Construction Law/Fuel indices
QUESTION: Dear Sir
we are working on road supervision project.
I am RE. we are using FIDIC 1987 reprinted 1992
my question is regarding price adjustment
In appendix to bid - the contract mentioned crude oil price from saudi arabia - obtained EIA America and he has given index in the table.
on the same page - he has mentioned fuel-local
in pre-contract negotiations both partied agreed that fuel indices shall be local.
Now he is procuring fuel from the local market.
our contractor, chinese, insisting that I should pay local fuel indices which will result in huge money.
can you advise
ANSWER: Dear Bala,
Thanks for your question.
I understand that, in your contract, the Price adjustment is allowed with the conditions agreed in Appendix to Bid . You said that the Contractor is using same indices as agreed (ie local). Please confirm if the Contractor was allowed to use such indices even if he procure fuel from the local market or not. If yes, he is entitled to the additional amount even if such amount is huge.
If there is no mention of such agreement to adjust the price by using indices in case of procurement of the fuel from local market, the actual price shall alone be paid.
Hope this clarifies your query. Please revert with a follow-up question with more details should you need further advise.
---------- FOLLOW-UP ----------
There is no mention. only contractor has mentioned in Table of adjustment.
He has attached- a web page of EIA,US and mentioned indices 111.
I can send a copy of relevant pages
If the mechanism to pay by using indices in case of local procurement is not mentioned, you need to interpret the intention of contract as a whole. The indices are used to compensate the Contractor for any cost fluctuations due to inflation and several other reasons etc. Please study the costs when this job was tendered and try to compare with current prices. I hope that you must be having local indices being published from Govt agencies. You may use them as try to compare what the Contractor is claiming.
By doing above exercise, trust you will be able to make a fair & reasonable decision.
You may however attach a copy of the scenerio and table of adjustments etc.