Construction Law/Price Adjustment
QUESTION: Dear Sir,
I’m working as engineer for Supervising Consulting Company.
Please give me your comments on fallowing issue.
We are working under FIDIC 2006 ( MDB Harmonized ).
To calculate Price Adjustment using Pn formula Contractor has to use statistical data provided by State Agency for Statistics.
Recently Client have forwarded a letter from State Agency for statistics, where it says that all previously data has to be changed since they were not correctly calculated. New data issued.
Now Client wants to recalculate all previously certified IPCs.
State Agency for Statistics explains situations as follows: “the Agency calculated indices based on the Data provided by companies which are involved in Project and companies manipulated situation to their advantage. Having understood this lately the Agency now decided to recalculate indices using data provided by neutral companies not involved the Project.”
Now Contractor put a Claim against Client for changing indices, specially Base Indices entrenched in Contract.
But in my opinion Client is not responsible for statistical data.
To me it looks like both parties are suffering from occurred situation and its beyond control of both parties, none of them can predict such a situation.
I think it is necessary to mention that Client and State Agency for Statistics are part of government but Client has no direct influence on State Agency for Statistics.
Could you kindly help me to find answers to following questions ?
1) Can Contractor put a Claim against Client in such a situation?
2) Is Sub clause 19.1 of FIDIC ( Force Majeure ) 2006 applicable in such situation?
( I believe that all items of Sub clause 19.1 of FIDIC 2006 a,b,c,d are applicable to that situation.)
3) Who is final cost bearer in such situation?
4) Client insisting that overpaid Price Adjustment must be recovered from the Contractor, knowing this from last IPA Contractor is not applying Price Adjustment. Client is saying that Engineer has to calculate PA himself and then include to IPC & recover. Is this ok ?
ANSWER: Dear Aslan,
Thank you for your question, it is a very interesting one.
I suspect the Employer is a State/ Governmental entity, I shall base my answer on that.
On that basis, I totally disagree that 19.1 applies (although I immediately thought that when starting to read your question), because:
a) the Employer represents in fact the State/ Government and the State Agency for Statistics is also a State/ Government entity;
b) & c) having simply chosen a better method for calculating the indices, they would have avoided that situation.
d) as per above, this obviously does not apply either.
Then, I also find difficult to believe that a State Agency for Statistics can be so unprofessional and only base their calculations on data from only a few companies, and surprise, surprise, exactly those ones are involved in the project.
If that is the case, then the Employer, hence the State Agency for Statistics, must provide a fully detailed explanation/ demonstration of that ascertainment.
One can not expect the Contractor to believe that. If a State Agency for Statistics can not be trusted, then you have a serious problem in the country.
Finally, I believe that should the Employer have considered they are entitled to such deductions, they should have followed a different contractual path and by not having done so, they rather diminished if not lost at all their eventual entitlement.
Explanation of that would rather exceed the limits of free advice provided on this website.
Sorry for failing to empathise with the Employer, but responsibilities must be properly understood and accepted.
Hope that answer will help at least in that sense.
---------- FOLLOW-UP ----------
QUESTION: Dear Sir,
Thank you very much for your answer.
I have two more questions, please give me your comments.
1)Data was changed by State Agency for Statistics not by Client.Why do you think that Contractor can put Claim against Client, to me it looks like Contractor can put claim against State Agency for Statistics, because that agency is provider of data and there is contract between Contractor and State Agency for Statistics.
2)Client is not provider of data and it cannot predict such a situation.Can one State body be resposible for another?
ANSWER: Dear Aslan
Thank you for coming back.
1. I did not say the Contractor should do any claim - please read again my previous answer.
And the Contractor should in no way claim against the Statistics Agency as firstly, they have no contractual relationship with them and secondly, that Agency did not caused them any loss, by the contrary, Contractor seem to might have benefited of Agency' mistake.
Possibly, the Employer goes against them, under the Laws of the Country.
2. BOTH Employer and Statistics Agency are State/ Government entities and are both engaging the Government through their deeds. That is where Employer's responsibility comes, although the mistake has been made by another (State) entity.
Hope that clarifies the matter.
---------- FOLLOW-UP ----------
QUESTION: Dear Florin,
Sorry for many questions,hope not taking your time.
1) Contractor has put a Claim against Client, because Client wants to recover many which were "overpaid" by PA.
2)There is a contract between Contractor and State Agency for Statistics.
3)Contractor willing to put a claim against State Agency.
Thank you in advance.
Thank you for coming back, no problem, that's why I am here.
Indeed, these details may indeed change the situation.
I am currently involved in finalising a course I delivered, tomorrow will travrl home and Sunday be caught with another training, hence have little time to assessthe whole case.
Could you please re-consider the whole context and comr back to me Monday, with a re-detailed question, imcluding all these detsils and giving the full picture?
Based on that, I will gladly take the time to re-consider the issue
Thank you in advance for your understanding.