterpretationofaFIDICclauses,anditshouldbenotedthatfortheapplicationofaclausetoa
particularproblemsituation,oneshouldalwaysconsultaspecialist.Withthatbeingsaid,ingeneral,the
SubClauseentitledVariations(SubClause52.1inthe4thEditionor13.1inthe1999Editionofthe
ConstructionContract)doesprovidetherightfortheEngineertovarytheworkdownwardspecificallythe
Engineermaydecreasequantitiesoromitwork,providedofcoursethatthisworkisnotcarriedoutthe
Employeroranothercontract.Further,SubClause51.1providesthatsuchvariationswillbevaluedin
accordancewiththeClause52,inthecaseofthe4theditionorClause12inthecaseofthe1999editions.
Bothoftheseclausesprovidetherulesforthevaluationofthesevariations,whichincludethepossibilityof
reductioninprice.Pleasenotethattheaboverepresentsageneralansweronly,andspecificadvicetothe
particularfactssurroundingyoursituation,werecommendyouconsultaspecialist.
LIQUIDATEDDAMAGES
QUESTION
IamworkingasaResidentEngineerforHighwayswithconsultants.Abriefdetailofourprojectisasas
follows:Theprojectisarepairprojectandisdividedin3sections.Thesectionsareofvaryinglengthswith
150mfortheshortestoneand1.5Kmforthelongestone.Completiondatefortheprojecthasalready
elapsedearlythisyearandnotimeextensionhasbeengrantedtothecontractorowingtodelayonhis
ownbehalf.Twosectionshavealreadybeencompleted(openedtotraffic)andthe3rdsectionisnear
completion.Noseparatetimesforcompletionhavebeenprovidedinthecontractforeithersection.
Clause47.2ofFIDICConditionsofContract(4thedition)recommendsthereductioninpenaltysubjectto
takingoverofdifferentsections.Assatedabove,noneofthesectionshavebeenacquiredbytheclient
contractually.Thereferredclausealsostatesthattheprovisionsofthesubclauseshallonlyapplytothe
rateofliquidateddamagesandshallnotaffectthelimitthereof.WhatIinferfromthispartisthatevenafter
thereductionofpenalty,itshallbeapplicablefromtheoriginaldateofexpiryofthecontract.Isthisthe
rightinterpretation?Mysecondqueryisregardingthereductioninliquidateddamages.Undertheabove
circumstanceswherethesectionshavenotbeenacquired,butopenedtotrafficandgeneralpublic,can
thepenaltiesbereducedcontractuallysubjecttomutualagreementwiththeclient?Thirdly,duringthe
currencyoftheproject,somesavingshavebeenthere(whichcouldn'tbeestimatedatdesignstagedueto
repairingnature).Thesavingsarelessthan15%(consideringClause52.3).Ifpenaltiesareappliedand
reducedthereof,aretheytobecalculatedontheoriginalcontractpriceortherevisedone?
ANSWER
Ifunderstoodcorrectly,yourfirstquestionrelatestosubclause47.2,specificallythelastsentence,which
reads"TheprovisionsofthisSubClauseshallonlyapplytotherateofliquidateddamagesandshallnot
affectthelimitthereof."Themeaningofthissentenceisthatalthoughthisclauseallowsfortheamountof
liquidateddamagestobereducedproportionatelytotheworkbeinghandedover,iftheworkishanded
overinparts,themaximumlimitofliquidateddamages(asspecifiedintheappendixtotender(seeSub
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Clause47.1))isnotaffected.Inregardtoyoursecondquestion,Clause47shouldbereadinconjunction
withClause48.Inthebackgroundtoyourquestion,youstatedthatnoneofthesectionshavebeen
'acquiredbytheClientcontractually',yetearlieryoustatethat'2sectionshavealreadybeencompleted
(openedtotraffic)'.Inthislight,wewouldsuggestthatyoumayreviewbothsubclause48.2and48.3,
which,dependingontheparticularfactpatternsurroundingyourcontract,maybeapplicable.Inanswerto
yourthirdquestion,liquateddamagesarenotpenalties.Youarekindlyreferredtotheverbiagecontained
inSubClause47.1,whichreads,inpart"...andnotasapenalty...".AsexplainedintheGuidetotheRed
Book,LiquidateddamagesareanamountdeterminedbytheEmployer,beforetendersareinvited,asa
reasonableassessmentoftheactualdamageswhichhewouldsufferintheeventofdelayincompletionof
theWorks.Hence,ingeneral,LiquadatedDamagesshouldbecalculatedfromthevantagepointthatwill
resultinareasonableassessmentoftheactualdamages.
VALUEENGINEERINGSUBCLAUSE
QUESTION
IntermsoftheFIDIC1987RedBook,istheContractorentitledtoaportionofthesavingasprovidedforin
thetermsofSubClause13.2(ValueEngineering)inthe1999RedBook?
ANSWER
TheFIDIC1987eRedBookdoesnothaveasimilarprovisionastheonementionedintheFIDIC1999
editionValueEngineering,SubClause13.2Howeveryoumayfindinthe1987RedBookasocalledbonus
forearlycompletion.
ADDITIONALWORKS
QUESTION
Beingaprojectmanagerfromtheclientside,IwouldliketoknowasperFIDICcanIforceacontractorto
carryoutadditionalworkspriortoapprovalofhisfinancialclaim?
ANSWER
ThebasicanswerisYES,providedyoufollowthecorrectcontractprocedures.ThereareanumberofSub
Clauseswhicharerelevantincluding,fromthe1999ConstructionContract:a)S/Cl3.1:TheEmployermay
haveimposedconstraintsontheEngineer'sauthorityintheParticularConditions.b)S/Cl3.3:The
ContractorshallcomplywithinstructionsgivenbytheEngineer.c)S/Cl13.1:TheContractorshallexecute
andbeboundbyeachVariationinitiatedbytheEngineer.SubjecttoexceptionsasstatedintheSub
Clause.d)S/Cl13.3:ProceduresfortheEngineertovaluetheVariation.TheEngineermayhaveaskedfor
andacceptedaproposal,orheproceedsasClause12.
NEWRATES
QUESTION
InacivilmarineworkcontractofFIDICconditions,disputesquiteoftenoccursonfixingofrevisionofrates.
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thoughclauses51and52ofFourthEditionRedBookclearlyprovidecausesforvariationandvaluation
ofrates,ambiguitystillpersistswithrespecttoadoptionofrevisedratesforvariedquantitiesonlyorforfull
quantityexecutedaslongastherearenomajorchangesindeploymentofworkmen,equipmentand
materials.Leavingthedecisiontoengineermaynotgiveanappropriatesolutionaspersonsholdingthe
postofengineermayhavedifferentviewsandtheirdecisionsmaynotexactlymatchwiththeviewsof
FIDICauthors.Pleaseclarifythesituationswhenrevisedratesareapplicablefortheentirequantityorfor
increasedquantitiesonly.
ANSWER
Thedecisionwhetheranewrateappliestothetotalquantityofanitem,orjusttotheVariationquantity,will
dependonthereasonwhyanewrateisnecessary.Thismaydependonthereasonanddetailsofthe
changetotheContractor'scost.Sometimestheoriginalquantitywillalreadyhavebeenexecutedandpaid
attheBQrate,beforetheVariationisordered.However,sometimesthefactofthequantitybeingchanged
bytheVariationwillchangethecircumstancesandcostsandmakesitreasonabletopaythetotalquantity
atthenewrate.ThenewratemaydifferifitisbeingappliedtothetotalquantityorjusttotheVariation
quantity.TheEngineerwill,ofcourse,takeallthesefactorsintoaccountwhencalculatinganewrate.You
shouldalsorefertothecommentaryonClauses51and52intheFIDICGuidetotheFourthEdition.The
commentaryemphasisestheimportanceofconsultationwithboththeparties.
APPENDIXTOTENDERDATAMISSING
QUESTION
AcontractwassignedundertheFIDICConditionsofContractwhichrequirethatindicesfortheskilledand
unskilledlabourshouldbefilledbytheContractorintherelevantAppendixwhilesubmittingthetender.
ThisrequirementincludingthesourceoftheindiceswashowevernotfulfilledbytheContractor.Thisfact
wasnotedbutemployerfailedtogetthisrequirementmetandthecontractwassignedwithoutthis
information.Thedisputearosewhenthecontractorsubmittedescalationclaimduechangeinpricesofthe
labourcomponentaccordingtorelevantprovision.Thecontractorinsiststheusesourceindicesissuedby
thelocalgovernmentforcalculationofadjustmentwhichisneartheplaceoftheconstructionandbecause
thisconditionismoreprofitabletocontractor.TheClientinsiststhathewillusetheindicesissuesbya
gevernmentofficewhicharenormallyusedingovernmentcontracts.IamtheArbitratorinonesuchcase
andneedadviceofFIDICwhatwillbethejudiciouscoarseofactioninthisscenario.Ihoweverfeelthat
entireresponsibilityofnotprovidingthisinformationcannotbeplacedontheContractorandtheEmployer
shouldhaveinsuredthatContractorprovidethisinformationbeforesigningofthecontract.omissionwas
madeandthecontractwassignedwithoutthisinformation(sourceofindices).Iwillbeanxiouslywaitingfor
advicefromyourexpertwhatreasonablecoarseofactionshouldbeadaptedinthisdisputeresolutionas
theContractorhasgoneindisputeonthisissue.
