Construction Law/Price Adjustment

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Question
Dear Madam,

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 ?

Best Regards,

Aslan Sembayev

Answer
Dear Aslan,
1) The contractual relationship is between the Contractor and the Employer, and if the Contractor cannot do something according to the Contract and it is not the Contractor's fault, the Contractor has right to claim for that from the Employer. Further, the Employer is to recover his loss from the entity responsible for the loss (in your case, the Employer can claim the damages, if there would be damages, from the State Agency for statistics.
2)19.1 says that some events, like the ones listed from (i) to (v), are of force majeure kind if the conditions a) to d) are fulfilled. So, a) to d) are not enough: they should be fulfilled, and the event be of the kind (i) to (v), therefore 19.1 [Force Majeure] cannot be applied here. Instead, 13.7 can be applied.
3) If the entitlement and the quantum are proven by the Contractor, the Employer is to pay to the Contractor, and the Employer is to recover, then, the costs/damages from the State Agency for Statistics, as shown above
4) It is not OK. When the Employer/Client wants to recover/claim money from the Contractor, the Contract says that the clauses 2.5 and 3.5 must be followed, i.e. the Employer is to make a claim under 2.5 and the Engineer is to give a determination under 3.5, then the IPC will be issued, according to 14.6, including the "minus" amounts related to the overpaid Price Adjustment, as the Engineer determined under 3.5. Only this way is permitted under FIDIC Contract for recovery of amounts by the Employer.
Best regards,
Alina

Construction Law

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Alina Valentina Oprea

Expertise

I can answer to questions regarding FIDIC 1999 contracts, including practical use of these conditions of contract, as well as to questions regarding dispute boards, both from theoretical and practical point of view. I cannot answer to questions related to other kind of contracts or to procurement process, except to some (limited) extent.

Experience

Implementation of works contracts (FIDIC 1999) financed by different financial institutions, including European Union; claims and disputes; dispute boards See more on www.alinaoprea.com

Organizations
Dispute Resolution Board Foundation

Publications
see http://alinaoprea.com/publications/ ; DRBF Forum Newsletter; Drumuri si Poduri; Revista Constructiilor; SIDiR Newsletter

Education/Credentials
Graduated the University of Civil Engineering Bucharest, Faculty of Railways, Roads and Bridges (1985-1990); Trained under Mr. Gwyn Owen’s pupilage program for arbitrators/adjudicators under FIDIC mentoring program (2006 – 2007)

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