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Construction Law/Clause-51.1(b) Omission of Work - Fidic 1988/1992

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QUESTION: In a Construction Project, The Engineer has issued instructions to omit an item(C12/15) from work scope in persuant to Clause 51.1 (b), also propose an alternate option and asking for its rate submission.

The facts at the Contractors end are :-

1. There are 3 types of concrete being supplied in the Project by the contractor, C12/15, C30/37 & C 40/45

2. Contractor, while quotaing the rates at bidding stage had added all the concrete suplly's overheads in one item i.e. C12/15 with increased rate, hence rest of concrete items are quotated without any overhead.

3. In clarification meetings of bid acceptance stage, rate analysis for C12/15 and C30/37 were called by the employer, accordingly submitted by the contractor clearly depicting all the overheads in C12/15. Same rates were agreed/accepted and Project awarded to the Contractor.

4. Now in mid of the Project, to overcome the unusual increase in Project cost due to design/BOQ errors, the Employer has instructed Engineer to omit/delete the C12/15. Accordingly The Engineer has issued instruction to omit the C12/15 as per Clause 51.1 (b)and propose some alternate options to continue rest of construction(which itself is non-practical approach)

5.  Due to this omission, Contractor is facing a huge loss and the Project is becoming commercially unfeasible for the Contractor.

In this context, your kind support and guidance is requested to deal with the situation under FIDIC provisions to safe the Project.

Regards

Farooq

ANSWER: Dear M. Farooq,

The general rule is that overheads and profit must be spread equally over all items.  You failed to do this and the Employer discovered the error during the tender evaluation.  Now you are paying the price for a kindergarten mistake.  What can I say to save you?  Not a lot.  

You have two choices; walk away or suffer a large loss.  It may be cheaper for you to walk away, but it is unlikely to be cheaper for the Employer.  The only thing that you can do is talk to the Employer and convince him that it would be cheaper to keep you on the project, rather than drive you bankrupt and find another contractor. Between you, you must find a compromise, which causes both of you a little pain but does not kill either of you.  

---------- FOLLOW-UP ----------

QUESTION: Dear Sir

Thanks for your guidance.

Please let me correct my statement, it was not the overall overhead but the expenditures of Batching Plants, associated machinery and equipment related to supply of concrete. (I agree that it should be distributed to all the classes of concrete).

Please advise, if Clause 52.2 can be applied here, as deletion of C12/15 will invalidate the rates of other class of concretes.

Regards

Answer
Dear M. Farooq,

I understood that you were talking about the overheads for the concrete works, not the overheads for the whole project.  Clause 52.2 is not appropriate as you do not have a new bill item.  I see no reason why the deletion of class 12/15 should invalidate the rates for the other classes.  You might have a chance to recover your costs depending on the alternative solution proposed by the Engineer.  Of course you could submit a claim for overhead recovery as part of the Variation Order for the deletion of the bill item for class 12/15, but it would be difficult to justify it.  

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Peter M. Elliott

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First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.

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Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
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.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
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Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

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