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Construction Law/Deduction of Prelim Charges due to Scope deduction

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Question
Dear Femi Alofe,

Could you please spare some time for resolving my question or issue!!

Recently I approached one of our Clients at Qatar for certification of our final contract bill.  We had a re-measurable contact with lumpsum Preliminaries cost. Unfortunately we have noticed that our claim for Preliminaries have been reduced to 70% of the total item claim, since there was a scope or item reduction during the contract period.  Also there was some reduction in BOQ.  Client representative is stating that if there is a deduction in the scope or reduction in the total contract price due to negative variations, proportionate reduction will be applicable to the Preliminaries cost also.

Request you to provide me with proper guidance for approaching the client for claiming the full prilims value to get teh favour to my company.

Thank you,
Abdulla

Answer
Dear Abdulla,

Thank you for your question and apology for the lateness in reply.

From your question, i can let you know that, preliminaries are expenses for general items that are necessary to be put in place and maintain for the execution of the works throughout the duration of the contract. In some contracts, these are submitted during the tender stage as either solely for site direct and indirect expenses or could comprise of both site direct and indirect expenses and also head office overheads. The breakdown of your tender figures if submitted during the tender stage will help you to know which one. Having said this, one thing stands out, and that is, the fact that, preliminaries includes costs for general items (establishment, maintenance and demobilisation costs) for he proper execution of the project. If so, any decrease or increase may and may not affect the preliminaries costs except it can be demonstrated. If it is increase, there must be evidence to show that, such costs is affected and the part which may be affected is usually, the maintenance or running cost which are usually time related, method-cost-related. Method related preliminaries could affect preliminaries' establishment costs and also demobilisation costs. These are all relating to preliminaries cost increase.

Now to preliminaries cost reduction, possible areas or reason for cost reduction may also arise from method-cost-related preliminaries and also time-related where the duration of the construction is reduced. But just on the mere cost saving as a result of variation instructions without demonstrating how the variation instruction resulted to "method-cost-related preliminaries, there can not be any reduction. Some contract condition or tender document forming part of the contract specifically indicated grounds upon which preliminaries can be reduced. You may try to check this out in your contract. if not, preliminaries can not be reduced if it is not method-cost related.

It you responsibility to look out the preliminary items which the costs are reduced and demonstrate that, the costs for these preliminaries items are either spent during the establishment, maintenance (running) or demobilisation of such items.... from there, you can then identify the basis of the reduction and if no basis, then, it will definitely be improper and you can seek redress as per the laid down procedure for disputes under your contract.

I hope this clears your doubt.

once again, i apologise for the lateness in reply.

Regards.

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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