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Construction Law/How to find the Final Answer.


QUESTION: Conditions of Contract: FIDIC Conditions of Contract for CONSTRUCTION for Building and Engineering Works Designed by the Employer - First Edition 1999

Clause: 12.3 - Evaluation - Pages 35 & 36.

Clause content: ---------- "However, a new rate or price shall be appropriate for an item of work if:
(a) (i) the measured quantity of the item is changed by more than 10% from the quantity of this item in the Bill of Quantities or other Schedule.

   (ii) this CHANGE IN QUANTITY multiplied by such specified rate for
        this item exceeds 0.01% of the Accepted Contract Amount.

   (iii) this CHANGE IN QUANTITY directly changes the Cost per unit
         quantity of this item by more than 1%, and

    (iv) this item is not specified in the Contract as a "fixed rate

What I want to get clarified is,
      What is "CHANGE IN QUANTITY" specified under (ii) & (iii) above?
      Is it the new Total Quantity arrived after the Variation
      The difference between the Total Quantity received due to
      Variation and the Original Quantity before Variation?
Thank you.

ANSWER: Dear Basil,

Thank you for coming back.

"CHANGE IN QUANTITY" is the difference (increase or decrease of the quantity of a certain item) between the value stated in the original Bill of Quantity and the final quantity that you obtain either by means of simple re-measurement, or variation.

In brief, it is the difference between the originally estimated quantity for a certain item and the final one, regardless how you get to it.

Trust that answer your question.

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

QUESTION: Thank you very much for the quick reply.
Now the "Change in Quantity" is clear and accepted by both parties.
But it has created a further uncertainty in finding replies to (ii) and (iii) above.

If the original quantity is 100 and the final quantity is 175, we now know the "Change in Quantity" is 175-100 = 75.
If the specified rate is say 500
Accepted Contract Amount is 200,000
how to find the answers for (ii) and (iii) above?

Please assist us to get the ambiguity among us cleared.

Thank you sir.

ANSWER: Dear Basil,

Thank you for coming back. Are you saying that as a result of my answer the Parties have agreed what "change in quantity" is?!

To answer your specific points:

ii) this CHANGE IN QUANTITY (75) multiplied by such specified rate (500) for this item exceeds 0.01% of the Accepted Contract Amount (200,000)

That means: 75 x 500 = 37,500 must be greater than 0.01 x 200,000 / 100 = 20. Which in this given case, is not.

Mind you, all four conditions I - iv must be cumulatively fulfilled for allowing establishing a new rate.

Check with your actual figures and ensure the condition is fulfilled.

iii) To answer this one, the best is to quote the "FIDIC Guide", that in respect of this point reads:
"The difference in quantity (namely the change from QB - the quantity stated in the Bill of Quantities to QM - the measured/ final quantity, only and excluding other matters) must have affected the "Cost per unit quantity", which is the Cost incurred executing the work covered by the item, divided by the quantity of the item as measurable in accordance with
the applicable method of measurement.

This criterion relates firstly to the Cost actually incurred ("Cqm") in the execution of the measured quantity QM; and secondly to what the Cost would have been ("Cqb")if the measured quantity had been equal to QB. Under this criterion, the Cost actually incurred divided by the measured quantity (Cqm/QM) must be less than 99%, or more than 101%, of the cost per unit quantity (Cqb/QB) which the Contractor would have incurred if he had executed QB.

Note that "Cqb" is the Cost which the Contractor would actually have incurred if QM=QB; and not (for example) his foreseen or estimated cost, or any amount included in (or otherwise derived from)the Bill of Quantities.

This criterion is specified in order to avoid adjusting a rate by less than 1%. As noted below, adjustments are based upon the proportion (Cqm/QM) / (Cqb/QB)."

As such, one need to actually get into the Contractor's breakdown of price for the respective item and do these calculations.

I appreciate this is not simple, please read the explanation above, read it several times and give yourself some time to comprehend it.

After you'll do that exercise, if you still have things to clarify, please come back to me with the specific issue and will gladly work it out with you.

Hope that helps, good luck!

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

QUESTION: Dear Mr. Florin,
I am very sorry to disturb you again.

This is regarding condition (iii) above.

(a) As I have grasped, first of all the Contractor should attend to the job while Jointly recording all the  resources used with the time spent from which the total cost of the executed quantity can be ascertained.

(b) From the above the rate for unit quantity can be ascertained.
   Say Total Quantity is 175 m3 and the Total Cost is $2,000.00
       Therefore Rate = $2,000.00/175 m3 = $11.43/m3

   If the BOQ Quantity is 100m3, In order to qualify for a New Rate,above $11.43 should be i
   either less than 99% or more than 101% of the rate for the cost of 100 m3 if 175 m3 was
   equal to 100 m3.

   BOQ quoted rate should not be used for this purpose.Has the Client to check the
   Contractor's/Tenderers Cost for 100 m3 from his Rate Build up and use it for comparisons.
   If it is so,if the Cost for 100 m3 is say $1,250.00, then Rate = $1,250.00/100 m3 = $12.50
   Then 99% of $12.50 = $12.38 and 101% of 12.50=$12.63

   Therefore the $11.43 is less than 99% of the rate derived from the Rate Build up.
   Therefore the Contractor is entitle for a New Rate.

   Please let me know whether I am correct.

   Thank you.

Dear Basil,

Thank you for coming back. Unfortunately, I had a very long and tiring day today, and must confess, I just can not follow your calculations - apologise for that (two more days like that, still to come).

But basically, the idea is to calculate how much does it cost the Contractor to produce one unit of a certain item.

For example, if Contractor has to build an embankment, he has to mobilise certain resources, which means a cost, beside cost of materials, fuel, etc.

If then he has to build a larger quantity of earthworks, for the additional quantity, he has already mobilized the resources, hence no cost incurred with that, respectively the cost for producing each additional unit is cheaper.

That is what you should look at and that is the "Cost per unit quantity" referred to in the explanation I sent with my other email.

Hope that will directly to the right rationale, once again apologise for not being able to properly aalyse the data you provided.

If no hurry, I will try to answer better during the week-end, when hopefully, I'll be in a better shape.

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