ANSWER
ItseemsthattheContractormadeamistakebynotaddingtheinformationtotheAppendixtoTender.The
EmployerthenacceptedtheTenderandthePartiessignedaContractwhichincludedthemistake.
UnfortunatelyyousaythattheycannotagreeontheinformationwhichshouldbeaddedtotheAppendixto
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Tender.TocorrectthemistakerequiresachangetothesignedContracttoaddthisinformation.
CorrectingamistakeinaContractisalegalquestionwhichmustbestudiedundertheapplicablelaw.
FIDICcannotcommentonsuchlegalquestions.
ENGINEER'SDECISION
QUESTION
OurfirmhasacontractforconsultingserviceswiththeGovernmentofElSalvadorfortheconstructionof
majortransportationinfrastructureinthecountry.Theprojectisdividedintothreepackagesthatare
governedbyFIDICConditionsofContractforWorksofCivilEngineering(Redbook,4thEd.1987).The
constructionofthefirstpackageofproject,whichincludedtwo400meterbridgesoverthemostimportant
riverinElSalvador,wascompletedlastApril.TheContractorisaJointVentureoffirmsthatisnowclaiming
additionalpaymentsbasedonthecontractdocuments.Inordertohaveaclearinterpretationofthe
documents,wewouldliketoclarifythefollowing:Clause67.1Engineer'sDecisionwewouldliketo
confirmifunderthisClausetheContractorcanclaimformattersthathappenedduringtheconstruction
period,evenaftertheTakeOverCertificatehasbeenissuedandtheStatementatCompletionhasbeen
certifiedandpaid.
ANSWER
RegardingClause67.1:iftheContractorisdissatisfiedwithanEngineer'sevaluationofaclaimunder
Clause53,hemayreferthematteratanytime(beforeoraftercompletion)totheEngineerunderClause
67.1foran"Engineer'sDecision".HecandothisanytimeuptohisFinalStatementandthereisnotime
limit.TheEngineerthenhas84daystorespond.TheContractorcannotsubmita"new'"claimfornormal
determinationunderthisclause.TheclaimmustfirstbeprocessedunderClause53,andonlywhena
Clause53determinationhasbeengivenwhichtheContractorfindstobeunacceptabledowehavea
"dispute"situationwhichcanbehandledunderClause67.1.
CALCULATIONOFCLAIMS
QUESTION
Iwouldliketoknowifyoucanhelpmefindinformationregardingtheprocedureandcalculationofclaims
(ofanykind)arisingoutofaCivilEngineeringConstructioncontract.
ANSWER
FIDICpublishesguidestoeachofitsformsofconstructioncontract,whichmayprovidetheguidanceyou
requireontheproceduresforclaims.YouwouldneedtoordertheGuidefortheuseofwhatever
Conditionsyouareusing.IfyourenquiryrelatestoOctober2000.FIDIC'sguidesdonotelaborateonthe
calculationofclaims,soyoumightneedtoconsultotherpublications.Personally,Iamonlyawareof
"BuildingandCivilEngineeringClaimsinPerspective"byGeoffreyArthurHughes,whichwasfirstpublished
byLongmanin1983.Itmayhavebeenrepublishedandfulfilyourneeds.
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NOTINPREHANDOVERLIST
QUESTION
IhavethefollowingproblemandIcannotfindasolutionintheFIDICRedBookFourthEdition1887.The
problemisasfollows:wehavemadeacontractwithaprehandoverlistmade,withtheEngineer,inApril
2000.Anewcontract,giventoanothercompanyinthesamebuildingwasgiveninMay2000,itwasan
obligationformetogivethekeysofthebuilding.AstheEngineerisinZimbabweandtheBuildingisin
Burundi,noengineerwasthereforthehandoveroftheinsideofthebuilding.Now,theEngineerasksus
torepairsomethingswhichwerenotontheprehandoverlist.CanyoupleasetellmewhatIhavetodo.
ANSWER
FIDICdoesnotundertaketoprofferadvicerelatingtoeverysituationwhichmayariseunderaFIDIC
basedcontract.However,itappearsthattheanswertoyourquestiondependsuponwhetheraTaking
OverCertificatehasbeenissued.Ifso,theprehandoverlistpresumablyadvisedyouofthework
describedinSubClause49.2(a),andtheEngineerhasaskedyoutorepairsomethingsasdescribedin
SubClause49.2(b).Ifnot,theEngineermaybe"specifyingalltheworkwhich...isrequiredtobedone...
beforetheissueofsuchCertificate"underSubClause48.1.Ineithercase,youhavenotindicatedany
reasonfornotcomplyingwiththeEngineer'sinstructions.
ADDITIONALPAYMENTS
QUESTION
OurfirmhasacontractforconsultingserviceswiththeGovernmentofElSalvadorfortheconstructionof
majortransportationinfrastructureinthecountry.Theprojectisdividedintothreepackagesthatare
governedbyFIDICConditionsofContractforWorksofCivilEngineering(Redbook,4thEd.1987).The
constructionofthefirstpackageofproject,whichincludedtwo400meterbridgesoverthemostimportant
riverinElSalvador,wascompletedlastApril.TheContractorisaJointVentureoffirmsthatisnowclaiming
additionalpaymentsbasedonthecontractdocuments.Inordertohaveaclearinterpretationofthe
documents,wewouldliketoclarifythefollowing:Clause53.1NoticeofClaimsitisimportanttoconfirmif
theContractorcaninvokethisClausetoclaimforadditionalpaymentowingtoconstructionworksthatwere
performedbeforetheTakeOverCertificate,oncethisCertificatehasbeenissued.Inotherwords,ifthe
ContractorcanclaimformattersthathappenedduringtheconstructionperiodevenaftertheTakeOver
Certificatehasbeenissued.
ANSWER
RegardingtheapplicationofClause53.1.ThisclauserequirestheContractortogiveNoticeofapotential
claimwithin28daysoftheeventoccurring.Thisestablisheshisrighttoclaimandheshouldthenproceed
tosubstantiatetheclaimaccordingtoClause53.3.HecanclaimatanytimebeforeorafterTakingover
ifeventsoccur(beforeoraftertakingover)whichheconsidersentitlehimtoclaim.TheintentionofClause
53.1istotrytomakesureclaimsaredealtwithasandwhentheyoccursothateveryoneisfamiliarwith
thecircumstances(thusthe28dayprovision)andnottoleavethemtotheendwhenpeoplehave
probablyforgottenallthedetails.Ifhedidthiswithinthetimelimits,thentheclaimshouldbeevaluated
accordingtotheContractor'ssubmissions.Ifhedidnotaswouldappeartobethecaseandhascome
data:text/htmlcharset=utf8,%3Cdiv%20class%3D%22field%20fieldnamefieldpagesummary%20fieldtypetextlong%20fieldlabelhidden%22%20style
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inwithaclaimaconsiderabletimeaftertheevent,thenwewouldsuggestthatyouhavetwocoursesof
action.Firstlyyoushouldperhapstrytoestablishwhyhedidnotgivenoticewithinthe28days.Eitheryou
canrejecthisclaimonthegroundthathedidnotsubmititwithin28daysasrequiredbyClause53.1,or,
underClause53.4youcanmakeanassessmentbasedonrecordswhichwerekeptatthetime.NormallyI
wouldsuggestitdependsonthecircumstances.Iftheclaimappearstobefrivolousandconfusedwithno
substantiation(possiblyaneventyouknewnothingabout)youmaywelldecidetorejectit.Butifit
concernsaneventofwhichyouwereawarewhichyouknewhaddisruptedtheContractor,thenmaybe
youcouldconsideritunderClause53.4.
NEWRATESFORREMEASUREMENT
QUESTION
IhaveaquestionregardingadoptionofFIDICRedBookFourthEditionreprinted1992.Theparticular
ContractcontainsClause51/52"Variations"andalsocontainsClause56"WorkstobeMeasured"andhas
BOQ.DesignandConstructServicesforElectricalandMechanicalweretenderedasdiagramaticdesigns
andaretobedevelopedtotheApprovalofEngineeraspartofobligationsundertheContractandhave
variousBOQitems.ThisDesignDevelopmentforMechanical/Electricalservicesishisobligationunderthe
Contract,andinthiswaywouldnotseemtoqualifyasaVariationtotheContract.Howevernewitemsto
theoriginalBOQhavebeennecessitatedbyDD.UnderwhichClausecannewratesbeestablishedforthe
remeasureoftheseWorks?
ANSWER
TheConditionsofContractforWorksofCivilEngineeringConstruction(1992)donotcontainexpress
provisionfornewratesbeingestablishedfortheremeasurementofnonvariedContractordesignworks,
wherenewitemstotheoriginalBoQhavebeennecessitatedbyDesignDevelopment.Typically,
Contractordesignworksarepricedonalumpsumbasis,andarenotsubjecttoremeasurementafter
DesignDevelopment,sosuchexpressprovisionwouldbeinappropriateintheConditionsofContractwhich
FIDICintendedtobesuitableforEmployerdesignworks.
