You are here:

Construction Law/Variation for Lump Sum Contract

Advertisement


Question
We are using FIDIC Yellow Book in a lump sum contract. There is an item in our contract for the supply of an equipment. The contract specified an old model. We proposed a new model, which is better. This was accepted by the Consultant more than a year ago without any condition and it has been installed now.

Now the client want us to give a cost breakdown to determine any cost difference between the 2 models and say that any cost saving shall be for the benefit of the client. We refused to give breakdown as this is a lump contract, is this correct? Otherwise please advise.

Answer
Dear Wong,

You should have no worries, provided that you followed the procedure set out in clause 13.2.  If the Employer feels that he should have a reduction, then he must discuss it with The Engineer, who may have exceeded his authority is accepting your proposal.  I am sure that you can provide a cost breakdown showing that the new model was more expensive but easier to procure, and that you accepted the extra cost due to time savings or something similar.  

Lump sum contracts should state performance specifications not method specifications.  Then the  Contractor is free to choose the best equipment which complies with the performance specification.  

Construction Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


Peter M. Elliott

Expertise

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.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

Organizations
Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

Education/Credentials
B Sc(Hons) in Civil Engineering

©2016 About.com. All rights reserved.