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Construction Law/FIDIC 1987 Clause: 70.1 & 70.2

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Question
Hello,
I am currently administering a project under the FIDIC 1987 terms of contract in Bahrain.

Since the signing of the contract the government has introduced legislation that increases a local levy for expatriate workers and increased the standard vacation allowance. These both have caused additional costs to our contract.
I have made a claim under CL: 70.2 Subsequent Legislation, but the client has rejected it as CL; 70.1 has been reworded as below.

The client basic argument is that clause 70.2 only covers items not covered under 70.1, and clause 70.1 states no adjustments shall be made in respect of any rise or fall in the costs of labour.

My understanding is that clause 70.1 is for if the prime cost of labour increases or if the price of copper rises. And I thought 70.2 was for legislative changes i.e. my current claim.

Is clause 70.2 only for costs increases to non-labour or material related items?

70.1 Increase or Decrease of Cost

Subject to Clause 70.2 no adjustments shall be made in respect of any rise or fall in the costs of labour and materials or any costs affecting the cost of execution of the Works, unless specifically referred to in the Bill of Quantities.

70.2 Subsequent Legislation

If, after the date 28 days prior to the latest date for submission of tenders for the Contract there occur in the country in which the Works are being or are to be executed changes to any National or State Statute, Ordinance, Decree or other Law or any regulation or bye-law of any local or other duly constituted authority, or the introduction of any such State Statute, Ordinance, Decree, Law, regulation or bye-law which causes additional or reduced cost to the Contractor, other than under Sub-Clause 70.1, in the execution of the Contract, such additional or reduced cost shall, after due consultation with the Employer and the Contractor, be determined by the Engineer and shall be added to or deducted from the Contract Price-and the Engineer shall notify the Contractor accordingly, with a copy to the Employer. The Contractor shall take all steps necessary to mitigate any such additional cost.

Regards,

Shane.

Answer
Hello Shane,

Sub-clause 70.2 deals with the changes that occurred through ordinance, decree,or other law/regulation of local or dully constituted body of the Government.This clause is not limited to change in cost to non-labour.I understand that the increase in standard vacation allowance is a subsequent legislation which was not foreseen by the Contractor at the time of Tender and the Contractor  is entitled for that under Sub-clause 70.2.

Sub-clause 70.1 restricts the change in labour rates or material which are not payable to the Contractor under the provision of your Contract.Specifically, I would say that you need to prove that the increase in vacation allowance is effected through legislation. Hope I have answered your question.

Regards

Engr Arshad Mahmood

Construction Law

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Arshad Mahmood

Expertise

I may answer to the questions relating to FIDIC 4th as well as FIDIC 2010 MDB Harmonized version,price adjustment ,Variations,Eot and Cost claims,EPC Contract,Bidding Document,consultancy Contracts,certification,Standard Forms, Dispute resolution; and others pertaining to Contract implementation.

Experience

Contract management and Contract Administration, using FIDIC Conditions of 4th Addition as well as Fidic 1999 Red, Yellow and Silver Books including MDB Harmonized Edition 2010. Particularly in the area of Procurement of Contracts, Certification,Price Adjustment, variations,disputes management, EoT and Cost Claims; and other contractual issues arises from time to time during currecy of the Contracts.

Organizations
Member -Pakistan Engineering Council Member -Pakistan Engineering Congress Member -FIDIC Organisation

Publications
Joint Venture and Consortium Agreements for Pakistan Engineering Council,Pakistan

Education/Credentials
BSc Civil Engineering; Basic Management course; Hydro power Projects; and various other on Job Trainings

Awards and Honors
Commendation Certificate for the excellent management qualities and dedication at Ghazi Barotha Hydropower Project; and Certificate of Excellent work performed during Survey Camp.

Past/Present Clients
Water and Power Development Authority (WAPDA),Associate Consulting Engineer(ACE) and National Engineering services Pakistan(Pvt.) Limited (NESPAK)

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