Construction Law/FIDIC 1987 Legislation Change
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.
I am taking the opportunity to reply your question.
Regarding CL 70.1 & CL 70.2; it very clear that CL 70.1 for rise and fall in the indexed cost of labour and other inputs to the works. Cl 70.2 related with for compensation for any rise or fall in the cost of the contractor due to change in country law.
Your claim is correct under clause 70.2 and client has to pay the full compensation after the recommendation of Engineer.
I hope this will clear the matter.
With due regards