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Construction Law/FIDIC 1987 Legislation

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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.

Thanks.

Answer
Dear Shane,

Thanks for your question.

From your narration, your claim is very genuine and should not be rejected by your Client. The two clauses you cited are very clear to justify your claim.
Clause 70.1 only addresses increase or decrease in cost of labour and material as may have been caused by inflation, prime cost sums for materials or labour, escalation caused by the economic forces of ordinary demand and supply. And even still, this has limits. If the escalation of increased or decreased cost experienced is beyond the reasonable limit, parties must re-consider this clause in fairness.

Now to your main defense using clause 70.2; this clause allows the contractor to claim for any increment resulting from government legislation which comes to effect after signing the contract or as specified (28days prior to latest date for tender submission). And you can see the justification in the wording of clause 70.1 which started with "subject to clause 70.2..." what this means is that, "except for clause 70.2...." again, it means that, "only clause 70.2... can give you entitlement to any rise or fall in cost of labour" that is why, it say that, "....subject to clause 70.2...."
I will advice you to follow up your claim with the client and try to explain as in the above, the interpretation of clauses 70.1 and 70.2 for proper understanding. Should there not be an agreement, try to suggest a third party (expert professional authority) interpretation to support your case.

Hope this clears your doubt?

femi

Construction Law

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Femi Alofe

Expertise

I can answer all questions relating to the followings: 1. Contract Administration - variations, contract clauses interpretation, all post contract procedures, valuations and certificates questions, extension of time issues and prolongation cost matters. 2. Contract Practice - Any questions regarding forms of contract like JCT, FIDIC & other Bespoke forms. 3. Quantification, measurements and Estimating questions 4. Contracts and construction law questions and dispute resolutions problems. 5. All FIDIC Conditions of contracts

Experience

Out of my 24 years experience in construction industry, i have the following specific experience: 1. Contract Administration - 15 years in contract administration with over 10yrs in Managerial positions covering africa and the middleeast. 2. Contract Practice - 15 years experience with over 10yrs in Managerial and expert positions covering africa, north america and the middleeast. 3. All pre-contract procedures, Tendering, Quantification, measurements and Estimating questions - 20 years experience. 4. Contracts and construction law questions and dispute resolutions problems - 15 years experience with over 10yrs in Managerial and expert positions and 5 years expert witness and active practice in arbitration proceedings covering africa and the middleeast.

Organizations
1. FAIQS - Fellow, Australian Institute of Quantity Surveyors, Australia 2. FRICS - Fellow, Royal Institution of Chartered Surveyors, UK 3. CCP - Certified Cost Professional AACEI, USA 4. PQS - CIQS, CANADA 5. ACIArb. - CIArb, UK 6. MNIQS - NIQS, NIGERIA 7. RQS - QSRBN, NIGERIA

Publications
1. AACEI RP on Estimating, 2010

Education/Credentials
1. B.Tech (QS) 2. RICS professional course, CEM - UK 3. MSc , UK NARIC 4. Professional Doctorate ( to commence 2016)

Past/Present Clients
1. Larsen & Toubro Ltd, Dubai UAE 2. Larsen & Toubro (oman) LLC 3. Archi + Web consortium, Abuja Nigeria 4. George Dike & Associates, Minna Nigeria 5. Public works Authority (Ashghal), Doha Qatar

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