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Construction Law/Cost under 4.12. Red Book


Dear Florin,
I have two questions. I am a Contractor's Representative on a Red Book Contract and I've issued some claims to the Engineer.
1. Under 4.12., I've issued a notice and then the claim for some Unforeseeable Physical Conditions. Work was done by a subcontractor and my claim was contained from subcontractor's bill to me plus my "fee". This fee was already accepted by Engineer in a percentage as my Costs ( onsite, offsite, overhead etc.) plus my profit. Engineer agrees with the claim and acknowledges bill from subcontractor and accepts my Costs but refuses to pay my profit because in 4.12., Contractor is entitled to "payment of any such Cost..." and in Definitions Cost does not include profit. I think I am entitled to profit on subcontractor works because in 12.3. if there are no relevant prices in Contract, as in this case, price shall be derived from the reasonable Cost together with profit.
2. In BoQ, we have protection of construction pit with sheet piles as a Temporary works. We changed methods and used slide rail shoring. Method was accepted and I've proceeded with Value engineering because this method needs less square meters so it will be reduction in the contract price. But I used the same price per square meter as in BoQ for a protection of construction pit. Engineer has made a new, reduced price for protection and I don't agree. Protection is Temporary work and it didn't in any case lowered the quality of Permanent works.
Thank you in advance and hope to get your opinion soon.

Dear Boris,

Thank you for your questions.

1. The Engineer is right, as Sub-Clause 4.12 entitles you to be reimbursed the Costs you incurred. Your "fee" is considered also a "Cost", as it represents your related overheads/ management expenses/ etc.

And indeed, Cost does not include Profit - of course.

The risk of Unforeseeable Physical Conditions, is a so called "shared risk", where Contractor can get EoT and Costs, but no Profit.

You will see in other cases, that Profit entitlement is specifically mentioned in the respective Sub-Clauses, which are entirely under Employer's responsibility, e.g 2.1 [Right of Access to the Site].

Mind you, under 4.12 it is not about establishing a new unit rate, but about being reimbursed the incurred Costs.

2. Here indeed, is about establishing a new rate and you should start from rate existing for sheet piles and demonstrate what is different, or in your case, what is similar, so that you demonstrate your new price, which is equal with the one for the sheet piles.

Mind you, it is not about "disagreeing" it is about DEMONSTRATING!!!

You must come up with relevant and trustworthy information to demonstrate whatever new rate you request for the slide rail shoring.

I am not saying you are not right in asking the same rate, but, for getting it approved by the Engineer, you must demonstrate where that rate is coming from, to convince the Engineer.

All that, while maintaining the advantages of indicated Value Engineering, so that your proposal remains better than the original option.

Trust these are answering your queries and clarifies these matters.

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