TERMINATIONBEFORECOMPLETION
QUESTION
HasEmployergotanauthorityaccordingtoFIDICtoterminatethecontractofEngineerbeforecompletion
ofprojectandappointanotherengineeringcompanyorcontinuewithitsownresources?Iknowthatthat
EmployercannotdothisaccordingtoRedBookFIDICClause1.1DefinitionsbyreferringtoPartIIofthe
contract.Whatshouldwedoasacontractoratthisstage?
ANSWER
YouappeartounderstandFIDIC'sprovisions,assummarisedatthetopofpage41oftheRedBook
Guide:"Itshouldbenotedthat...theeffectof...[1.1(a)(iv)]istopreventtheEmployerfromchangingthe
EngineerwithouttheconsentoftheContractor."Ineffect,providedthelegalpersondefinedas"Engineer"
continuestoexist,suchlegalpersoncontinuestobetheEngineerforthepurposesoftheContract,and
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theEmployerhasnopowertonamesomeoneelseasEngineer.By"continuestoexist",wemeandoesnot
(asanaturalperson)die,orisnot(asacompany)dissolved.FIDICcannotgivespecificadviceinrespect
totheactionsapartyshouldtake,andonlyundertakestoclarifyaspectsofitsownprovisions.Youdonot
seemtoneedsuchclarification,butmayneedtoobtainadvicefromalawyerwithexpertknowledgeof
constructionlaw.
Thereisalwaysapossibilitythatsomeaspectofthesituation(whichyouhavenotmentioned)wouldentitle
theEmployertoreplacetheEngineerunderthelawgoverningtheContract.ForFIDIC,itseemsthatyou
shouldfirstdecidewhetherthereplacement"Engineer"isacceptableassuchbecause,ifnot,youcould
informtheEmployeraccordinglyandseektoresolvethematterbeforeitescalatesintoamajordispute.
EMPLOYERREPLACESTHECONTRACTOR
QUESTION
RegardingthecorrectapplicationoftheRedBookContract,theEmployerincompliancewithsubclause
63.1,aftergivingwrittennoticetotheContractoruponhiscontraventionofprovisioninsubclause4.1,
enetereduponthesiteandtheworks,andterminatedtheemploymentoftheContractor.TheEmployer
wantstoemployanotherContractor,whichtooksecondplaceintheinitial,publictender,tocompletethe
works.Thefurtherprocedurewillbeincompliancewithsubclauses63.2,63.3,63.4and64.1.The
questionsis:isthisprocedureincompliancewiththeGeneralConditionsoftheRedBook4thEdition?
ANSWER
WerefertoyourquerywhetheraproposedprocedurecomplieswiththefourtheditionoftheGeneral
ConditionsofContractforWorksofCivilEngineeringConstruction.
FIDICcannotundertaketoprovideadviceonactualcircumstances,andisonlypreparedtoclarifyand
explainthemeaningandpurposeoftheprovisionsitpublishesinitsConditionsofContract.Inthecaseof
seriousmatterssuchastermination,legaladviceshouldbesought.
However,wewouldmakethefollowingobservations,withoutconcludingwhethertheEmployerisentitled
toproceedasyouhavedescribed.Forthesepurposes,westartbyassumingthattheEmployer's
terminationwasvalidbyreasonoftheContractor'sbreachofsubclause4.1.Suchvaliditymay,ofcourse,
bechallengedbytheContractor.
Followingavalidtermination,theEmployer'soptionsonemployinganothercontractorwouldnotappearto
beconstrainedbytheGeneralConditions,otherthanunderClause63(withwhichyoustatethefurther
procedurewillcomply),althoughtheymaybeconstrainedbytheapplicablelaw.Youmentioncompliance
withsubclause63.4,whichrelatestoassignmentofsubcontracts.Applicablelawmayconstrainthe
Employer'srightsinrespectofsubcontractswhichwereassociatedwiththeContractor'sbreachofsub
clause4.1.
Youmentioncompliancewithsubclause64.1,whichrelatestourgentremedialworkwhichtheContractor
isunwillingorunabletodo,priortotermination.Aftertermination,hispreviousunwillingnessorinability
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wouldnotseemtoentitletheEmployertoinvokesubclause64.1.Asregardsemployingacontractor
whichtook"secondplace...intheinitialpublictender",thisisnotamattertobedecidedbytheGeneral
ConditionsoftheContractunderwhichtheterminationwaseffected.Thechoiceofreplacementcontractor
isamattertobedecidedbythelawrelevanttotheprocurementproceduresandanyconstraintsimposed
bythoseprovidingfundsfortheproject.
DELAYEDPAYMENT
QUESTION
IamanArchitectregisteredwiththeRIBAintheUKsince1978andtheUAEAuthoritiesinAbuDhabi,UAE
since1981.
IhaverecentlybeenEngineerunderaFIDICRedBook4thEditionBuildingContractbetweenaUAE
GovernmentAgencyandalocalContractor,andEmployer'sRepresentative/AdviserunderaFIDICDesign
andBuildContract,sameEmployerbutdifferentContractor.
ClausesofParticularApplicationhavebeenpreparedbyathirdpartyadvisingtheEmployerdirectinboth
cases,butlargelyignored,theEmployerpayinglatethroughout,notpayingthefinalInterimCertificateson
TakingOvertheWorksineithercase,threateningtheimpositionofPenaltiesbyignoringand/orrejecting
thecasesforExtensionsofTimeinbothcases,andnotpayingatalluntilforcedagreementtoreduced
amountshasbeenacceptedbytheContractorsthroughbarter.
Asyoumayknow,thereisverylimitedrecoursetothelawhere,especiallyforforeigners.BothContractors
arelikelytoweighthecostsofCourtsandfurtherDelayagainstthebenefitofanypaymentatallonehas
alreadygivenin,buttheotherisstillfighting,orperhapsmorerealistically,negotiating.
WhatshouldIdo,please:indeed,isthereanythingthatcanbedone?Thisistheworstcaseofabuseof
ContractIhavecomeacrossinmorethan20yearshere,thoughtheamountsarerelativelysmall.
ANSWER
Whilstwecansympathisewiththesituationdescribedinthequestion,thereisnotalotFIDICcan
recommendorthathecandoasEngineerinthiscase.
Thesituationdescribedis,unfortunately,notallthatuncommoninsomeMiddleEastcountriesandthe
ultimatedecisionofwhattodolieswiththeContractor.Ifhefeelsthesituationwarrantsextreme
measures,thenhecanterminateunderClause69.1(unlessofcourse69.1hasbeenchangedasitvery
oftenisinthesecountries).Otherwisethereisnotalotyoucando.
BeingfairandimpartialtheEngineercould(andperhapsshould)writetotheEmployerremindinghimof
thetermsoftheContractbuthewillprobablybringdownthewrathoftheEmployeronhisshoulders,and
thatmaynothelpanybody.
YoushouldperhapsalsobearinmindthatContractorswhochoosetoworkinthesecountriesareusually
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(orshouldbe)ratherfamiliarwiththissituationandmaywellhaveallowedsomethingintheirpricetocover
thissortofthingespecially,asthepersonaskingthequestionsays,theamountisnotverylarge.
EXPIRYOFDEFECTSLIABILITYPERIOD
QUESTION
FortheRedBook,cantheEngineerissueinstructionsunderClause13.1aftertheexpiryoftheDefects
LiabilityPeriod?
ANSWER
AftertheDefectsLiabilityPeriodexpires,theEngineermayissueinstructionsunderClause49,andcannot
relyuponClause13asauthoritytoissueotherinstructions.
PERFORMANCESECURITY
QUESTION
Pleaseinformusaboutthevalidityoftheperformancesecurityifthedurationofthecontractis90days.
ANSWER
TheseprincipleswouldprobablyapplywhicheverFIDICdocumentisbeingused.
PRIORITYOFTENDERDOCUMENTS
QUESTION
ThequestionreferstoFIDICConditionsofContractforWorksofCivilEngineeringConstruction(4thEdition
1987,reprinted1988witheditorialamendments,reprinted1992withfurtheramendments).Iaman
employerwhoisnegotiatingwiththecontractornow.IhaveatroubleinusingtheFIDICconditions,and
askforyourhelpurgently.SubClause1.1(b)(v)"Tender"meanstheContractor'spricedoffertothe
EmployerfortheexecutionandcompletionoftheWorksandtheremedyingofanydefectsthereinin
accordancewiththeprovisionoftheContract,asacceptedbytheLetterofAcceptance."AndSubClause
5.2specifiesthepriorityofthecontractdocument,ofwhichtheTenderislistedasthird.Arethosetwo
"Tender"havethesamemeaning?CanweexplainthattheTenderonlyrefertothedocumententitled
letteroftender(maybe1or2pages,veryshortandsimpleanyway),orallthedocumentssubmittedbythe
ContractoralongwiththeletteroftenderasresponseupontheBiddingDocument(alotofdocuments,
suchasappendixtotender,pricedBOQ,technicalproposal,evidenceforconstructionexperienceand
financialcapacity)?
