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Construction Law/Cost under 4.12. Red Book

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Question
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 1.1.4.3. 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.
Boris.

Answer
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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Florin NICULESCU

Expertise

Questions related to Civil Engineering Contracts, using FIDIC or other Conditions of Contract, concerning Procurement procedures and documents (pre-qualification, tendering and contracting) and Services/ Works Contracts implementation matters including Determinations, Payments, Time Extensions, VOs, Claims/Disputes. Additionally, questions related to dealing with International Financing Institutions. Can also answer questions in Romanian. Can not answer improperly formulated questions.

Experience

Over 20 years of experience in the field of design, works supervision, construction, management of aid funds and technical assistance for various types of contracts implementation, including severe conflictual contractual situations leading to Claims and disputes. Claims/ Contract management, Disputes adjudication, Arbitration.

Organizations
Member of Romanian Professional Association of Roads and Bridges; Listed on President's List of Adjudicators of Romanian Association of Consulting Engineers www.aric.org Former member of the Disputes Resolution Board Foundation (DRBF) of United States – nominee on DRBF President’s Disputes Board Members List www.drb.org and of DRBF Chapter for Eastern Europe http://dabdrb.googlepages.com Former member of Polish Association of Consulting Engineers (SIDiR) – nominee on SIDiR President’s Disputes Board Members National List http://www.sidir.pl/sidir/index.php?action=czlonkowie&a2=r Member of “AllExperts.com” volunteers pool http://www.allexperts.com/user.cgi?m=4&expID=85358&catID=914 Member of the "Constructions Disputes Resolution Services” International Panel of Construction ADR Specialists" of United States www.constructiondisputes-cdrs.com

Education/Credentials
- Graduate in 1994 the Construction Institute - Graduate of several FIDIC,Procurement and other courses - Graduate of first Disputes Board Members Mentoring Scheme (http://www1.fidic.org/resources/adjudicators/pupilage.html) - FIDIC Accredited Adjudicator

Past/Present Clients
- Several State organisations/Ministries , such as Ministry of Transport, National Admistration of Roads, Ministry of Regional Development (former Ministry of European Integration), Public Works and Housing, Central Contracting and Financing Unit in Romania and also in Turkey, Croatia and Macedonia - Numerous Western based private consultancy companies - full CV and other relevant information available at www.abinitio.ro

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