Construction Law/Inclusiveness of Day Rates in a Lump Sum Contract
QUESTION: Dear Femi,
I am working in a project governed by a Lump sum contract, my company is Subcontractor for Construction and there is a Main EPIC Contractor who is doing the E, P & Commissioning.
My question is, despite the "No interparty claims" as well as various protective in clause with respect to engineering & procurement delays & faults, we have a mechanism for additional works which has unit rates and Day rates to evaluate it, however, in the description of “Construction personnel Day Rates” and “Equipment Day rates” the below is stated:
"The rates for labour shall include for the cost of wages, accommodation, messing, all
insurance required in the General Conditions of Subcontract, all indemnities and
additional payments required under any laws, resolutions or orders of the State of Qatar
relating to the employment of labour, recruiting, transport and repatriation of expatriate
labour, transporting labour to and around the construction site, site supervision and staff
(including but not Limited to engineers, site agent management, head of office
management, general foremen, other foremen and charge hands, timekeepers, surveyors
and clerks), small tools (including but not limited to picks, shovels, barrows, trowels
ladders, hand saws, buckets, chisels, screwdrivers, hand-held instruments and all items of
a like nature), head office and other overhead charges and profit, and other costs and
charges not specifically detailed above but are required for Subcontractor to undertake
The reference table for Manpower in the Subcontract includes Foreman, Charge Hands, Operators etc., however, the client deducts the same on the grounds that they are included in the rate as described above.
Please advise if there is a justifiable basis for Subcontractor to claim those trades other than the fact that they are mentioned in the reference table, which the Contractor justify by answering that those are mentioned in case we request manpower supply.
You feedback is appreciated in advance.
ANSWER: Dear El Khatieb,
Thanks for your question.
From the description of what constitutes the unit rate for labour on the project, it is convincing that the rates is all-inclusive for wages for all the tradesmen described which for fact has added to the "wages" only, other costs such as direct, indirect and hidden costs or charges, both incidentally and accidentally needed by the labour to discharge their duties on the project.
It therefore follows that, if there is going to be any reimbursement of any of the tradesmen on day work basis, such all-inclusive rates shall be used to evaluate the entitlements and no deduction is permitted for any of the direct, indirect, hidden, accident and incidental charges or costs. These charges or costs would normally qualifies the tradesmen to carry out their role and it is assumed that their employer (i.e Contractor / Subcontractor)would normally have such obligation to reimburse the tradesmen for such costs as would have been enshrined in the engagement contract.
It therefore means as well, that any other trade not mentioned in the above but are required for the works and which are to be reimbursed by analysing their daywork wages and directly paying them or by using the basis of their wages to deduce a unit rate of work items or activities, such new rates would need to consider all the inclusive direct and indirect, incidental and accidental costs mentioned.
Should any deduction is made, then, it would be an injustice to what has been agreed. Daywork rates are valid for inclusive use without alteration. Since they work are paid based on actual resources allocated / consumed in the execution of the works, which are materials, labour, plants and equipment - so the rates you have mentioned only detailed what has been included in the "labour" rates only. All those heads mentioned in addition to the basic wages would normally be part of what the labour is reimbursed for, so, i do not see any justification for deducting them because, they are contractually required anyway.
I hope this is clear?
---------- FOLLOW-UP ----------
QUESTION: Dear Femi,
Thank you for that.
But to make sure that we are on the same page, my understanding is that, your interpretation calls for not accepting deductions that are made for any workmanship that is already deployed even though it was included in the Subcontract rate description as described earlier, meaning that, if an additional work requires labors, fitters, "Charge hand", & "Foreman" the client cannot deduct the charges of the "Charge Hand" & the "Foreman" in spite of being stipulated as included in the rate of other workers in the Labors Rate definition.
Thanks. Apologies for replying late.
The interpretation of the clause you have described does not mean that you have only one Labour rate and that this singular Labour rate include the rates for other tradesmen like charge hands and the supervisors and foremen and others at same time. What I understand is that you have several individuals rates for charge hands, foremen, and other tradesmen and as such, all these rates at their individual status for the different labours include other additional expenses that we could refer to as additional expenses that goes along with wages. Expenses like accommodation, transport, incentives, bonus, health expenses, leave, gratuity, insurance etc..
In essence, what you should know is that the individual Labour rates for each tradesman do not include rates for other tradesmen as this is not the practice and I do not see this as the intention of the clause.