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Construction Law/Transportation costs

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Question
Dear Sir, thenk you very much for your previous resourcful answer.
I would like to ask another question and I appreciate you opinion on that.
For placement of Subbase course the unit rate is $12.20 per 1m2 (includes transportation, spreading and etc.). The material for subbase (crushed stone sand mix) is specified to deliver from a quarry located between 150-200 km as shown in the contract and design. However the Contractor to save money and time has found a quarry located nearby the project site, 27 km from the job site. It is clear that the contractor is saving money for himself due to reduction in material haulage length. The Employer, taking account of this wants to benefit from this situation. What do you think can the Employer 1) cut the unit price becuase a reduction in haulaga length from 200 km to 27 km or 2) should the Employer keep the unit price unchanged (the Contractor protesting against the cutting of $12.20 despite a decrease in the delivey length) 3)what can be done to save money for the Employer also and not get another claim from the Contractor.
I hope I was able to describe the situation.  

thank you.

Answer
Hello Mansur,

Thank you for the question – it is very succinct and well stated.
1) Can the Employer cut the unit price because of the reduction in haulage length from 200 km to 27 km?  
Answer-1:  If the Contract does not have the provisions for value engineering or for the profit sharing, rewarding the Contractor for money saving initiatives under this Contract, the Employer can’t cut down the unit rate just because the Contractor, through his own effort, was able to find a more economical solution in locating the supply quarry closer to the site.  From you question, it appears that the Contractor has secured a supply quarry with material fully compliant with the requirements of the project.  If the material from 27-km quarry is indeed fully compliant with the requirements of the Contract, the Employer must pay the agreed unit price based on 200-km supply quarry, as this is what parties agreed to.  The Engineer/Employer can’t unilaterally fix, or “re-negotiate” the price post factum, based on the actual lower costs incurred by the Contractor.   If, however, the Employer tries to “fix” a lower price, as I have seen in the past practice, the Employer may likely find itself in breach of contract action filed by the Contractor in relevant court or under arbitration provisions of the Contract.  Absent any other complications, or other facts relevant thereto, the Contractor is likely to prevail in such action in any arbitration or litigation forum, absent, of course, bias of the court, bribery, rigged proceedings, etc..

2) Should the Employer keep the unit price unchanged (the Contractor protesting against the cutting of $12.20 despite a decrease in the delivery length?
Answer-2:  YES, unless both parties agree to re-negotiate the rate down.  On any bi-lateral contract, the agreement to vary the rate – up or down - must be bi-lateral as well.  

3) What can be done to save money for the Employer and not get another claim from the Contractor.
Answer-3:  The only thing the Employer can do is to AMICABLY agree with the Contractor to vary the unit rate down.  The Contractor will seek to maximize his ‘reward” for his ingenuity (and that is what low bid contracts tend to encourage the Contractor to do), while the Employer may also share the savings from a lower rate.  As stated above, this can only be based on mutually agreeable basis.
Although I have seen many instances where the Engineer colludes with Employer and partakes in Contractor bashing trying to win his next commission from the same Employer by unilaterally “fixing” lower unit rates based on the actuals expenses incurred by the Contractor – and in the Middle East Employers and Engineers often get away with these tactics – this may severely backfire on the Employer and the Engineer, because together with the “unpaid” amounts underpaid under the terms of the Contract, the Contractor may seek additional awards for Engineer’s administration practice under collusion with the Employer, or in “bad faith.”

I hope the answer is helpful to your understanding of these issues and responsive to your questions.

Respectfully,
Gerry Sverdlin, PE, Esq.

Construction Law

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Gerry Sverdlin

Expertise

Questions I can answer or provide assistance to reflect the following subjects: contract terms and conditions, interpretation of ambiguity, construction management and practices, claims for costs and time, variation / change orders, disputes, dispute resolution techniques and organizations, claims for extra work or materials, delay analysis, disruption or interference, defective design and negligent supervision, construction risks and mitigation, warranties and insurance. Questions I can NOT answer: too numerous to list here.

