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Construction Law/New rate under FIDIC 2002 redbook

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QUESTION: Dear John
Hello
I have a one question for you.
In one of the FIDIC red book 2002 agreement , The one BOQ item of construction of cement concrete drains is included in BOQ wrongly the quantities are very much less than required to execute at site as per drawings (unit of quantity denoted as meter in place of Kms in the BOQ).The contractor has quoted the rate at very much higher side and the BOQ item is not satisfying the conditions of Sub clause 12.3 of FIDIC red book 2002 for new rate of the BOQ item.The drawings and specifications are on priority of Schedule of items(BOQ) in the contract.
1. Please clarify that;If the contractor has executed the work as per drawings which is very much more than BOQ. Then contractor is asking for the payment as per quoted rates.
a.   Whether contractor has the right to ask the payment on the basis of of quoted rates or not?
b.   Engineer has denied to pay the amount and ask to the contractor for new rates of the Item. Action of Engineer is correct or not as per the provisions of FIDIC documents as the item is not satisfying the provisions of sub clause 12.3 of contract agreement.
The provisions are;
"Any item of work included in the Bill of Quantities for which no rate or price was specified shall be considered as included in other rates and prices in the Bill of Quantities and will not be paid for separately.

However, a new rate or price shall be appropriate for an item of work if:
(a)    (i)    the measured quantity of the item is changed by more than 25% from the quantity of this item in the Bill of Quantities or other Schedule,
      (ii)    this change in quantity multiplied by such specified rate for this item exceeds 0.25% of the Accepted Contract Amount,
      (iii)  this change in quantity directly changes the Cost per unit quantity of this item by more than 1%, and
      (iv)   this item is not specified in the Contract as a “fixed rate item”;"
Thanks in advance for reply and valuable guidance
With regards
SANJAY

ANSWER: Dear Sanjay,

Thank you for this question.

As the "red book" form of contract in an unchanged form anticipates that all work will be measured and valued the starting point is that the contractor will be entitled to payment for the quantity performed at the existing contract rates and prices.

As to whether a new rate is required, you have not provided sufficient information for me to consider whether (a)(ii)-(iv) apply.

Regarding the actions of the Engineer, the Engineer is responsible for determining the Contract Price (sub-clause 12.3 refers) and can make a unilateral adjustment of the rate if all the conditions at sub-clause 12.3(a)(i)-(iv) are applicable.



I hope that this assists you.

Kind regards,
John Dowse

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

QUESTION: Dear John Dowse
Hello
Thanks for your reply. I am in follow up of my previous query. The conditions of clause 12.3(a)(ii)-(iv)  does not apply on the BOQ item. The unit of quantity has written 06 Meter in place of 6000 meters and the contractor quoted the rates very high for less quantity. The actual execution of quantities performed as per Drawings which is 6000 meters.
Please clarify the matter as the Engineers wants to pay with reduced rates for the such BOQ item, Does the Engineer's action contractual to reduced the rates with out satisfying the conditions of Evaluation clause 12.3 of FIDIC red book.
Thanks in advance
With due regards
SANJAY

Answer
Dear Sanjay,

Thank you for this question.

The starting point is that the work completed by the contractor shall be measured and paid at the rates included in the BoQ. In a RED book contract the Employer (or its representatives) prepared the BoQ and it is the Employer who carries the risk of any errors in quantities. In this respect I refer you to the opening paragraph and the first sentence of the second paragraph of sub-clause 12.3.

In theory, the BoQ was in error and the Contractor is now entitled to payment of 6,000 metres of drainage work at the BoQ rate. However you must read further in sub-clause 12.3 as it goes on to state:

"However, a new rate or price shall be appropriate for an item of work if:

(a)(i) The measured quantity of the item is changed by more than 10% from the quantity of this item in the BoQ.

Clearly the increase in quantity in your circumstances exceeds the criterion and the first test has been passed.

Please note, however, that all four of the criteria set out under 12.3(a) MUST be satisfied for a new rate to be deemed appropriate. The Engineer should not seek to determine a new rate (a lower rate in your case) if the four criteria are not satisfied.

Unfortunately you have not provided enough information for me to assess whether the remaining three criteria are satisfied. Can provide  me with the following information?

1. A note of the existing BoQ rate;
2. A note of the Accepted Contract Amount;
3. Confirmation that the existing BoQ rate is not a "fixed rate item"; and
4. Whether the increase in quantity directly affects the Cost per unit quantity of the item by more than 1%

Item 4 above is probably the most difficult to assess.



I hope that this assists you.

Kind regards,
John Dowse
Follow me on Twitter: @CernoOrg
For my regular industry newsletter e-mail to info@cerno.org, stating SUBSCRIBE in the subject line

Training and consulting services are available, bespoke to companies and individuals.
John Dowse can be contacted by e-mail to info@cerno.org (When e-mailing, please include “AllExperts” in the subject line.)

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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