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Construction Law/Plant and Design Build Variations

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Question
Dear John,

Thank you for your continued dedication. I have a question under FIDIC Conditions of Contract for Plant and Design-Build.
We have a contract running under the above conditions, the Engineer received a contractor's quotation for a change in scope of work. The Engineer then wrote to the Employer stating that in accordance with clause 3.1 and clause 13.9 the variation was approved by him and requested the Employer to issue a variation order to the contractor (stating the amounts of the VO). The contractor performed the work and payment was effected by the Employer for the said Variation.
6 months later the there was a change in personnel in the Employers side and the new QS reviewed the VO's and found that there were items of work that were priced at new rates meanwhile rates for similar work was included in the contract. Additionally the new rates were not backed up. There is a clause in the contract (particular conditions) requiring the contractor to provide detailed breakdowns of all new rates including invoices and markup factors. The Employer's QS the requested the Contractor to provide these breakdowns and backups. The contractor refuse stating the following reasons
1. The VOs were approved by the Engineer (according to Clause 13.2 and 13.3) hence the approval was final and could not be revisited
2. The Contractor didnt receive any correspondence from the Engineer refuting their submission
3. The Employer was time barred in terms of revisiting these rates since 6 months had lapsed according to clause 5.2

Could you confirm if the above 3 reasons can be held as valid.

Additionally can the Employer dispute the Engineer's determinations under clause 3.5 using clause 20.4.

Thank you in advance for your time and effort.

Answer
Dear Kuda,

Thank you for this question.

I disagree with the Contractor but I can see an alternative argument that I perceive, from your summary, has not been advanced.

The Engineer's decision on the Variation can be challenged by the Employer, for example through the mechanism of sub-clause 2.5 and in arbitration. Further I do not consider that sub-clause 5.2 relates to documents submitted for the purpose of pricing variations under clause 13.

Notwithstanding this, the Engineer's "approval" at the time probably caused the Contractor to act at his detriment; it was a "promise" that the contractor would be paid the "approved" amount. The Employer should not be entitled to resile from that promise subsequently.

Whilst the QS is probably correct in his approach I question whether, in light of all the facts, the amount at stake is worth the cost of pursuing the recovery. Conversely, if the Engineer was to make an adjustment of the cost would the Contractor challenge same? And what damage would be done to the working relationship? This issue seems not to be one of "right" but one of maintaining a pragmatic approach in the circumstances.


I hope that this assists you.

Kind regards,
John Dowse


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Construction Law

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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