Experience

Mr. Sverdlin provided over 20 years of services in dispute resolution and expert opinion of complex construction claims for extra work, delay & acceleration, defective design & installation, unauthorized deviations, differing site conditions, productivity loss, labor & material shortage, owner’s interferences, force majeure, bonding, warranties and insurance coverage. Mr. Sverdlin participated in dispute resolution proceedings regarding 10 mile sub-aqueous outfall tunnel at Deer Island Treatment Plant – Boston Harbor Project, and claims arising out of construction of the South Boston / South Bay Interchanges for the Central Artery/Tunnel Project in Boston, Massachusetts, USA, and multiple proceedings Middle East. Specialties: Mr. Sverdlin established expertise in construction contract preparation under EJCDC, AIA, FIDIC and agency-specific bespoke contract frameworks: procurement administration, resolving defects in scope of work coverage, specification and estimates, change order processing, project controls & cost recovery. Engineering practice encompasses design & procurement management of highway & rail transportation systems, wastewater treatment and drainage networks, key performance indicator regimen.

Organizations
2011 - CIArb Member Grade 1999 - Attorney at Law – Massachusetts Bar, BBO # 642980 1992 - Registered Professional Engineer - PE: Lic. MA-36839 - Civil Affiliated Memberships: MBA - Massachusetts Bar Association DRBF - Dispute Review Board Foundation TASA - Technical Advisory Service for Attorneys

Education/Credentials
2010 - 2011 - American University in Dubai -Grad. Sch. of Business Administration Construction Contracts, Means & Methods, Claims & Changes, Project Controls March 2009 - Chamber of Commerce, Colombo, Sri Lanka – Construction Management Seminar Changes & Claims, EOT/Delay Damages, Loss of Productivity – Measured Mile 2000- 2007– Boston Architectural Ctr & Wentworth Inst. of Technology - Construction Law 1991- 1993 - Northeastern University, Boston, MA – Land Surveying, Sewage Disposal System Numerous continuing education specialty courses Suffolk University Law School - Juris Doctor, law -1993 – 1997 Northeastern University - MS, Construction / Public Works Management - 1993 Polytechnic University - BS, Civil Engineering 1982 – 1985

Past/Present Clients
Representative Projects Dubai International Airport UAE Muscat & Salalah Int'l Airports Oman South River Dredging Mechanical Scituate, MA Permitting / Boundary Dispute (Title V) Worcester, MA Hazardous Material Site Assessment New Bedford, MA Groundwater Pollution Monitoring Burlington - Woburn, MA Hazardous Material Disposal - Site Clean-up Wrentham, MA Sewer Rehabilitation Project – STEP Abu Dhabi, UAE Dubai Metro - Road & Transportation Authority, Dubai, UAE Boston Harbor Project - Deer Island MWRA - BHP Winthrop, MA 1,200 MGD Waste-Water Treatment Plant Doha North Sewerage Treatment Works Ashghal, Doha, Qatar 254K m3/d STP, 25-km triple force mains, 33-km Interceptor Sewers 10,000 l/s PS Central Artery / Tunnel Project - MHD / MTA Boston, MA 116 lane-miles Old Colony Railroad - Commuter Rail (Boston, MA 70+ mi) Cherry St. Reconstruction Full-Depth Bridgewater, MA 2.1 mi Scenic Roads Reconstruction Town-wide Wayland, MA 8.7 mi Strawberry Hill Rd Reconstruction Full-Depth Concord, MA 1.7 mi Craigsville Beach Rd Reconstruction Full-Depth Hyannis, MA 3.4 mi Water Main Replacement Southborough, MA EMAAR – Gulf III Towers, Dubai, UAE Mixed-Use Hi-Rise Peabody Properties Residential Hi-Rise Lynn, MA Bristol Properties Shopping Mall Attleboro, MA May Institute (children w/special needs) Institutional Randolph, MA Bear Hill Executive Park Commercial Waltham, MA Prospect Hill Executive Park Commercial Waltham, MA Residential Community Subdivision 128 lots Hopkinton,MA Retirement Community Subdivision Residential – 126-lots Warren,MA Independence Mall Retail Kingston, MA Mashnee Village Subdivision Residential – 54-lots Buzzards Bay, MA Hyannis Industrial Park Heavy Commercial

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