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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 Dear Sir,
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

Dear Umer Shabbir,

Clause 13.8 is meant to be a rather crude instrument not a a precise definition of the effect of inflation.  The intention is to transfer part of the risk of inflation in costs to the Employer.  Part of the risk, in this case 40%, remains with the Contractor.  

The contract value in this instance refers to the net value of the IPC for the given period.  Pn is applied to the value of each IPC.  Thus if insurance is paid as a lump sum at the start of the contract, there is no inflation effect.  If it is paid in stages with each IPC, then it becomes part of the value of the IPC and is inflation indexed.  

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Peter M. Elliott


First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol before submitting a question.


Value . . .
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Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

B Sc(Hons) in Civil Engineering

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