Construction Law/VO price payment


Dear Sir,
I have a question regarding Variation order payment.
During contract agreement, the Contractor has offered some discount,  5% of the quoted price in the price list.
After the execution of the contract, some variation orders (VO) are issued and there is not clearly mentioned about price adjustment,discount and currency portion payment in the VO.But in the initial contract the mode of payment is 65% foreign currency and 35% is in local currency.The contract document is the Fidic Red Book 1999.
-The Contractor is not ready to give any discount and only wants price adjustment in the VO price.
-The Employer wants the same discount rate ie 5% with the price adjustment.
- Some argues that the VO is only applicable either the new items or the extra items in the BOQ are introduced, So, totally new rate without price adjustment should be applied.
- The mode of payment 65% foreign currency and 35% local currency is still valid for VO or it can be paid either in foreign currency or local currency.
It would be great  if you provide the best alternatives/ solutions  from your side regarding the above issues.

Dear Binod,

All VO's must be priced in the logic of the Contract.  So any variations must be priced using the existing rates, including any discount.  If there are no applicable rates, then the new rates must be based on the prices for plant labour and materials, which were used for the Contract, including any discounts.  The Employer is correct in wanting the 5% discount.  Payment for VO's must be made in the same manner as for any other payment under the Contract, including any split between local and foreign currency.  

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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 . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
Match your presentation to the reader!
The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

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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