ANSWER
TheTenderatSubClauses1.1(b)(v)and5.2(3)meanstheformofTenderwhichisgivenattheendof
Part1oftheRedBook.TheformofTender,atparagraph2,confirmsthattheAppendixtoTenderforms
partoftheTenderandSubClause1.1(b)(iv)confirmsthatthepricedbillofquantitiesformspartofthe
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Tender.IftheEmployerrequiresotherdocumentstobeincludedintheContractaspartoftheTenderthen
hemuststatethisclearlyintheInstructionstoTenderersandintheformofTender.
OBTAININGCONTRACTDATA
QUESTION
SubClause11.1tellusthatthehiredcontractingpartyisresponsibleforthedatacontainedinhisproposal
basedonthedatasuppliedbytheContractor.CouldyoupleasetellmehowIcanobtainthedata?
ANSWER
TheContractormusthavebasedhistenderoninformation:1)whichwasprovidedtoalltenderersbythe
EmployerfromtheinvestigationswhichhadbeencarriedoutbytheEmployer2)whichtheContractor
obtainedfromhisowninspectionandexaminationoftheSiteanditssurroundings.WheretheContractor
obtainedthisinformationwilldependonthecircumstancesbuthemusthavesatisfiedhimselfthathis
tenderwascorrectandsufficienttomeethisobligationsundertheContract.
INTERIMCERTIFICATES
QUESTION
SubClause60.4stipulatesthattheEngineermaycorrectanyerrorinaninterimcertificateinsubsequent
certificates.Arethereanylimitationsintheapplicationofthisprovision?
ANSWER
YouarereferringtoSubClause60.4ofthe1987ContractforCivilEngineeringWorks.Thereisasimilar
provisionatSubClause14.6ofthe1999Contracts.TheContractdoesnotputanylimitationonthis
provision.However,underSubClause60.2theEngineerhaspreviouslycertifiedtheamountwhichhe
consideredtobedueandpayable.Ifhehasnowfoundanerrorandchangedhismindheshouldexplain
thereasonsforthechange.
REFIXINGOFRATE
QUESTION
IaminterestedinapplicationofClause52.2(PoweroftheEngineertofixRate).Ifcircumstancesallowa
refixingofrate,woulditapplytothevariedquantity(increased/decreased)ortotheentirequantity,i.e.,
quantitiesinthebidplusincrease/decrease?
ANSWER
Youarereferringtothe4thEdition1987oftheContractforWorksofCivilEngineering,SubClause51.1
(a)allowstheEngineertoissueaninstructiontoincreaseordecreasethequantityofanyworkincludedin
theContract.TheratewhichtheEngineeragreesorfixesunderSubClause52.2wouldonlyapplytothe
variedquantity(increasedordecreased).TheoriginalquantityisnotpartoftheVariationandwouldbe
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paidattheoriginalrate.
RECOVERYOFCOSTS
QUESTION
Workingwith1987,4thEdition,reprintedin1992FIDICformofcontractonaprojectwhereClause70,
whistbeingmodifieddoespermittherecoveryofchangesinthepricesoflabourandmaterials.Arethere
anylegalprecidentswhichreflecttheprovisionreflectedinthe1999formofcontracttoallowtherecovery
ofcosts,postthestatedcontractcompletionwherethecontractorhasfailedtocompletetheworksinthe
specifiedtime?Orarethereanyprecidentstoreflecttherecoveryofcostspersec,postthecontract
completiondate?Ifthereareanyprecidents,ifthereareinelectronic,format,couldyouforwardthemor,
advisewheretheycouldbeobtained.
ANSWER
FIDICisunabletoprovidelegalguidanceorinformationonlegalprecedents.However,tobehelpful,the
federationhasaskedanexperttocommentsothatyourfutureresearchcanguidedintheapproriate
direction.Youarecorrectthatthe19874thEditiondoesnotincludespecificprovisionfortherecoveryof
pricechangesafterthecontractcompletiondatewhentheContractorhasfailedtocompletetheworkin
thespecifiedtime.AlternativeclausescanbefoundintheFIDICGuidetothe4thEditionandinthe1999
Contracts.Theproblemwithlegalprecedentsisthatnotwodisputesituationsareeverexactlythesame
andsoneedlegaladvice.Guidanceandsummariesofsomearbitrationawardscanbefoundinthe
internationallegaljournals,newslettersfromlawfirmsandthepublicationsoftheinternationalarbitration
centressuchastheICCParis,theLondonCourtofInternationalArbitrationandothercentresindifferent
partsoftheworld.
ENGINEER'SINSTRUCTIONS
QUESTION
AFIDICstandardContractforcivilengineering(RedBook4thEdition1987)isbasisofaContractfora
WharfandApproachBridgeConstructionandCausewayReclamationproject(TheContrac
).TheContract
isaLumpsumAgreementandtheBOQrefersasfollows:AllworksinthissectionexceptProvisional
QuantitieswillbepaidforasLumpSums.Quantitiesareestimatesonly.IftheContractorwishes,additional
itemsmaybeaddedtotheBillorquantitiesamended.Ratesnominatedwillbeusedonlytoassess
variations(ifany)totheContractandtoassessprogressclaimsandpayments.ProvisionalQuantitiesand
ItemswillbepaidforasdescribedintheConditionsofContract.OneoftheBoQitemwaspertainingto
CraneRailstobeprovidedbytheContractor.LatertheCompanyorganizedtheRailsontheirownandthe
ContractorisnotrequiredtoprovidetheCraneRailsaspertheBoQ.InviewofthistheCraneRailrelated
AmountasstatedintheBoQisproposedtobedeductedoutoftheBoQ.Pleaseconfirmthatthisisproper
approachunderArticle51and52oranyotherconditionsofFIDICstandardcontract.
ANSWER
UnderaFIDICContract,anychangetoaddoromitworkmustbemadebyaninstructionfromthe
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Engineerundertheappropriatesubclause.YoumentionSubClauses51and52,whicharefromthe1987
4thEditionoftheContractforCivilEngineeringWorks.SubClause51.1,item(b)allowstheEngineerto
issueinstructionstoomitwork,butthisisqualifiedbythestatementinbrackets"(butnotiftheomittedwork
istobecarriedoutbytheEmployerorbyanothercontractor)".Yourproposalforthecranerailswould
appeartocontravenethisrequirement.Hencethechangeandpriceadjustmentmayneedtobe
negotiatedbetweenthePartiesandwouldprobablyinvolvelegaladvice.
VARIATIONSEXCEEDING15PERCENTOFTHEEFFECTIVECONTRACTSUM(CLAUSE
52.3)
QUESTION
WeareintheprocessofpreparingaclaimunderClause52.3oftheFIDICConditionsofContractfor
WorksofCivilEngineeringConstructionandareseekingclarificationontheapplicationoftheclause
especiallyasregardstowhichamountdoweapplythepercentagewhichisinexcessofthe15%.Dowe
applyitto:Theeffectivecontractsumor,Thedifferencebetweentheamountscalculatedusingthe
actualpercentagebywhichtheeffectivecontractsumshallhavebeenexceedbyandthe15%.Please
notethatInthisparticularcontract,themajorityofPreliminaryandGeneralItemswerestatedas
provisionalsums(asstatedintheBillofQuantitiesbytheEngineer)itisnoteasyforustoaccurately
determinethecontractor'soncosts.Wehavesinceacquiredacopyofthe"GuidetotheUseofFidlic
ConditionsofContractforWorksofCivilEngineeringConstruction"andtheexplanationgivendoesnot
adequatelycoverus,referpage117oftheguide.Pleaseadviseusonhowthisclauseistobeapplied.
ANSWER
ThepreciseproblemisnotclearandwecanonlycommentingeneraltermsontheinterpretationofSub
Clause52.3.TheSubClauseallowstheContractorandEngineertodiscussandagreealumpsum
additionordeductiontotheContractPricewhentheadditions/deductionsasdescribedat(a)and(b)are
morethan15%ofthe"EffectiveContractPrice".ItwillbeuptotheContractortoprovethechangestohis
Siteandgeneraloverheadcosts.Thedetailsandcalculationofthelumpsumwilldependantonthe
reasonsfortheincreaseordecreasetotheContractPrice.
