You are here:

Construction Law/Price Adjustment under FIDIC 1999-RED Book

Advertisement


Question
QUESTION: Dear Sir,
I am working on a FIDIC 1999 based MDB Conditions of Contract. Our Contract Specify 60% amount to be adjusted under sub-clause 13.8. The BoQ contains a bill on General Items which includes Insurances that are paid as a lumpsum item at the start of the Contract. Is there any price adjustment for such lumpsum items like Insurances?
In this sub-clause, it is stated that “Pn” to be applied on Contract Value. Please also explain that which of the amounts to be considered in "Contract Value"?

Regards,
Umer Shabbir

ANSWER: Dear Umer,


Thank you for your question.

I believe there is no straight forward answer, it depends how do you interpret the Sub-Clause 13.8, which reads: "the amounts payable to the Contractor shall be adjusted for rises or falls in the cost of labour, Goods and other inputs to the Works".

I underline "amounts" and "inputs to the Works".

As those include the Insurances, my answer goes for such amounts to be applied the respective adjustments.

As for "Contract Value", I believe definition under 14.1 is explanatory.

Hope that helps.

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

QUESTION: Dear Sir,
Thanks a lot for your precious comments. The sub-clause 13.8 also states " No Adjustment is to be applied to work valued on the basis of Cost or current prices". In my opinion, Insurances fall in this category becasue they are paid as a lumpsum item at the start of the Contract. please also explain your interpretation for aforementioned line of sub-clause 13.8.

Thanking you in advance. you are providing great services.

Regards,
Umer Shabbir

Answer
Dear Umer,


Thank you for coming back, that is a good remark.

I would say that respective comment applies to items under Provisional Sums, rather than those under Lump Sums.

You have a certain amount in the Contract, as Lump Sum, for the Insurance. You are paid that price, not the price you actually pay for the Insurance.

In which case, that provision seems not to apply.

Hope that helps.

Construction Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


Florin NICULESCU

Expertise

Questions related to Civil Engineering Contracts, using FIDIC or other Conditions of Contract, concerning Procurement procedures and documents (pre-qualification, tendering and contracting) and Services/ Works Contracts implementation matters including Determinations, Payments, Time Extensions, VOs, Claims/Disputes. Additionally, questions related to dealing with International Financing Institutions. Can also answer questions in Romanian. Can not answer improperly formulated questions.

Experience

Over 20 years of experience in the field of design, works supervision, construction, management of aid funds and technical assistance for various types of contracts implementation, including severe conflictual contractual situations leading to Claims and disputes. Claims/ Contract management, Disputes adjudication, Arbitration.

Organizations
Member of Romanian Professional Association of Roads and Bridges; Listed on President's List of Adjudicators of Romanian Association of Consulting Engineers www.aric.org Former member of the Disputes Resolution Board Foundation (DRBF) of United States – nominee on DRBF President’s Disputes Board Members List www.drb.org and of DRBF Chapter for Eastern Europe http://dabdrb.googlepages.com Former member of Polish Association of Consulting Engineers (SIDiR) – nominee on SIDiR President’s Disputes Board Members National List http://www.sidir.pl/sidir/index.php?action=czlonkowie&a2=r Member of “AllExperts.com” volunteers pool http://www.allexperts.com/user.cgi?m=4&expID=85358&catID=914 Member of the "Constructions Disputes Resolution Services” International Panel of Construction ADR Specialists" of United States www.constructiondisputes-cdrs.com

Education/Credentials
- Graduate in 1994 the Construction Institute - Graduate of several FIDIC,Procurement and other courses - Graduate of first Disputes Board Members Mentoring Scheme (http://www1.fidic.org/resources/adjudicators/pupilage.html) - FIDIC Accredited Adjudicator

Past/Present Clients
- Several State organisations/Ministries , such as Ministry of Transport, National Admistration of Roads, Ministry of Regional Development (former Ministry of European Integration), Public Works and Housing, Central Contracting and Financing Unit in Romania and also in Turkey, Croatia and Macedonia - Numerous Western based private consultancy companies - full CV and other relevant information available at www.abinitio.ro

©2016 About.com. All rights reserved.