Construction Law/Application of Subclause 12.3(a) Fidic Harmonised MBD 2010 Edition
QUESTION: Dear Peter,
I am supervising a gravel to paved road upgrading civil works contract based on the FIDIC Harmonised MDB 2010 Edition Conditions of Contract. During the design review, we noticed that the Design Consultant didn't carry out any detailed investigations of the swamp crossings along the new road alignment. However, in the Bill of Quantities, a nominal provision quantity of 500 tonnes of dump rock was included for purposes of construction of pioneer layers in swamps. Therefore, during the design review, we carried out detailed geotechnical investigations for the swamp crossings along the new road alignment. Our findings were that there was no way we would construct a new road embankment in the swampy areas without constructing a pioneer layer using dump rock to give the Contractor a working platform. Accordingly, when we ran the numbers, we noted that we would require about 65,000 tonnes of dump rock for swamp treatment.
One challenge though was that the Contractor's rate for dump rock was US$ 182 per tonne, yet the average market rate is about US$74 per tonne. He must have anticipated that the quantities would significantly increase to his benefit.
At the same time, we noted that the revised quantity of 65,000 would not only mean that the quantity has increased by more than 25%, but would also result in an overall increase in contract sum of about 17.4%, over and about 0.25%. This would now bring in the application of Sub-clause 12.3(a) of the Conditions of Contract.
The other challenge is that the unit rates breakdown provided by the Contractor to the Employer during pre-contract negotiations do not yield the same rates as compared to the rates (here above) used for pricing the works in the Bill of Quantities. In this particular instance, when we looked at the rate breakdown provided by the Contractor during the pre-contract negotiations for dump rock for swamp treatment, his derived unit rate from the rate breakdown was US$ 23,974 per tonne as opposed to the rate of US$ 182 per tonne used to price for the works.
At the same time, when we reviewed the pre-contract minutes of negotiation, the Employer, in verbatim had clearly stated that he had reviewed the Contractors at the time and although seemingly low, they were acceptable.
Under the prevailing circumstances, wherein the quantity has skyrocketed and is likely to blow the contract sum in the roof, how can we use subclass 12.3(a)?
Thanks and regards,
ANSWER: Dear Maurice,
Some times, some one has to bite the bullet and endure the pain when an advisor makes a mistake.
Due to your use of a comma for the decimal separator, I am not sure whether the derived cost is US$23 or US$23,000. I assume that it is US$23. As the change in the quantity appears to meet the four conditions of clause 12.3(a), you can adjust the rate in line with the Conditions of Contract. The Contractor is unlikely to accept a rate of US$23 compared with US$182, so make sure that you comply with the Contract in all respects. He will submit a claim in accordance with clause 20.1 and you must be ready to defend it.
With respect to your relationship with the Employer, I suggest that you explain the situation to him as soon as possible and see if further funds are available. You must ensure that your proposed solution is the most cost effective. There are alternative ways of crossing a swamp apart from filling it with dump rock, including the use of pre loading to accelerate settlement, geotextiles, geogrids or fascines, depending on the depth of soft material. Depending on the extent of the swamp, it could be possible to bridge it or use a series of culverts to drain the area.
---------- FOLLOW-UP ----------
QUESTION: Dear Peter,
Thanks for your prompt reply. Just to correct the misunderstanding due to the use of the comma, the rate from the rate breakdown submitted by the Contractor to the Employer during pre-contract negations was US$ 23974 not US$23.
I do agree that there are other alternative techniques that could be used for crossing the swamp. However, in this case, the recommendation by the Geotechinal/Materials Engineer was for use of dump rock to construct a pioneer layer of about 0.75m after carting away to spoil of about 0.5m of expansive clay/black cotton soil. This would provide a working platform for constructing the gravel embankment up to road formation prior to constructing the pavement layers.
Back to my question of how do I proceed with application of Subclause 12.3(a) with a view of revising the rate and how feasible is it in such a scenario to bring down the rate.
Thanks once again and kind regards,
From a rough calculation, you have between 5 and 12 km of swamp to be crossed. Surely the original designer is guilty of gross negligence. Most design documents suggest the use of a timber corduroy rather than rock fill. I suggest that your engineer sharpens his pencil to find the most cost effective solution.
It is feasible to reduce the rate based on the economies of scale. It would appear that there is a problem with the rate breakdown provided by the Contractor in his tender. Is there a similar error with other items? You ask the Contractor for a revised rate, based on the economies of scale. If he is unwilling or unable to provide a reduced rate, then you make your own calculations, based on the location of the quarry and the costs of excavation, transport and placing. Once you have a rate, you use it for payments. The Contractor submits a claim and everyone talks to the DAB or the Arbitrators. Of course it might be cheaper to use normal backfill, which could be used as a lever to persuade the Contractor to be realistic with his revised rate, rather than spend a long time laying backfill and compacting it in 300 mm layers. Be advised that you are likely to get a claim for EoT based on the increased quantities.