Construction Law/Relevant Rates

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QUESTION: I am contacting you to inquire about an issue related to derived new  price from  Relevant rates  as clause 12.3 “Evaluation” in Red book of Fidic/1999 , in this case :

In project there is an item about Reinforcement Concrete Slab with an area of 3000M.S in Bill of Quantity of the contract with Unit price of 50 EUR per M.S .

When the contractor proceed to implementation of the work  , Show that the area of Reinforcement Concrete of Slab  on the site only 1500M.S ,

So the contractor ask the Employer  to determinate New Price of this item of slab as Clause 12.3 in the  Fidic  because  The changes in the item “ slab” Check the following :
-(a)    the measured quantity of the item is changed by more than 10% from the quantity of this item in the Bill of Quantities or other Schedule,
-(b)   this change in quantity multiplied by such specified rate for this item exceeds 0.01% of the Accepted Contract Amount,
-(c)   this change in quantity directly changes the Cost per unit quantity of this item by more than 1%,

So as this Clause the new price shall be derived from  relevant rates , the question is :
- how can be that However the reinforcement concrete of slab is specified in the contract , and the price of contractor in this item  (50Eur) is not appropriate , and the responsible cost of this item is (90 EUR ) .
- what is the meaning of “ Relevant rates “ in this Clause .

Best Regards

ANSWER: Dear Shadi,

Thank you for this question.

Dealing with your questions in reverse order, a "relevant rate" refers to rates and prices for items of similar work, that may be adapted to derive a new rate for the additional/changed work. In your case you have an existing rate for the work that will form the basis of your calculations.

As to why the contractor is entitled to greater payment, that will depend upon factors such as how the contractor tendered for the work and how the reduction impacts upon its efficiency. Without knowing the circumstances of your case I cannot conclude whether the contractor is entitled to the claimed increase, or to any increase at all; I can give an example of when such an increase may be valid.

Assume that the contractor elected to site batch the concrete for the slab. (Unlikely in the circumstances, but I am uisn this as an example only.) He would have built into his price an allowance for the set up and demobilisation costs of using site batching equipment. Such costs will be quite high. If the production of the batching plant is reduced by 50%, the set up costs as a proportion of the unit rate is doubled.

I suggest that you review the contractor's detailed submission for an increased price and compare with the tender methodology. Then you might also ask the contractor to advise what further mitigating measures it can implement as, depending upon where the project is being performed, the contractor may be under common law obligations to reduce the employer's costs.

If you would like to send further details I will be happy to see if I can advise further.





I hope that this assists you.

Kind regards,
John Dowse

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---------- FOLLOW-UP ----------

QUESTION: thanks about above but my question is :

Can i change only the profit and overhead of the item because the quantity are changed with satisfied all the conditions (1,2,3,4) in 12.3 Fidic clause, without change the price of others.(materials , transport , Labour ,,,,) .
Suppose that in above cases there is no change in tender methodology of the contractor in this item .
best regards

Answer
Dear Shadi,

Thank you for this additional question.

You should change all elements that ought to be changed. However in the circumstances described I doubt that you need to change the overhead element but it might be that the profit element can be changed, possibly reduced. Less work is being done. Assuming that the time for performance is not changed the contractor should be allowed to earn the same overhead recovery and a suitable level of profit.

Assessment of changes in overheads and profit should not be made without consideration of the contractor's ability to earn its OH&P figure through the entire portfolio of projects; not just one project.




I hope that this assists you.

Kind regards,
John Dowse

Follow me on Twitter: @CernoOrg
For my regular industry newsletter e-mail to info@cerno.org, stating SUBSCRIBE in the subject line

Training and consulting services are available, bespoke to companies and individuals.
John Dowse can be contacted by e-mail to info@cerno.org (When e-mailing, please include “AllExperts” in the subject line.)

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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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