Construction Law/FIDIC Clause 7.6
Our project follows the FIDIC 99 Red Book Contract, and due to Contractor's failure in executing some works, the Owner omitted them from their scope and employed another contractor to undertake the works, under Clause 7.6.
Consequently, the owner-employed contractor is delayed in their works, which has hindered the original contractor from finishing their scope because some of it depends on the works that were omitted from their contract.
My questions are:
1. As per Clause 7.6, the contractor shall pay the owner all costs arising from their failure. This includes omission of the item from the contractor's BOQ. Can the owner also deduct the amount they paid to the replacement contractor? So the omission from the contract would be the BOQ item PLUS the cost of doing works with another contractor, or would that be a duplicate deduction?
2. Seeing as the owner-employed contractor is delayed and consequently delayed the main contractor, does that entitle the main contractor to an extension of time? Or is he still responsible for the works and hence for all delays encountered even if by others?
Firstly I would assume that the Engineer's decision to implement clause 7.6 was properly justified and executed in accordance with the provisions of the contract.
With respect to the Contractor paying all costs arising from their failure, this should be categorized as follows:
(i) The costs for any removal or demolition of works not in compliance with the specifications.
(11) The cost for any testing of materials which does not comply with the specifications.
(iii) The cost for the Engineer to pay the new contractor to carry out the works. This is where the Engineer can deduct monies from the main contractor's contract [from the item in the BOQ]to compensate as payment to the new contractor. This technically is a trade off and should not be a duplication of deductions. However, the amount paid to the new contractor must be within a reasonable cost for the works completed. This payment must not be an inflated amount that is above market rates. No deductions should be made from the main contractor for any additional works performed by the new contractor which was not part of the original contract.
With respect to the effects of "time" in this scenario, whatever delays which may have been caused by the main contractor before the new contractor was introduced (if existing), should be noted and quantified by the Engineer. Then whatever delays are caused by the new contractor should also be identified quantified and claimed by the main contractor under clause 20.1 for extension of time including associated prolongation cost (within the 28 day period he became aware or should have became aware). Determination of these delays should be made by the Engineer within the procedural guidelines of the contract.
Please note that the main contractor is still responsible for the contract works and is entitled to legitimate delays caused by external entities.
I hope this answers your question