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Construction Law/Price Adjustment under FIDIC 1999-RED Book


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"?

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 ----------

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.

Umer Shabbir

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.

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