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Construction Law/FIDIC 99 Sub clause 8.1

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Question
QUESTION: Dear Sir;

Employer has issued Letter of Acceptance.But now he wants to change the scope of the work.What is the Contractor's entitlement,

1. If the commencement date is not issued but LOA is issued

2. If the commencement date is issued but the Contractor has not started the Work.

Thank you!

ANSWER: Dear Fernando

I thank you for your question. My short answer to your question will be that when a Letter of Acceptance (LOA) is issued and it is accepted by the Contractor by affixing his signatures on it then it becomes a binding Contract between the parties. Any action by either party after this will be assessed as action under the Contract and will be dealt so. Any such action is not dependent whether notice to Commence has been issued or whether the Contractor has commenced the work or not.

In my opinion change in the Scope of work at this stage will be governed by Clause 13  "Variation and Adjustments". The entitlements of both the parties have been mentioned in the sub clauses.

However, I may add here that the parties are free to mutually agree to any terms which they deem fit in the best interest of the project.

I hope the question is answered. If you still need any clarifications or if you want to add some additional information to your question, please feel free to ask.

Regards

Abdul Majid Khan  

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

QUESTION: First Thank you very much for your early reply..

I want to know if the scope is changed largely or totally what will be the solution for the contractor. For an example the employer 1st decided to build an apartment and now he wants to build a hotel..

Answer
Dear Fernando

Thanks for your question. This is really a big change. I will first want to know whether the Employer is a government Agency and if yes then I will suggest to scrap the tender and bear the cost if any for his action and call for a new tender for the new scope of work. I do not think that the earlier tender can be moulded enough to cope for the new scope.

In case the Employer is a private agency, then may either exercise the option mentioned above or negotiate with the present successful bidder on the rate of new items involved. I am sure that the Employer will not have detailed working of such a change. I will therefore suggest that both the parties agree on a formula as to how new rates would be computed by agreeing on the overheads and profit factors and source of cost and materials to be used on the project.

I understand that it will be a cumbersome exercise and the Employer must hire a very experienced and honest Project Manager to deal with these issues. A joint team of the Employer and the Contractor will remain busy to finalize the new rates which will crop out every day.

If the Employer understands that he has the capacity to do all this then he should opt for this as the agreement of the Contractor will be required at each stage and the terms of the Contract will be re framed to cater for these requirements.

I think you also now understand that hypothetical questions have such difficult answers.

I hope this answers your question

Abdul Majid Khan  

Construction Law

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Abdul Majid Khan

Expertise

I am interested in questions related to time Extension, Liquidated Damages,variations, price adjustments,payments, disputes and Dispute Board under FIDIC IV, FIDIC 1999 and FIDIC 2006 Harmonized Documents.

Experience

I have been heading the Construction Management Division and Contract Divisions of National Engineering Services Pakistan (PVT) Limited, NESPAK, the largest Consulting Engineering Firm in Pakistan, for more than seven years and two years respectively. I have also worked as "The Engineer" on a number of projects. I have been working in Saudi Arabia for about seven years on a road projects. Additionally I worked as Arbitrator and am member of few Dispute Boards in individual capacity on Asian Development Bank funded projects.

Organizations
Inland and in Middle East. I have worked with National Engineering Services Pakistan (Pvt) Limited (NESPAK)as my Employer for more than 27 years in Pakistan. In Saudi Arabia I worked for Rashid Engineering, Consulting Engineers during 80s. After retirement I provided advisory services to NESPAK on technical and contractual matters to its various divisions and lately I was appointed as Advisor to Managing Director NESPAK on Technical and Contractual matters. Currently I work as Free Lance Contract Specialist on Fidic Form of Contracts.

Education/Credentials
I am a graduate with a B.E (Civil Engineering) degree. My year of graduation is 1970.

Awards and Honors
A few appreciation Letters and Honorariums during my service in NESPAK. I remained member of Administrative Committee and Board of Management of NESPAK. I had been part of the Management Committee in the absence of Managing Director.

Past/Present Clients
Most of the Clients used to be Government Departments, Corporations and Authorities. In Saudi Arabia the Client was Ministry of Communications. As Arbitrator and Dispute Board (DB) member, I provide services to various Government Departments and Contractors.

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