Construction Law/Variation - Omission
I am working for a Construction Company in UAE. Our Contract is based on FIDIC 1999 ( red book) and Contract is for construction of 10 story office building but recently Engineer ( as instructed by the Employer ) issue variation order to omit 4 floors from the building. It is about 30% of Contract Sum. Could you kindly mention :
1. what are the possible claim available for the Contractor and under what Clauses?
2. Can contractor ask for loss of profit due to huge omission?
Your kind respond is highly appreciated.
Thank you & best Regards.
Thank you for this question.
The scope of the variation is significant and may be sufficient to be deemed to change the nature of the project, if not at a fundamental level then very nearly so. Accordingly it is likely that the Contractor can seek a rerating of the entirety of the project.
I suggest that the Contractor reviews sub-clause 13.3. This will allow the Contractor to submit its proposal for the completion of the project.
You have not stated how much of the Works have been performed to date and this will be a factor for consideration as it determines both eh (under) recovery of fixed costs to date and the time in which recovery of any balance can be made.
As to the loss of profit issue, the nature of the change is such that the Contractor can make a loss of profit claim, as it is now prevented from earning all of the profit it would generated if it had been allowed to complete the Works as originally envisaged. Again this falls within the ambit of sub-clause 13.3.
The evaluation of the variation will be made in accordance with Clause 12 and there sub-clauses thereto, which also gives the authority to develop new rates and prices based upon the magnitude of the variation (sub-clause 12.3).
For completeness the Contractor should also notify its intention to claim under Clause 20 also.
The Contractor should bear in mind when making its claim that is was making a profit on the Works and would have made a profit on the element which is now omitted. It should also consider whether the omission allows it to participate in other opportunities which it could not have entertained if it was engaged on completing the original scope of work and to set off against its claim for loss of profit the benefit it will earn from those other, new opportunities.
I hope that this assists you.
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