UNITRATES
QUESTION
1.ThefollowingadditionhasbeenmadeinClause52.2(FIDIC1987,ContractforWorksofCivil
Engineering)inourcontractbytheEmployer:"..ProvidedfurtherthatnochangeintheUnitRatesorprices
quotedshallbeconsideredforanyitemintheSchedulestotheBillofQuantities,unlesssuchitem
individuallyaccountsforanamountofmorethan2percentofthesumnamedintheLetterofAcceptance,
andtheoriginalbilledquantitybymorethan30percent.Notwithstandingabove,forvariationexceeding
10%inquantityofanyitemofBOQwithrespecttooriginalBOQquantities,thefollowingshallapplytothe
unitrateofthatitem:a)ForratesquotedbelowCSR2000rates,nochangeinquotedunitrateshallbe
allowed.b)ForratesquotedaboveCSR2000rates,thequantityexceeding10%fromoriginalBOQ
quantityoftheitemsshallbepaidtothecontractorasperNHACSR2000ratesapplicableintherelevant
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district.ProvidedfurtherthatfornonBOQitemsappearinginNHAsCSR2000,CSR2000ratesshallapply
whereastheratesofnonCSR&nonBOQitemsshallbedeterminedbytheEngineerasstipulatedin
GeneralConditionsofContract."2.TheSituationBOQItemNo.108b(i)Formationofembankmentfrom
roadwayexcavationinRockmaterial(HardRock)andBOQItemNo.106d(i)ExcavateSurplusRock
material(HardRock)hasincreasedupto453%and77.8%respectivelyfromtheOriginalBilledQuantity
andtheseItemsareindividuallyaccountingformorethan2.55%and4.99%respectivelyofthesum
namedintheLetterofAcceptance.Therefore,wedesiretorequesttheEmployer/TheEngineerthatthe
UnitRatesforthesaiditemsasquotedintheBOQfortheentirequantitybechangedandtillthetimenew
ratesarefixed,theprovisionalratesorpricesbedeterminedinaccordancewithCSR2005with25%
Premiumtoenableonaccountpayment.3.Questionsa)Willtherevisionofratesbebasedoncomposite
scheduleofrates2005(CSR2005)with25%premiumasrequestedbyus?b)Aresubparagraphsa
andboftheadditionmadeinthesaidclause(refertopara1above)applicabletousasweconsiderthat
thesaidsubparagraphsarenotrelevanttousbecauseourvariationisover30%.c)WillRevisedRatesbe
applicabletotheentirequantityoronlyonvariedquantity?d)Withsomuchvariation,isitalrighttoaskfor
determinationofProvisionalrates?
ANSWER
Asageneralprinciple,FIDICexpresslyprohibitsusersofitscontractstoaddandadjustClausesinthe
GeneralConditions.AnyadjustmentsandchangesshouldbemadeintheParticularConditions.However,
sinceyourOrganizationmaynotberesponsibleformisuseandbreachofcopyrightweshallattemptto
helpyou.Buthereagain,FIDICisabletoofferadviceoninterpreationofclauses,butofcourseonlyonthe
clauseofthecontractsGeneralConditions,notonsomeoneelse'sclauses.Thissaid,onceagain,weshall
trytobehelpfulontheunderstandingthatinfutureyoutrytoimpressonclientsthattheyshouldusethe
GCscorrectly,andnotrisklegalactionandcontractinvalidityowingtobreachofcopyright.Thechangesto
theGCmeanthattheinterpretationoftheFIDICSubclause52.2maynotberelevanttotheamended
contract.Howeverthefollowingmaybehelpful.a)Impossibletoanswerbecauseofthechangestothe
GC.b)ImpossibletoanswerbecauseofthechangestotheGC.c)Revisedratesarenormallyonly
applicabletotheadditionalquantitybutthisdependsonthecircumstancesandthemakeupoftherevised
rates.IndeterminingrevisedratestheEngineershouldtakeallfactorsintoconsideration.d)The
ContractorisentitledtobepaidforworkdoneinaccordancewithSubClause60.2.Iftherevisedrates
cannotbeagreedintimeforthenextInterimPaymentCertificatethentheEngineershoulddetermine
provisionalratesasthelastsentenceofthefirstparagraphofSubClause52.2.Ifthefinalrateisdifferent
tothisprovisionalratethenInterimPaymentCertificatescanbecorrectedasSubClause60.4.
ADDITIONALSUMFORREPLACEMENTCOST
QUESTION
WearerequestingaclarificationoftheintentionofClause21.1(b)InsuranceofWorksandContractor's
EquipmentoftheFIDICCivilEngineeringConstruction1987(4thEdition)Part1.Thereappearstobea
mixedInsurancemarketviewastowhethertheadditionalsumof"15%ofsuchreplacementcost"for
ProfessionalFees,DemolitionandRemovalofDebrisappliesto:(1)eachofthesecostsindividually,or(2)
asacombinedamount,and(3)whetherthisamountshouldbeappliedasapercentageoflossora
percentageofthesuminsured(contractvalue).OurContractorsarekeentohaveclarification.
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ANSWER
ThewordingofSubClause21.1(b)shouldbeclear.Theinsuranceshallcoverthefullreplacementcostas
(a),plusanadditional15%ofthatfigure.Thisadditional15%istocoveranyadditionalandincidental
costs,INCLUDINGprofessionalfeesetc.ThisfiguremaybechangedintheParticularConditionsandyou
shouldalsorefertotheFIDICGuidetothe4thEdition,atpage72.
EXCESSQUANTITIESOFWORK(SUBCLAUSE52.3)
QUESTION
Iam"TheEngineer"ofProjectandhaverecommendedreratingofcertainitemsofworkunderthe
provisionsofClauses52.2oftheContract.Ihavehoweverfailedtounderstandfromthegivenprovisionis
that:a)TheEngineershallevaluateatthetimeofTakingOver,iftheContractCosthasincreasedor
decreased()15%oftheoriginalcostofcontract,asaresultof:i)allworkexecuted&measuredisin
excessofBOQqualities.b)ThentheEngineershalldeterminesuchfurther"Sum"thatmaybeaddedor
deductedfromthecontractprice,takingintoregardtheContractor'ssiteandgeneraloverheadcostsofthe
Contractbasedupononlytheamountbywhichsuchadditions/deductionswillbeinexcessof15%ofthe
EffectiveContractprice.InmyopiniontheExcessquantitiesofworkhavebeentakencareofbyrerating
underClause52.2andnofurtherSummaybeaddedtotheContract.DoestheClause52.3intendto
applythereratingonquantitiesthataremorethan15%oftheBOQquantitiesthusrerated.Iquotean
example:letusassumethecostofContractasUSD100000.ABOQitemcostingUSD20000isincreased
tovalueUSD50000atcontractrates.HencereratingunderClause52.2becomesapplicable.Onrerating
thevalueof(original+increased)qtyofworkbecomesUSD55000.Nowthetotalvalueofcontract,i.e.,
USD55000.Thevalueofworkbeyond15%ofcontractpriceis$40,000.IstheContractorentitledto
additionalpremiumunderClause52.3forExecutingworkbeyond15%ofContractprice.Isthiswhatis
meantbytheprovisionoftheClause52.3?
ANSWER
Clause52.2referstothereratingofanindividualvariation.Clause52.3referstothesituationwhenthe
totaleffectofallvariations,plustheremeasurementoftheapproximatequantitiesintheBoQresultsinan
increaseordecreaseofmorethan15%.Itispossiblethateachindividualvariationdidnothavea
significanteffectontheContractor'soverheadsbutthetotaleffectofallvariationsandtheremeasurement
wassignificant.ItisnecessarytoconsidertheactualeffectoftheadditionalquantitiesontheContractor's
overheads.Forexample,partoftheallowanceforoverheadsmaybeafixed,orlumpsum,figurewhichis
notrelatedtothequantityofworkwhichhasbeencarriedout.Asubstantialincreaseinthetotalquantityof
workmaynotincreasethispartoftheoverheads.Hence,theoverheadsperunitquantitywoulddecrease.
Theallowanceforoverheadsintherateswouldneedtobereconsidered.AnyreratingunderClause52.2
wouldbetakenintoaccountwhenconsideringClause52.3.TheGuidetotheFourthEditionpublishedby
FIDICgivesusefulguidanceandexamplesatpages115and117.
FREEHAULAGE
QUESTION
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Myinquiryis:aretheiranyguidlinesformaximumFREEHAULAGEdistance...fortheTERMBORROW
materialstobeengagedinEMBANKMENTCONSTRUCTION....sinilarly....whatfreedistancelimitsare
set/providedinFIDICforanytransportationofmaterial....fromBORROW,fromthesiteofe.g.,asphalt
mixingorconcretemixingplanttothesiteofaccomodatingthefinishedproductintheroadconstruction
projects.
ANSWER
TheFIDICConditionsofContractgivethelegalrightsandobligationsofthePartiestotheContract.
Matterssuchasthemaximumfreehaulagedistancewilldependontherequirementsanddetailsofthe
project.Theywillvaryfordifferentprojectsandshouldbegiveninthetechnicalspecificationsand/orbillsof
quantities.
ENFORCINGACLAIM
QUESTION
IamrequestinganinterpretationofClause63.2and63.3oftheFIDICRedBook,4thEdition.a)Whena
ContractorhassumsduetoitarisingoutofavaluationunderClause63.2atthetimeoftermination,and
theEmployer/EngineerdelayscertificationofpossibleclaimsunderClause63.3,howdoesFIDIC
envisagethattheterminatedContractormayenforceitsclaim/obtainthosesumscertifiedbytheEngineer
asbeingduetoit?b)Onceanewcontractorhasbeenengaged,isthedatescheduledforcompletion
underthenewcontractrelevant,andwhenisthenewcontractorliableforfurtherdelaystothecompletion
date?c)IsthereadutyontheEmployerorEngineertoinformthefirstContractorthattheprojecthasbeen
completed?Whenthedefectsliabilityperiodisover?d)IsthereadutyontheEmployer/Engineertoissue
acertificateinaccordancewithClause63.3withinareasonabletime?Whatmaybeconsidereda
reasonableperiodforissuingsuchacertificate?e)WhatarethepossibilitiesforaContractortoobtainthe
moniesdueunderClause63.2iftheEngineerfailstoissueacertificateunderClause63.3.?
