Construction Law/Price Adjustment under FIDIC
Dear Mr. Dowse
I am working as a project manager for a certain road project under the Fidic condition with MDB harmonised edition(2006).For the Accepted Contract Amount, this is an item of price contingency of 10% in it, forming the final contract sum.In the course of the construction, we have encountered a lot of events beyond our control, such as torrential rain happening once in 50 years in that region, variation orders , and price escalation in labor and materials, etc. So, we have made the relevant claims as per the Clause 13.8 under the contract in a timely manner.We expect that when the project is completed, the monetary amount claimed by us will exceed 10% of the Accepted Contract Amount. Now, we target 10% of price contingency available for the compensation of loss incurred by us, but that is not enough.So, my question is:
-Are we entitled to the balance compensation apart from 10% of price contingency from the Employer,and what are the legal and contractual basis?
Dear Mr. Gao,
Thank you for your question which has been diverted to me. As i could understand from your question you are having problem with contingent pricing allowance provided in your contract price within a limit of 10 % with no provision for remedy if it increases than this limit. To me, Contingent pricing allowance is used to adjust risk that cannot be exactly assessed at Bid submission stage by the employer and hence an assessed percentage has been kept to cater for this.
Now your problem is that how to meet additional expenditures incurred on this account due to force Majure conditions/adverse climatic like conditions and which are beyond the control of the contractor and no remedy is specified in the contract although such an increase needs to be considered for payment, in principle. In such circumstances the remedy have to be found either under the provision of applicable law of the contract or through arbitration/Litigation depending on the terms and conditions of the contract. This will be my line of action in such a scenario and hope gives you some useful thought how to proceed further
Regards and best wishes