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Construction Law/Variation Under LS Contract

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Question
Dear Sir,

This relates to a lump sum contract (Modified FIDIC Red Book 99) for a residential project under the applicable laws of Jordan. The contract includes a Provisional Sum for certain expected variation at the time of entering into contract to a couple of buildings. At the time of entering into contract, it was not expected that this variation will comprise a structural re-design, it was expected to be all about architectural changes. The contract BOQ shows a quantity of steel reinforcement less than the contract drawings by 400 tons. This was known before entering into contract but not considered an issue since it is a lump sum contract. The new structural design (different cores, staircases, columns etc.) shows the same quantity of steel reinforcement of the original design under the contract, however the contract is claiming the additional 400 tons on the basis that that particular conditions include a provision specifically stating that if any variation involves an omission that creates a saving (a condition precedent which probably implies that not all omissions could create a saving) such saving will be calculated on the basis of the rates set out in the BOQ. The contractor is claiming also that the employer cannot exceed the total allowance made under the BOQ when calculating the saving from omitting the elements of the work comprising the original design. The rates of the BOQ are fixed for any variations, the contractor contractually takes the responsibility of the quantities under the BOQ, no sundry items were added under the BOQ and the contract is a standalone document and supersedes tender negotiations.
Is the contractor entitled for the 400 tons or he is not entitled at all for the same since there is no difference in quantities between the original and varied designs. From a variation procedure perspective and valuation of this variation, should the employer omit the original design (and calculate the saving as aforementioned) and then add the new design (and calculate the extra cost) or the employer should claim that this is a substitution without extra cost. I am confused about the term “substitution” under the definition of the term “variation” under the contract as it could be escape from calculating the omission and then the addition as per the terms of the contract.
I am from the employer side and very keen to be fair. I hope I am clear in my enquiry and thanks in advance for your time in clearing my confusion.

Regards,
Wael

Answer
Dear Mr.  Wael,
Thank you for your question.
As I could understand from your question is that there is a discrepancy for the quantity shown in the BOQ when compared with drawings by 400 tons and secondly it is a lump sum price contract. The first impression that one gets is that a lump sum contract has nothing to do with quantities shown in the drawings or provided BOQ and has to comprise of total work as per approved drawings. The work has to be subsequently fit for purpose. I am, therefore, of the opinion that work has to be got completed as per original drawings and this is what is covered in your contract amount. Now the question comes that revised structural drawings were issued changing stair cases, columns etc. with no change in BOQ quantities. If I am the Engineer, I will only see the difference in quantities between the two sets of designs i.e. the contract design and the revised design now been discussed. The difference in quantities of these two designs should form basis of further discussion with the contractor to arrive at a mutually agreeable decision. Coming to your specific questions, 400 tons steel is not the relevant issue but difference in steel for two designs is the issue in a lump sum contract. I hope this clarifies my view point but you are welcome if still there is any point not clear.

Regards
Liaqat Hayat  

Construction Law

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Liaqat Hayat

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I can answer questions based on FIDIC 4 and FIDIC 1999 [design-build] with particular reference to time extension , price adjustment and disputes. I am in particular more inclined for response to points pertaining to how claims should be framed and put up in case of technical or other contractual shortcomings. Regarding procurement matters I have spent over 5 years as procurement specialist for highway authority and dealt with numerous claims and disputes in the capacity of "The Engineer" .

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