ANSWER
Thisisreallyalegalquestion,butthekeyseemstobethatthefirstsentenceofClause67.1saysthatit
continuesaftertermination.Afewadditionalcommentsmaybehelpful.Oneassumestheenquiryis
referringtotheFourthEdition,amended1992,withoutanysignificantamendments.Mattersarisingfrom
terminationunderClause63.1willdependontheprovisionsoftheapplicablelawaswellasFIDICContract
Clauses.Mostlegalsystemsincluderequirementsfortheterminationofacontractandalsocontain
provisionsbasedontheconceptof"goodfaith"whichmaybeapplicable.Anycommentsbasedonthe
FIDICContractmustbereviewedinrelationtotheapplicablelaw,butsomegeneralcommentsmaybe
helpful.a)Clause67.1,firstsentence,saysthatitcontinuesaftertermination.b)Clause63.1enablesthe
Employerto"terminatetheemploymentoftheContractor".TheClauseisclearthatthisdoesnotrelease
theContractorfromanyofhisobligationsorliabilities.SodoesthelawrequirethattheEmployeralsoisnot
releasedfromhisobligations?IfsothenotherClauseswillalsoberelevant.c)Thenewcontractoris
presumablyliablefordelayswhichhecausesandwhicharenotattributabletothepreviouscontractor.d)
Clause1.5,finalsentence,requiresthatanyconsent,approval,certificateordeterminationshallnot
unreasonablybewithheldordelayed.e)Clauses60.6and60.8givetimeperiodsfortheContractor'sFinal
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StatementandtheEngineer'sFinalPaymentCertificate.Clause63.3requirestheEngineertoissuea
certificate,withoutstatingatimeperiod.ByreferencetoClause1.5,thismustbeissuedinareasonable
time.ReasonablemightbebasedontheClause60.6and60.8timeperiodsunlesstherearespecial
circumstances.f)ItcertainlyseemsnecessaryfortheContractortobeinformed,orhisquestionstobe
answered,inorderthatheknowswhentheconstructionandDefectsLiabilityPeriodsarecompleted.g)
TheContractor'srightsandproceduresforobtainingpaymentarecoveredbyClause67andthe
applicablelaw.
NEWRATEORPRICE
QUESTION
WeareaconsultingfirmprovidingContractAdministrationServicestoContractorsinPakistan.While
seekingassistancefromtheFIDICwebsiteFAQSection,wehavecomeacrosstheadviceuponSub
Clause52.2ofRedBook4thEdtionConditionsofContractPartIIstatingthereinthat:theratewhichthe
EngineeragreesorfixesunderSubClause52.2wouldonlyapplytothevariedquantity(increasedor
decreased).TheoriginalquantityisnotpartoftheVariationandwouldbepaidattheoriginalrate.The
rationalebeingusedinconstruingtheSubClause52.2intermsthattheRevisedRatesunderSubClause
52.2willbeappliedtothevariedquantityonlyhascreatedmuchconfusioninsomeoftheongoing
projectswiththeNationalHighwayAuthority,Pakistan.AspertheadviceofFIDICSecretariatFAQSection,
ifforinstance,aContractor'soriginalBOQworkincreasesfrom100m3to140m3,thenheshallbepaidfor
100m3asperoriginalratesandfortheremaining40m3,revisedratesshallbeapplicable.Ifweapplythe
samelogicinacasewheretheContractor'soriginalBOQworkdecreasesfrom100m3to60m3,thenhe
shallbepaidfor100m3asperoriginalquantityofwork.Whereas,forthedecreasedquantity,heshouldbe
paidattherevisedrates(althoughheshallbeactuallyexecuting60m3work.).Thesameistrueforthe
casewhentotalexecutedquantityexceedsbymorethan30%andthenewrateshallbeapplicabletothe
totalexecutedquantity.ThesameClausecannotbeconstrueddifferently.Ifthisdoesnothappen,thenit
shallcauseprejudicetotheinterestoftheContractor.
ANSWER
UnderSubClause52.2,theEngineeronlyfixesanewrateorpricewhentheBOQrateorpricehas
becomeinappropriateorinapplicableforaparticularVariation.Infixingthenewrateorpricehewill
considerthereasonswhytheoriginalrateorpriceshouldbechanged.Hewillnotfixanewrateorprice
untilheknowswhetheritinvolvesanincreaseordecreaseinquantity.Thenewrateorpricewillprobably
bedifferentforadecreasetothatforanincrease.Itmaybedifferentforalargeincreasetoasmall
increase.TheanomalieswhichyoumentionshouldnotoccurbecausetheEngineerwillhaveconsidered
thesesituationsbeforehefixesthenewrateorprice.
NEWBOQRATES
QUESTION
Acontractwasdrawnupforaspecificlengthofhighway.Realignmentwasrequiredwhichincreasedthe
lengthbyafewkilometers.ShouldthisadditionalworkbeincludedinavariationorderasperClause51or
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shouldaseperatecontractbefloated.Thecontractorisaskingforsinglevariationorderwithtwodifferent
refixedrates(forthesameitemofBoQ),oneforthevariationintheoriginalworkandsecondforthe
additionalwork.Idifferwithhisviews.Ifeelthatifonevariationorderisconsideredforthewholeworkthen
onlyonlyonerefixedrateforvariedquantitycanbegiven.Irequireyouradviceonthisissue.
ANSWER
Ifboththechangetotheoriginalworkandtheadditionalworkcamefromthesamechangeofrequirement
andinstructionthenitwouldbeusualtoissueasinglevariationorder.However,itisalsoquitenormalfor
thepricecalculationsforavariationordertoincludedifferentratesforthesameBoQitem.Thecontractor's
costsandthereasonswhytheBoQratesareinappropriatemaybedifferentforthevariedworkandforthe
additionalwork.Itisthenfairerandmoretransparent,tothebenefitofbothparties,tonegotiatedifferent
newrates.
NEWVARIATIONORDER
QUESTION
Acontractwasdrawnforaspecificlengthofhighway.Realignmentwasrequiredwhichincreasedthe
lengthbyfewkilometers.shouldthisadditionalworkbeincludedinavariationorderasperClause51or
shouldaseperatecontractbefloated.Thecontractorisaskingforsinglevariationorderwithtwodifferent
refixedrates(forsameitemofBoQ),oneforthevariationintheoriginalworkandsecondfortheadditional
work.Idifferwithhisviews.Ifeelthatifonevariationorderisconsideredforthewholeworkthenonlyonly
onerefixedrateforvariedquantitycanbegiven.irequireyouradviceonthisissue.
ANSWER
Ifboththechangetotheoriginalworkandtheadditionalworkcamefromthesamechangeofrequirement
andinstructionthenitwouldbeusualtoissueasinglevariationorder.However,itisalsoquitenormalfor
thepricecalculationsforavariationordertoincludedifferentratesforthesameBoQitem.Thecontractor's
costsandthereasonswhytheBoQratesareinappropriatemaybedifferentforthevariedworkandforthe
additionalwork.Itisthenfairerandmoretransparent,tothebenefitofbothparties,tonegotiatedifferent
newrates.
INSTRUCTIONSTOVARYTHEWORKS
QUESTION
Weareexecutingaconstructionworksproject(18floortower),nowthereisanadditionoftwomorefloors.
Iwouldliketoknow...thisadditionwouldbedealtasavariationorseparatecontractrequired,wherewe
willhavethelibertytorevisetheprice,sincethistwofloor'sadditionislessthanthe25percentofthe
contractvalue,hencewedonthaverighttoincreasetheprice,inceaseifwedealitbyvariation.please
clarify.
ANSWER
Clause51.1allowstheEngineertoissueinstructionstovarytheWorks.Yourquestioniswhetherthe
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additionaltwofloorsarejustachangetothequantityoftheworkwhichisincludedintheContract,as
Clause51.1(a),orareoutsidethescopeoftheWorks,whichshouldbedefinedintheContract.The
answertoyourquestionthereforedependsontheexactwordingoftheContractAgreement,theother
contractdocumentsandperhapsalsotheTenderDocuments.Itwillalsodependontheinterpretationof
thiswordinginaccordancewiththeapplicablelaw.ThisisnotsomethingwhichFIDICcananswerandyou
shouldobtainspecialistadvice.
