Construction Dispute Resolutions/Way of Recovery of Discount offered
Dear Mr. Sivaraman,
Conditions of Contract: FIDIC for Work of Civil Engineering Construction - Fourth Edition 1987
Reprinted 1988 with editorial Amendment only.
Reprinted 1992 further Amendments.
At the Time of Tendering, the Contractor has offered Discount as per the guidance provided in the Contract which is a Civil Engineering Project.
It was to be applied to the Tender Sum Less Provisional Sums in the Grand Summary indicating the percentage and Total Sum of the Discount.
When Prov. Sums are excluded from the Tender Sum, only the value of BOQ items are left behind to which only the Discount was offered.
There was no way of recovery of Discount in the Contract specified and the Tenderers also had nod been requested to specify the way they want.
Mentioning that this Contract is Measure and Pay Contract, Recoveries are made from even exceeded quantities in re-measurement and Contract Variations too.
Our argument is Discount is to be recovered only from the quantities of BOQ items available at the time of Tendering. The exceeded or reduced quantities obtained in re-measurement and variations are not entitled to receive Discount.
Dear Mr Basil,
I refer to the following facts conveyed by you,
The discount is to be applied on the contract sum less provision sum.
The discount is indicated as % of contract sum and in absolute value. (So, it is NOT a lump sum discount)
The contract model is the re-measurable item rate contract. (So the contractor is aware that the BOQ quantity and the final contract sum shall vary as per the actual execution)
From the above facts, it is appropriate and logical to apply the discount on the final contract sum (less provisional sum). this would include exceeded or reduced quantities and variations. When the contractor enjoys the benefits of quantity variation, he should be prepared to give discount on the revised BOQ quantities. imagine a condition that the final quantities of all the items are less than the tendered quantities, will the contractor still claim to apply the discount as per tender BOQ?
your argument would be correct ONLY if the contractor had given the discount as a lump amount to be deducted irrespective of quantity variations.
hope I have clarified your question.
-- r sivaraman