Expert: Bogdan Oprea - 1/17/2012

Question
Dear Sir,
A Contract under FIDIC MDB version 2006 for construction of a highway.The Particulat Conditions of Contract s.cl. 4.2 states that the Contractor has to provide a performance security at his own cost. The BOQ has a provisional sum of 20Mn for performance Security. The priority of documents is PCC over the BOQ. The Contractor claimed cost of providing the PS. The Engineer rejected the claim. Is the Engineer correct in rejecting the claim ?
Thanks in advance
Mututantree

Answer
In order to answer to your question I assume that the provisions of the Sub-clause 1.5 remain unchanged, meaning that the priority of the documents is:
(a)   the Contract Agreement (if any),
(b)   the Letter of Acceptance,
(c)   the Letter of Tender,
(d)   the Particular Conditions,
(e)   these General Conditions,
(f)   the Specification,
(g)   the Drawings,  and
(h)   the Schedules and any other documents forming part of the Contract.
What we can see is the fact that above the Particular Conditions we have Letter of Tender, Letter of Acceptance and Contract Agreement.
On the other side what is a contrac?
A Contract is a legaly binding agreement in which there are establisher rules and obligation of the Parties.
What are the elements of the Contract?
I shall develop just one and this is offer and acceptance.

The Conclusion is:
The Contractor offer his services for a certain price in which the cost of Performance Security was included in letter of Tender and the Employer accepted it in the Letter of Acceptance or in the Contract Agreement which are above particular conditions
What should have happened is that during the tender the Employer should have asked clarification or desqualify the Contractor. But after he signed the contract is not possible
Therefore the Engineer is wrong in his assumption,.
Hope it helps