FIXINGOFANEWRATE(RED4:52.2)
QUESTION
WerequestedfortheclarificationregardingrepliestoacoupleofquestionswhichappearattheFAQ
SectionofFIDICwebsite.ReplytothefirstquestionillustratesthatunderSubClause52.2,Engineermay
fixanewrateorapriceiftheBOQratebecomesinappropriateorinapplicableforaparticularvariation,
keepinginviewthereasonsforthechange.Inreplytothesecondquestion,FIDICsaysthattheoriginal
quantityisnotapartofthevariationandcannotbepaidattherevisedrate.Repliestothequestionsas
notedabovearecontradictorytoeachotherandwethinkthatthemattershouldfurtherbeclarified.Our
elaboratenote,whichwassubmittedtothiseffectconstitutesofourunderstandingoftheClause52.2of
theRedBook4thEdition.ThedefinitionofthevariedworktricklestotheClause52.2fromtheClause51.1,
whichgivesthedefinition/scopeofthevariedworkasfollowing:(a)increaseordecreasethequantityof
anyworkincludedintheContract,(b)omitanysuchwork(butnotiftheomittedworksistobecarriedout
bytheEmployerorbyanothercontractor),(c)changethecharacterorqualityorkindofanysuchwork,(d)
changethelevels,lines,positionanddimensionsofaypartoftheWorks,(e)executeadditionalworkof
anykindnecessaryforthecompletionoftheWorks,(f)changeanyspecifiedsequenceortimingof
constructionofanypartoftheWorks.Thegivendefinitionthusholdsthatthevariedworkmaynot
essentiallycompriseofonlythechangeinthequantityofcertainitemincludedinthecontract.Variedwork
mayalsoariseoutofthevirtueofotherreasonsasnotedabove.Hence,restrictingthedefinitionof
variationonlytothechangeinquantitymaynotbeappropriate.ThereplygivenattheFIDICwebsitetothe
firstquestion,ashasbeenreferredabove,seemstoholdthesameviewbythevirtueofwhichthedecision
tothiseffecthasbeenlefttotheEngineer.However,thereplytothesecondquestionforwardsrathera
restrictiveinterpretationoftheClause52.2bysayingthatanewratewouldapplyonlytothe
increased/decreasedquantity.Suchaninterpretationfallsincontradictiontothedefinitionofthevaried
workaswellastheopenendedspiritoftheFIDICDocumentingeneralandthatoftheClause52.2,read
inconjunctionwiththeClauses51.1,51.2and52.1therebefore,aswellasthatoftheClauses52.3and
52.4thereafter......FIDIC'sinitialreply:FIDICcanonlycommentingeneraltermsontheinterpretationofa
FIDICclause.Ifyourequireamoredetailedopinionontheapplicationofaclausetoaparticularproblem
situationthenyoushouldconsultaspecialist.Theexamplesinyourletterillustratethewiderangeof
situationswhichmayariseonaprojectandresultintheapplicationofClause52.2.Forthisreason,the
clausecannotrestricttheEngineerinthewayhecalculatesanewrate.TheEngineerisawareoftheexact
situationandsocanmaketheappropriatedecisiontosuitthewordingandapplicationoftheVariation.A
Variationnormally,butnotalways,onlyappliestoworkwhichhasnotyetbeenexecuted.Ifsomeworkhas
alreadybeencarriedoutonthesamebasisaswasenvisagedfortheoriginalbillratethenthatworkwould
normallybevaluedatthebillrate.HoweveraparticularVariation,suchasadecreaseinquantity,maybe
wordedinsuchawayastorequireadifferentapproach.........Yourreplyalsonarratesthatour
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understandingoftheissuefallscloselytoacertainprojectspecificlegalopinion.Webelievethatsucha
concurrenceonthematterhasbecomeevidentonlybecauseoftheproperunderstandingoftherationale.
Thisparticularlyholdswhenwealsoconsiderthepossibilityofvariationbecauseofthedecreaseinthe
quantityofcertainitemsofwork.Nologicwouldallowthatthedecreasedquantitywhichisnotexecuted
maybepaidatsomerevisedratefixedbytheEngineer.Therevisedratewouldcertainlyapplytothe
quantityexecuted.TherationalethusdemandsthesametreatmentforfixingoftheratebytheEngineerin
caseofvariationinthequantityofcertainitemsoftheworkbecauseofanincrease,givinganobvious
reasonofourunderstandingofthematterinlinewiththelegalopinioninthesimilarcontext.Yourreply
dated7thJune2007furtherseemstoacknowledgethattheexactsituationundersuchacasemayonlybe
determinedbytheEngineerthroughanappropriatedecision,ashasbeenprovidedunderthespiritofthe
FIDICDocument.However,thecommentsthereafter,onceagainseemtorestrictthedefinitionofvariation.
So,tocontinue:regardingfixingofanewrate(Red4:52.2)Regardingourqueryregardingreratingofthe
variedquantity.WeseektheclarificationregardingtheopinionofFIDIConreratingofthevariedquantity,
asshownintheFAQSectionoftheFIDICwebsite.Ourdebate/discussionasappendedwithourqueryis
onlymeanttoexpressourunderstandingthattheSubClause52.2onlytalksofthe"variedwork"andnot
the"variedquantity",which,however,remainssubservienttothedefinitionof"variedwork".Theactual
intentionofourquerythusremainstoseektheclarificationinlightoftheSubClause52.2ofCivilWorks
contract4thEdition,1987.Tothiseffect,itmaybedeemedappropriatethatthewritersofthisparticular
clauseortherelatedbackupmaterialmaybeconsultedsothattheambiguityortheconfusion,ashas
arisenregardingthevariedworkthroughtheopinionofFIDICintheFAQsection,mayberemovedandthe
prestigeoftheorganizationlikeFIDIC,whichisconsideredasanapexbodyincontractadministration,
wouldbemaintained.
ANSWER
Thankyouforyourmoredetailedexplanationofyourquery.Ourrepliestopreviousquestionswerein
responsetoparticularquestions,whereasyourquestionisratherdifferent.Youare,ofcourse,correctthat
VariationsunderSubClause52.1cancoverawiderangeofsituations,includingchangestothenatureas
wellastothequantityofanitemofwork.Forthisreason,SubClause52.2mustbegeneraltocoverthe
widerangeofpotentialsituations.ItisthenfortheEngineertoassesstheparticularsituationandtoagree
orfixanappropriaterate.Indecidingthequantum,andalsotheapplication,ofthisratetheEngineerwould
takeintoaccounttheconsequencesofachangeinnatureaswellasachangeinquantity.Youshouldalso
notetheexplanatoryremarksintheFIDICGuidetotheuseoftheFIDICConditionsofContractforWorks
ofCivilEngineeringConstruction.SubClauses52.1and52.2arereviewedatpages114and115ofthe
Guideandincludethestatement:Ifthenatureoramountoftheworkinvolveddifferssomuchfromthat
includedintheoriginalContractthattheratesandpricesarerenderedinapplicable,itistheEngineer's
tasktoagreeappropriateratesandpriceswiththeContractor,or,ifagreementcannotbereached,tofix
theratesandprices.Wetrustthisfurtherexplanationwillansweryourquery.Anyfurthercommentswould
requiredetailsofthespecificcontractandproblem,whichFIDICcouldnotconsider.
UNDUEDELAYFORCLAIMS
QUESTION
Canyoupleaseidentifywhatismeantby"withoutunduedelay"underRedBook4thEditionclause44.3
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consideringthattheContractorandtheEngineerhavemutuallyagreed,undercl.44.2(b),tosubmit
detailedparticularseveryfirstweekofthemonthandnotingthateverymonththecontractorissubmitting
thesame.Whatisthedurationneededbyengineertoprovidehisinterim/finaldeterminationofextension
oftimeclaimsunderthisclause?
ANSWER
YourquestionreferstoSubClause44.3intheRedBook,FourthEdition1987.SubClause44.2has
imposedtimelimitsforthesubmissionofinformationbytheContractor,whichyousayhavebeenagreed.
FIDICdoesnotimposeatimelimitontheEngineerbecausetheactualtimeneededforhimtomakehis
determinationwilldependonthecircumstancesandthedetailsintheinformationprovidedbythe
Contractor.Howeverthe"withoutunduedelay"emphasisestheneedforthedeterminationtobemadeas
soonaspossible.SubClause1.5alsorequiresthatanydetermination"shallnotunreasonablybewithheld
ordelayed".ThisgivestheContractortheopportunitytoraiseaqueryifheneedsthedeterminationin
ordertoplanhiswork.
PAYMENTONACLAUSE63.2VALUATION
QUESTION
ConcerningClause63.2and63.3oftheFIDICRedBook4thEdition.TheContractwasterminatedbythe
EmployerpursuanttoClause63.1(thisisundisputed).Itwasagreedthattheadditionalcoststothe
Employerofexecutingtheworksbyanalternativecontractorhastobedeductedfromthevalueofthe
worksexecutedbythefirstContractor.ThewordingofClauses63.2and63.3wasnotchangedor
amended.ContractornowrequestsapaymentfromtheEmployercalculatedpursuanttoaClause63.2
valuation.InadditionContractorstatesthatthewholeoftheWorkshasnotcompletedand,therefore,the
DefectsLiabilityPeriodhasnotexpired,whichisaprecedenttoanycertificationofEmployer'scostsunder
Clause63.3.Therefore,anEmployer'sapplicationforClause63.3costsispremature,cannotbe
consideredandContractorisentitledtorequestapaymentbasedonthecalculatedClause63.2valuation
withoutanydeductionpursuanttoClause63.3.a)Isacontractorentitledtoaskforapaymentbasedona
Clause63.2valuation,sinceanemployerisnotobligedtomakeanyfurtherpaymentuntiltheexpirationof
theDefectsLiabilityPeriod?b)IsitcorrecttointerpretthatContractor'srequestforpaymentbasedon
Clause63.2isnot(currently)justifiedalsoincases,whereacompletionoftheprojectwasdelayeddueto
circumstancescausedbyanalternativecontractorortheemployer,iftheterminatedandrequesting
Contractoritselfhasformallyandexplicitpleadedthatthewholeprojectisnotcompletedwithout
complainingthedelayofcompletingtheprojectcausedbythealternativecontractorortheemployer?c)
CantheContractorsimultaneouslyrefertoandrequestaClause63.2calculatedclaimandreject(alleged)
unmaturedEmployer'sClause63.3costs,ifbothclauseswereagreed?
ANSWER
Thisisacomplextechnical/legalquestionarisingfromaspecificrequestbytheContractoronyourproject.
FIDICcanonlyanswergeneralquestionsofinterpretationandcannotcommentonspecificrequestsor
claims.TheFIDICGuidetotheFourthEditionstatesatpage146forSubClause63.3:"IftheEmployer
terminatestheContractor'semployment,heisnotliabletopaytheContractoranyfurtheramounts
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(includingdamages)untiltheexpirationoftheDefectsLiabilityPeriodandthecertificationbytheEngineer
ofthecostofexecutionandremedyingofanydefects,damagesfordelayincompletion(ifany)andother
expensesincurredbytheEmployerasaresultoftheContractor'sdefault."
WHENISPAYMENTMADE
QUESTION
Weareseekingadefintionastowhenpaymentisactuallymadebytheemployertothecontractor.Isit
whentheemployerissueshispaymentinstructiontohisbank,orispaymentdeemedtobemadeoncethe
moniesarereceivedinthecontractor'sbankaccount.ArethereFIDICguidelinesonthismatter?
ANSWER
yourqueryisreallyagenerallegalquestionaboutwhenapaymentis"made",ratherthanaquestionof
interpretationofaFIDICcontract.Theanswermaybedifferentunderdifferentjurisdictions.Youshould
consultalawyerwithexperienceoftheapplicablelaw.
STATUTORYDECLARATION
QUESTION
MyfirmisexecutingaContractwithFIDICtermsandconditionsandIrequireaStatutoryDeclaration
documentforinternationaluse(ProjectlocationisMadagascar).CanyoupleaseadvisewhereIcanfind
thisinyourdocumentation,orbetteryetcanyouemailmetheappropriatedocument.
ANSWER
YourStatutoryDeclarationwouldseemtoconflictwiththeprinciplesoftheFIDICContracts.Progress
paymentsarereferredtoas'interim',whichsuggeststhattheyareprovisionalandnotfinal.EPCTSub
Clause14.6allowstheEmployertomakecorrectionsormodificationstopreviousamountsconsidered
due,whichsuggeststhattheContractorcanrequestmodificationstoapreviousvaluation.Itisonlythe
requirementfortheApplicationfortheFinalPayment,asSubClause14.11,whichuseswordsindicating
finality.TheContractorthenconfirmsthefinalitybyhisDischarge,asSubClause14.12.Theequivalent
provisioninthe1987RedBookwasSubClause60.7.TheStandardLetterforthatSubClausemerely
repeatedthewordingoftheSubClause.However,thiswasacontractualletterandnotaStatutory
Declaration.AStatutoryDeclarationwillpresumablybeissuedbytheGovernmentandwilldependonthe
requirementsoftheapplicablelaw,whichwillvaryfordifferentcountries.
FINALANDBINDINGDABDECISION
QUESTION
Inthe1992reprintedversionofthe1987FIDICConditionsaswellasinthe1999FIDICConditionsitis,in
therelevantDABClauses,statedthattheContractor,EmployerandEngineershallgiveeffectforewithto
everydecisionoftheBoardunlessanduntilthedecisionisrevisedinanamicablesettlementoran
arbitrationalaward.OntheotherhanditisstatedthataBoarddecisionbecomesFINALandBINDING
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unlesseitherpartygivesanoticeofdissatisfactionwithin28daysafterreceivingtheBoarddecision.Avery
basiclegalprincipleisthatonlyfinalandbindingdecisionsareenforceable.AretheFIDICconditionsreally
basedontheveryunusualprinciplethattheEmployerhas,onbasisofununbindingBoarddecision,topay
totheContractoracompensationwiththeconsequenceofrunningtheriskofneverbeingabletorecover
thepaidamountfromaforeigncontractorwhentherevisedarbitrationawardisissued(long)afterthe
completionoftheworks.PleaseclarifywhethertheEmployerhastopayamonetarycompensationon
basisofaBoarddecision,whichisNOTFINALANDBINDING.
ANSWER
SubClause20.4ofthe1999ContractsisclearthatbothpartiesshallpromptlygiveeffecttotheDAB
Decision.TheEmployermustpayanysumawardedtotheContractoralthoughthesumtobepaidmaybe
changedbyalateramicablesettlementorarbitration.IfaNoticeofDissatisfactionhasbeenissuedthen
thedispute,nottheDABdecision,maybereopenedandfinallydeterminedbytheArbitralTribunal.The
sumtobepaidmaythenbeincreased,ordecreased,andadditionalmoneymayneedtobepaid,or
moneymayneedtoberepaid.AnArbitralAward,includingsuchfurtherpaymentorrepayment,wouldbe
FinalandBindingandwouldbecoveredbyarbitrationlawandtheNewYorkConvention.Itisnormal
practicethataDABorAdjudicator'sDecisionisBindingandsomustbepaid,butisnotFinalandsomay
bechangedinthisway.IfnoNoticeofDissatisfactionhasbeenissuedthentheDABDecisionbecomes
FinalaswellasBindingandthedisputecannotbereopened.
LUMPSUMCALCULATION
QUESTION
Canyoupleaseadvisehowtocalculatethelumpsumtobeaddedordedcutedtothecontractpricewhen
theeffectivecontractpriceexecceds15%.Inaddition,pleaseadviseonwhendowededuct,andwhendo
weaddsuchamount.
ANSWER
Commentaryatpage117oftheFIDICGuidetothe4thEditionisrecommended.TheGuideexplainsthat
someoftheContractor'soverheadcostsareincludedintheratesforitemsofworkandothersareincluded
inseparateitemsintheBillofQuantities.Changestotheactualquantitiesmaymeanthattheoverhead
contentofitemswhichhavepaidisnotappropriatetotheactualoverheadcostsincurredbythe
Contractor.InordertocalculateanyadjustmenttheEngineerwillneedtoobtaininformationfromthe
Contractor,orwouldhavetomakehisownassessment.Anycalculationmusttakeintoaccountany
adjustmentwhichhasalreadybeenmadeunderanotherSubClauseandonlyappliestoanyincreaseor
decreaseinexcessof15%oftheEffectiveContractprice.TheSubClausestartswithareferencetothe
situation"ontheissueoftheTakingOverCertificateforthewholeoftheWorks".Itisalsonecessaryfor
thevalueofvariationsandotheradjustmentstohavebeenagreedinordertomaketheSubClause52.3
calculations.Anyadditionalpaymentordeductionwouldthenbemadeinthenextpaymentcertificateafter
thefigureshavebeenagreedordetermined.
NEWRATEFORANINCREASEDQUANTITY
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QUESTION
Iam"TheEngineer"foraroadconstructionproject.Adifferenceofopinionhasarisenontheapplicability
ofnewratesfixedbytheEngineeronthequantities,i.ewhetherthenewratewillbeapplicableonlyonthe
enhancedquantitybeyondtheoriginalBoQquantity,Ooritshallapplyontheentirequantity.Toexplain
thisfurther,theBoQquantityforpileswas2000cum.Thedesignerincreasedthenumberofpilessothat
thequantitybecame3000cum.TheEngineerfixedanewrateforpileworkfromXtoY.WillYratebe
applicabletoenhancedquantityof1000cum,orshoulditapplyto3000cum?
ANSWER
FIDICcanonlycommentingeneraltermsontheinterpretationofaFIDICclauses,anditshouldbenoted
thatfortheapplicationofaclausetoaparticularproblemsituation,oneshouldalwaysconsultaspecialist.
Withthatbeingsaid,ingeneral,SubClause52.2givesthepowertotheEngineertofixnewratesand
statestheconditionswhensuchnewratesmaybefixed,butSubClause52.2doesnotindicatea
calculationmethodortheapplicabilityfornewrates.ThereasonforthisisbecauseSubClause52.2must
allowforcoveringawiderangeofpotentialsituations.So,althoughitistruethatrevisedratesarenormally
onlyapplicabletotheadditionalquantity,itisfortheEngineertoassesstheparticularsituationand
circumstancessurrounding,andtotakeallfactorsintoconsiderationinmakinghisdeterminationregarding
thequantumandapplicabilityofthenewratesfixedunderSubClause52.2.Forreference,seepage127
128oftheFIDICRedBookGuidetotheuseoftheFIDICConditionsofContractforWorksofCivil
EngineeringConstruction,andpleasenotethattheaboverepresentsageneralansweronly,andspecific
advicetotheparticularfactssurroundingyoursituation,werecommendthatyouconsultaspecialist.
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